Dow 8000?

[wolfbay]

Stocks for the long run

Stocks have always risen long term.Long term could mean 25 years before getting back to even(even worse taking inflation into account.)as happened 1929-1954.As long as you have the guts &cash to keep buying the market during that period you'd do great. If you were retired like me you'd be toast.

 

[Donzo]

It is interesting to read all the posts - it is really push and pull. I am in the same state - I have alot of cash on the sidelines from the sale of some investment property. I go back and forth on when to put it to work with my planned allocation. But, gotta tell you - when ever the market behaves like last week having that cash feels good....but I need to make sure that I outpace inflation......I am thinking of DCAing now and if we hit DOW 11,000 putting in a larger slug.
I gotta tell you all this pontificating is starting to feel like work!
Do any of you have a target for the market to hit before you take the leap of faith with cash on the sidelines?
I plan to keep enough cash so selling stock won't be necessary for 7-9 years, but, I want to get in low - I dropped a chunk in when we were at 13,300 and that did not work out so well -- thus far.
I am being a dirty market timer.....it comes natural I shop for the best deal on everything....

 

[unclemick]

Stocks have always risen long term.Long term could mean 25 years before getting back to even(even worse taking inflation into account.)as happened 1929-1954.As long as you have the guts &cash to keep buying the market during that period you'd do great. If you were retired like me you'd be toast.

Ah man - is time yet to trot out unclemick's unified lefthanded general theory of chickenheartedness? Hmmmm? I have absolutely no qualifications except I did survive 1966-1982 without filling my closet or attic with seven years of freeze dryed food. I did commit a few other sins like real estate, gold coins etc which I won't confess here.

All together now - pssst Wellesley! Quick now - what's the current yield/income of what you own versus your retirement expenses?

If you have your expenses covered/you are home free/if not/cut expenses.

Whining is optional. Some days I really get my jollies pissing and moaning - sort of a perverse pleasure - probably comes from watching the Saint's snatch defeat from the jaws of victory all those decades.

heh heh heh - I will conceed sell to the sleeping point is necessary for some.

 

[clifp]

All together now - pssst Wellesley! Quick now - what's the current yield/income of what you own versus your retirement expenses?...

If you have your expenses covered/you are home free/if not/cut expenses.

I am with Unclemick concentrate on income. I have had half a dozen dividend increases this year vs one (my first ever) dividend cut. Now I've invested in some admitedly higher risk financial companies who may cut the dividends. So if the credit crisis to continues to deteriorate I maybe in trouble with some of these companies.

Still I am really not too concerned about the price of stocks only the earnings. The latest S&P earning estimate for the S&P 500 is $98.63for 2008. This gives an earnings yield of 7.6%% a number comfortably above a 4% SWR. As long as US companies earning keep up with inflation we should be fine. Even if this forecast is optimistic S&P earnings would have drop to about $52 to but the 4% SWR rate in serious risk.

I really think the secret to (pyschologically) surviving bear market is to stop viewing stocks or equity mutual funds as pieces of paper where you hope to buy them low and sell the to another sucker later at higher price.
That is gambling and if you aren't by nature a gambler you'll be miserable.

Instead treat stocks for what they actually are a claim on the future income stream of business. Whats important is; is the stream big enough to meet your expenses? I'm personally a fan of getting my money now (dividends) but trusting companies (in the aggregate) to reinvest their earning for future growth has also worked out well.


Wellesley has current yield of 4.63%, a big chunk of Wellesley, Vanguard Total Stock Market, a sprinkling of foreign stocks, a several years worth of expenses money markets, CDs and short term bonds you are fine.

 

[twaddle]

All together now - pssst Wellesley! Quick now - what's the current yield/income of what you own versus your retirement expenses?

So, if Wellesley yields 4% and Vanguard's junk bond fund yields 8%, does that mean I can double my SWR by switching to 100% junk bonds?

 

[haha]

Still I am really not too concerned about the price of stocks only the earnings. The latest S&P earning estimate for the S&P 500 is $98.63for 2008. This gives an earnings yield of 7.6%% a number comfortably above a 4% SWR. As long as US companies earning keep up with inflation we should be fine. Even if this forecast is optimistic S&P earnings would have drop to about $52 to but the 4% SWR rate in serious risk.

Although I agree with the thrust of you remarks, it is really the current cash yield and the expected rate of increase that confers security. Earnings yield is only tangentially related to cash payments, which are what you need to buy groceries.

With the 4% WR and the 7.6% earnings yield mentioned above, there is still plenty of room to get clipped by stock price volatility.

Ha

 

[Independent]

I don't know where you got these figures from. The 10 year average annual return of Vanguard's S&P 500 fund through February 2008 is + 3.99%.

https://personal.vanguard.com/us/funds/performance?FundId=0040&FundIntExt=INT&DisplayBarChart=false

During the same period, Vanguard's Total Stock Market Fund had an average annual return of + 4.46%.

https://personal.vanguard.com/us/funds/performance?FundId=0085&FundIntExt=INT&DisplayBarChart=false

My data is from Robert Shiller at:
Online Data
I took the Excel file, computed a monthly real return, and compounded that. (Note that Shiller seems to use an average price for the month instead of an ending price.)

Our numbers are consistent. I have "real" returns, you have "nominal". I have a 9 year period, you have a 10 year period. The S&P 500 went from 963 to 1249 in the one year from Jan 1998 to Jan 1999. That's almost 30% on the price alone. The entire gain for your 10 year period is equal to the gain in the first year. The remaining years had ups and downs, but averaged approx zero.

You used the "every year" in your original post. I was trying to point out that the market is very erratic, and not just over short periods. It seems to go up until everyone believes it can only go up, then it drops. After that, it gets into a funk until everyone believes that stocks are never going to go anywhere, then it goes up. The funky periods can be pretty long. It has done this three times in the last 90 years. I was just pulling out the longest periods since WWII when the compound return was about zero as examples.

Of course, there is no guarantee going forward that history will repeat itself.

 

[al_bundy]

I am with Unclemick concentrate on income. I have had half a dozen dividend increases this year vs one (my first ever) dividend cut. Now I've invested in some admitedly higher risk financial companies who may cut the dividends. So if the credit crisis to continues to deteriorate I maybe in trouble with some of these companies.

Still I am really not too concerned about the price of stocks only the earnings. The latest S&P earning estimate for the S&P 500 is $98.63for 2008. This gives an earnings yield of 7.6%% a number comfortably above a 4% SWR. As long as US companies earning keep up with inflation we should be fine. Even if this forecast is optimistic S&P earnings would have drop to about $52 to but the 4% SWR rate in serious risk.

I really think the secret to (pyschologically) surviving bear market is to stop viewing stocks or equity mutual funds as pieces of paper where you hope to buy them low and sell the to another sucker later at higher price.
That is gambling and if you aren't by nature a gambler you'll be miserable.

Instead treat stocks for what they actually are a claim on the future income stream of business. Whats important is; is the stream big enough to meet your expenses? I'm personally a fan of getting my money now (dividends) but trusting companies (in the aggregate) to reinvest their earning for future growth has also worked out well.


Wellesley has current yield of 4.63%, a big chunk of Wellesley, Vanguard Total Stock Market, a sprinkling of foreign stocks, a several years worth of expenses money markets, CDs and short term bonds you are fine.

don't believe everything you read

the so called analysts got the sp500 earnings growth wrong back at the start of 2007 and i wouldn't be surprised if these numbers turn out to be nothing more than dreams

 

[Slarty]

I think we're having a news induced recession. The extreme fear in the news seems to have come before the data. I guess that if we all try hard enough and stop buying things we could slow it even further.

 

[dumpster56]

I think we're having a news induced recession. The extreme fear in the news seems to have come before the data. I guess that if we all try hard enough and stop buying things we could slow it even further.

Really? I was at the gas station yesterday and watched a family in a suburban late model they still owe money on it fill it and listened to the argument from the wife at the 81.50 they just pumped into the thing. There is financial trouble in that family. gasoline was 3.47 at that station.

Housing in my new not high priced neighborhood three homes are now foreclosed out of 80 homes, never saw that in my other neighborhoods even in the late 80s last bad time.

No its not media driven. I would hate to have to work everyday in this economy.

 

[Ronstar]

I think we're having a news induced recession. The extreme fear in the news seems to have come before the data. I guess that if we all try hard enough and stop buying things we could slow it even further.

We could know if we're technically in a recession as soon as March 27th. That's the date that the final report of 4th qtr GDP comes out. Preliminary numbers are 0.6% increase for 4th qtr. If the final report comes out negative, and the 1st qtr is negative(I'd bet it is), then we're in a recession. If the 4th qtr remains positive, we'll have to wait and see if 1st and 2d qtr GDP growth is negative.

 

[Ronstar]

Here's a GDP link:

BEA: News Release: Gross Domestic Product

 

[Texas Proud]

Last 3 Months1.25% 1 Year4.57% 3 Year Annualized4.26%

It is JP Morgan 401K Fund. I don't know if it's available outside deferred plan. I sure slept better after I got out of stocks for awhile.

My heavy in stock funds portfolio is up .4% 1 year, and 8.3% 3 year and 13.0 5 year.... (don't have 3 months, but it is DOWN)....

So, is sleeping better really that good?

 

[Razor]

My heavy in stock funds portfolio is up .4% 1 year, and 8.3% 3 year and 13.0 5 year.... (don't have 3 months, but it is DOWN)....

So, is sleeping better really that good?

That's the stable value fund return, not mine.
Yes sleeping better is good, because I had all my money in the stock fund up until August of last year. You see I missed the 16% drop. My return is up more than 15% for last 52 weeks and still moving positive. I expect a substantial drop in the market in '08 so I will probably sleep even better not to be part of that slide.
Back when the DOT com bubble was peaking I was going to get out of stocks but my financial advisor told me to stay in so I didn't miss out. After losing 40% of my retirement and waiting 5 years to get back to even I decided to make my own decisions. When it's pretty obvious when stocks are high and the economy is ready to tank it's my preference to get out of stocks for awhile..

 

[REWahoo]

... I had all my money in the stock fund up until August of last year. ...I expect a substantial drop in the market in '08 so I will probably sleep even better not to be part of that slide.

I asked this earlier and didn't see a response. What will you do if the market doesn't continue to slide, but has already hit a low and begins to climb? When will you get back in?

 

[Razor]

I asked this earlier and didn't see a response. What will you do if the market doesn't continue to slide, but has already hit a low and begins to climb? When will you get back in?

I am probably not going to do anything for six months. If something happens that leads me to believe prosperity is ahead I will get back in. Right now I don't see another housing boom or technology explosion in the near future. I honestly believe we are in for some tough times the next few years.
The DOW was close to 14000 when I got out of the stock fund so I do have some room to work with. At this point in my life I am satisfied with any gain, just can't handle a big loss like before, too close to retirement.

 

[Notmuchlonger]

I am probably not going to do anything for six months. If something happens that leads me to believe prosperity is ahead I will get back in. Right now I don't see another housing boom or technology explosion in the near future. I honestly believe we are in for some tough times the next few years.
The DOW was close to 14000 when I got out of the stock fund so I do have some room to work with. At this point in my life I am satisfied with any gain, just can't handle a big loss like before, too close to retirement.

So what point determines when you get back in? When your gut tells you? When the indexes get to a certain point? Any kind of metric?

 

[Razor]

So what point determines when you get back in? When your gut tells you? When the indexes get to a certain point? Any kind of metric?

I work in the housing industry and when it looks like the housing market is going to stabilize, housing starts rise, our analysts forecast increase demand for new homes, US car companies start making a profit, energy prices drop, and the value of the dollar rises I will get back in.
Or I may put some back in when the DOW reaches 10,000, 9,000, 8000.
I really haven't decided for sure yet.

 

[al_bundy]

damn you Fed, damn you

my shorts were doing so well

 

[Dawg52]

damn you Fed, damn you

my shorts were doing so well

God Bless them. No sticking my head in the oven today.

 

[W2R]

God Bless them. No sticking my head in the oven today.

Oh pooh. Serves me right for not checking the news before buying equity funds. Guess it won't matter in 40 years, but this is still aggravating.

I'm happy for you though, Dawg52! I can imagine this must be easing your mind a bit.

 

[al_bundy]

no biggie

they cut the discount rate in august and we all know what happened since then. might just lock in my slimmer profits today just in case

 

[Dawg52]

Oh pooh. Serves me right for not checking the news before buying equity funds. Guess it won't matter in 40 years, but this is still aggravating.

I'm happy for you though, Dawg52! I can imagine this must be easing your mind a bit.

Hard to time it perfectly. Who knows, some other news might come out today and it all goes away.

I'm ok. I restocked the bar so I'm prepared for anything.

 

[W2R]

Hard to time it perfectly. Who knows, some other news might come out today and it all goes away.

I'm ok. I restocked the bar so I'm prepared for anything.

Good idea. We probably will not be completely out of the woods for some time.

 

[al_bundy]

i get around 2220 as the magic line of resistance for the nasdaq