OK, I'll say it

[Texas Proud]

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Originally Posted by rs0460a Respectfully, I respond that you are caught in "short term" (investor) thinking. Did I lose $$$ since January 1'st of this year? Yes! Did I lose $$$ since I started investing 25+ years ago (allowing for inflation and my contributions)? Nope! It's the same as that old song sung by Kenny Rodgers, "The Gambler" in which he sings: "You never count your money when youre sittin at the table. There'll be time enough for countin when the dealins done". As for me? I'm still at the table ... - Ron

Uhhh, under that thinking.... you are at the table until you die... then someone else gets to count your money...

I am not saying that you need to do anything because of the ups and downs.... just that you lost 'real' dollars when the market goes down just like you make 'real' dollars when it goes up.... so no short term thinking.... but also no irrational thinking to try and hide your losses...

[Alan]

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Originally Posted by Texas Proud The true accountant in me says you 'mark to market' every day (or every month or whatever)... and you either made money or lost money from the previous day or month....

Is this what they teach in accountancy school? :confused:

In 13 years I've realized many gains when re-balancing, either selling stock funds and buying bond funds or vice-versa. The whole point of a balanced portfolio is to realize gains and avoid realizing losses. I'm about to enter the withdrawal phase and like many on this board I have built a cash cushion to minimize having to realize losses by needing to sell when they are down. Of course, if they stay down for more than 5 years then I will be losing real money.

[Texas Proud]

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Originally Posted by Rich_in_Tampa So I think you are probably right in a bookkeeping sense, but for the posters who express a wide range of unpleasant emotional reactions to the market's gyrations, the buy and sell dates seem to be a much more user-friendly way of looking at it. And it fits real-life circumstances better, for me: I lose 20% this year on investments I plan to sell in 13 months, I'm right to be remorseful. OTOH if I plan to hold them for 20 yrs, I really shouldn't give a hoot about the bad year they just had. Different ways of looking at the same circumstances, I guess.

I am not even talking bookkeeping... as you said... if you LOSE 20% and expect to sell in 20 years... who cares... but you still 'lost' 20% no matter what kind thinking you want to do...

And we know that it is a loss because so many people are 'scared' at the loss and want to 'talk' themselves into keeping invested by saying 'it is not a loss.... it is not a loss... it is not a loss'..... sorry, it is, but if you are a long term investor... who cares...

BTW, I am down big time... but have not changed my investments excpet to put cash aside the last few months for a downpayment on a house...

[bamsphd]

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Originally Posted by retire@40 I'm glad I haven't made the commitment to fully retire yet.

We were just 5% away from "our number" at the peak last fall.
Then the markets fell.

So I've said more than once recently, at least we hadn't retired yet. I'm quite convinced that "the worst time" financially to retire is at the start of a bear market, and the best time is at the start of a bull. So I hope to just sit tight until the bull comes around again, then leap. Hopefully, we won't console ourselves with too many luxuries in the meantime, so "our number" won't go up too much. Though paying to heat the house this past winter certainly pushed it up a little bit.

As for the side thread on mark-to-market versus only when you buy-sell. I'm definitely in the mark-to-market frequently camp. I also peel bandages off really slowly. That way sometimes the pain is so mild I hardly notice, even if it does last a long time.

When mark-to-market really hurts, I can generally console myself by comparing my cost basis with the current market value of my portfolio. Not quite the same as buy-sell, but close.

[Alan]

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Originally Posted by Texas Proud I am not even talking bookkeeping... as you said... if you LOSE 20% and expect to sell in 20 years... who cares... but you still 'lost' 20% no matter what kind thinking you want to do...

I still don't get your logic, perhaps it's just a matter of words. Suppose I want to get from a to b on a boat. There is a chance the boat may sink, or be forced to return or get blown off course, but if get there regardless of the ups and downs then I will have achieved my objective.

Same with your investments. True, I'm down 5% ytd, but year on year over the past 13 years I have made 9%/year so I can say that I am still very much on course despite the ups and downs which you call gains and losses. It's just semantics.

[Texas Proud]

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Originally Posted by harley I have to say, I'm glad you're not my accountant. You'd have me paying capital gains taxes on stocks I haven't sold yet. And that car analogy doesn't make any sense to me. Apples and oranges.

NOPE... that is the difference between your book and your taxes.... you only have to pay taxes when you sell...

The car example is the same... you are trying to justify a higher value for your stock than it really is... just like the guy who says his car is still worth what he bought it for...


Let me give another example.... my mother bought Exxon back in the early 80s... I think she paid $3500 or so... have been reinvesting the dividends the whole time... so in reality her true out of pocket is her $3500.... but her 'value' is over $140,000.... and if it dropped down to $100,000 she would have 'lost' $40,000... now, she might think... 'well, I am still ahead of what I put into the stock so I have lost nothing'.... I just can not see that kind of thinking...

[Texas Proud]

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Originally Posted by Alan I still don't get your logic, perhaps it's just a matter of words. Suppose I want to get from a to b on a boat. There is a chance the boat may sink, or be forced to return or get blown off course, but if get there regardless of the ups and downs then I will have achieved my objective. Same with your investments. True, I'm down 5% ytd, but year on year over the past 13 years I have made 9%/year so I can say that I am still very much on course despite the ups and downs which you call gains and losses. It's just semantics.

With what you say... absolutely... no semantics at all... you are still on course even though you have lost money these last 9 months... not 'it is not a loss until I sell it'...

[Alan]

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Originally Posted by bamsphd We were just 5% away from "our number" at the peak last fall.

Do you change your "number" each year to take into account you are 1 year closer to no taxes, 1 year closer to Medicare, inflation factor etc? just curious as we don't have a "number" as such. I update the budget on what I expect we need to live on and then run claculators such as Firecalc.

[Alan]

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Originally Posted by Texas Proud Let me give another example.... my mother bought Exxon back in the early 80s... I think she paid $3500 or so... have been reinvesting the dividends the whole time... so in reality her true out of pocket is her $3500.... but her 'value' is over $140,000.... and if it dropped down to $100,000 she would have 'lost' $40,000... now, she might think... 'well, I am still ahead of what I put into the stock so I have lost nothing'.... I just can not see that kind of thinking...

That is the difference between a pessimist and an optimist, a stressful and a relaxed person. I would definitely see that example as a gain not a loss.

I know folks who one day are delighted when they say "I just made money selling a particular stock" and then are disappointed because it continued going up and so they are down in the dumps because they "lost" money because they sold too soon.

[samclem]

Though I understand the "accountancy" of marking to market, I don't think that mindset serves a long-term investor well. It encourages both unwarranted elation and unwarranted woe. Although the difference is primarily psychological, it can have behavioral implications. For example, an individual who truly believes that marking to market is the absolute truth will see no difference between the returns of a bond fund with a five year average maturity and a bond ladder with a five year average maturity. Same maturity, same quality= same expected returns. On the other hand, I see a big difference (even aside from repayment risk). With a bond, I know for certain what the bond will pay me each quarter and what it will be worth on the day of maturity. I can count on that money for use in funding my living expenses. With the bond fund (same maturity) I'll never know exactly what the fund will pay me, and the constancy of the available dollars is not the same.

[barbarus]

From the way people post about the market, I get the impression most here have little comprehension of how bad off the economy really is. Very few investors can accurate time the rise and fall of equities prices, especially day-by-day, but even a simple barbarian, (vis. moi), can see that there are unprecedented dislocations occurring and there is little in the short term to change the situation for the better.
Normally, buy&hold is about the best we ordinary folk can do, but the financial world is grievously threatened right now.
Down is a heckofvalot more likely than up and for some time as well

I'm intensely interested in the perceptions of ya'll. What do you guys think is going on? I just can not grasp how anyone can see good times just down the road. What forces that will counter the fundamental problems? Why are things really not that awful?

The world is certainly not ending. The sun's gonna rise in the morning. Flowers will still bloom and kittens frolic in the meadow, but economically, dark clouds gather.

I'd appreciate some enlightenment on what my fellow readers are perceiving.

[Urchina]

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Originally Posted by Want2retire Investing in the 2008 market does seem like treading water with anvils tied to each foot, at times.

No fun, sure, but when you're done you'll have amazing thighs (assuming you don't either give up or go under, of course).

[Alan]

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Originally Posted by barbarus From the way people post about the market, I get the impression most here have little comprehension of how bad off the economy really is. Very few investors can accurate time the rise and fall of equities prices, especially day-by-day, but even a simple barbarian, (vis. moi), can see that there are unprecedented dislocations occurring and there is little in the short term to change the situation for the better. Normally, buy&hold is about the best we ordinary folk can do, but the financial world is grievously threatened right now. Down is a heckofvalot more likely than up and for some time as well I'm intensely interested in the perceptions of ya'll. What do you guys think is going on? I just can not grasp how anyone can see good times just down the road. What forces that will counter the fundamental problems? Why are things really not that awful? The world is certainly not ending. The sun's gonna rise in the morning. Flowers will still bloom and kittens frolic in the meadow, but economically, dark clouds gather. I'd appreciate some enlightenment on what my fellow readers are perceiving.

From 1900 to 2000 the British Empire collapsed, the country was devasted by 2 world wars the economy in tatters, rationing in place up to 1955 etc, yet the quaility of life for the average Brit improved 7 fold. I thought I had it rough growing up economically but it was so much better than my father, grandfather and great grandfather who I knew very well. (btw, I was born and raised in a small coal mining town in NE England and didn't move to the USA until I was 32)

I guess I am just a positive thinking person, but I'm confident that things will sort them selves out, and I just plan on indexing the world and not worrying about the things that are outside of my control.

[mb]

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Originally Posted by barbarus From the way people post about the market, I get the impression most here have little comprehension of how bad off the economy really is. Very few investors can accurate time the rise and fall of equities prices, especially day-by-day, but even a simple barbarian, (vis. moi), can see that there are unprecedented dislocations occurring and there is little in the short term to change the situation for the better. .

Sorry, can't provide much enlightenment. I'm in the dark more often than most but I will throw out some rather random thoughts and questions.

Is there a particular set of metrics that you would use to characterize/quantify the economy? For example if you use housing foreclosures then I suppose that it is pretty easy to justify your conclusion with regard to the state of the economy but if you use say unemployment rates then maybe you come to a different set of conclusions.

Of course almost everyone on this board follows the economy/their investments to some extent and indeed the news from that perspective is pretty bad but from my interaction with family, friends and colleagues I don't see the symptoms. No one that I know has lost their job. No one that I know has lost their house. No one that I know has lost so much money that it has changed their life style significantly. I'm in Silicon Valley and during the dot.com bust there was a huge decrease in rush hour traffic because of all the down-sizing. Fortunately or unforunately, the current traffic is as bad as ever. Of course that may all be a function of where I live. The west side of Silicon Valley was not a bubble area.

I recall that in one of Peter Lynch's books where Wall Street and the financial sector were having problems and the feeling in "his world" was that everything was falling apart. But one day he was driving his car in the "real world" and realized that things weren't as bad for the "average guy" and decided to invest based on that observation and made a lot of money.

The market is pretty efficient at pricing in information? If you think that the market is going to go down then you must think that known information is not being discounted properly or that some really bad news that no one else knows about is on the horizon? What events do you anticipate that the market does not already know about will drive the market down even more?

MB

[youbet]

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Originally Posted by retire@40 I'm glad I haven't made the commitment to fully retire yet. I'm glad I still have a business going......mmmmmm.....and a job that provides enough cash flow to keep me afloat. One of the benefits of staying semi-retired is to be able to test the ER waters while still having the ability to ramp up the earned income if needed.

Two comments, both of which prior posters have already touched on.......

1. If you're glad you're still working, then positively you haven't reached an overall financial status (all sources of RE income) that would support the no earned income lifestyle you desire with no/little probability of failure. So, yep, it's good you're not RE.

2. In one of the most interesting threads I've read on this forum, the issue of variation in the values retirement portfolios can take over time despite the fact they are destined to "survive" was discussed. For example, a Firecalc run which indicates your portfolio (at some AA and withdrawal rate) would have survived 99% of the time when tested historically may also indicate an extremely wild ride along the way. Coming to grips with the fact that I'll likely see breath taking dips and dives along the way, despite the fact my RE portfolio is likely to survive, is key to sanity when living primarily on investment income.

Edited to add: The current market is causing me some stomach churning, but not enough to make me wish I was still working.

[dm]

I retired at the peak last October. I would not give up my time since then. The only difference is if I was still working, I would still be adding to my stock portfolio, and would probably be down more money. If things were to get really bad I would just do like everyone else would have to do, cut back. If there was really another great Depression or our money was worthless I dought that I would still have a job anyway.

I can go several years without having to sell any stocks. And if they are all still down at least I wont have to sell as much as I wont have to pay any taxes. And this is to maintain my current spending. If things are still bad in 5 years I imagine I will have cut back on some vacations and other extras.

[rs0460a]

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Originally Posted by Texas Proud Uhhh, under that thinking.... you are at the table until you die... then someone else gets to count your money...

True (since it's all going to charity )...

- Ron

[dm]

Now I'm off to the golf club for a party. I'll do my best to keep the economy going for the wage slaves there.

[MichaelB]

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I'm glad I haven't made the commitment to fully retire yet.

OK...I’ll say it too. I’m still so glad I left when I did.

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From the way people post about the market, I get the impression most here have little comprehension of how bad off the economy really is.

I am very clear on how the economy is, here in the US and in much of the rest of the world. Including extended family, I have more relatives now looking for work or living at the financial edge than at any other time in my life.

Maybe it’s because I spent most of my adult life living and working abroad, where there is real hardship and despair. The only thing new in today’s market and economy is the extent of financial and political hubris. But this too shall pass.

Here and elsewhere there is opportunity to work as never before. The better paying jobs are more demanding and competitive, but they are out there. The capital markets around the world also offer more opportunities than ever before – it’s just that it isn’t easy and there is lots of risk. – and noise, and confusion, and fear.

But it's not about the money. No, I’m still so happy I left when I did because I got my life back. Since then I have learned much – like the value of having realistic goals, options and a “plan B”.

Still retired, lovin’ it and lookin' forward to more

Michael

[Dawg52]

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Originally Posted by barbarus From the way people post about the market, I get the impression most here have little comprehension of how bad off the economy really is.

Really? I got the impression that there are a lot more concerned about the market and economy than not. There are some post indicating they have several years of cash to get them through a rough period, but I don't see that as being overly optimistic. Maybe you are referring to something else.