riding out the storm - r u battening down the hatches?

[harley]

Quote:

Originally Posted by Purron Our homes are both located in the Washington DC suburbs and I gotta tell you the market is brutal right now. Foreclosures have skyrocketed and prices are falling fast. On the one hand, we have thought we should sell before prices fall more, but the buyers seem to have vanished. . . . Plus, the job market is still very strong in the DC area and, hey, people gotta live somewhere, right?

If you are anywhere near the beltway, I suspect there will be a nice jump in the market after the election. I lived in Arlington for 25+ years until last year, and with every new administration there was a housing market upswing. All real estate is local. Timing the market is allowed.

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Originally Posted by haha I am unfortunately low on cash, but what I do have I am spending buying some stocks wih 0 debt, for less than half of what I sold them for within the year! Doesn't matter, they jsut keep going down. Maybe we are going to get a depression, but unless it is a really really bad one, a lot of these stocks seem like they are already there.

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Originally Posted by Budman I am very concerned about the DOW being down by 26% since its high of 14198.

While 26% is a fairly good amount, I'm of the opinion that the market was vastly overvalued at it's high, and I still think it's overvalued historically. I know it's painful to watch, but if you've got either a job or a number of years of cash to live off, you should be fine. I'm still hoping for somewhere in the mid 9000s. THAT would be a buying opportunity. And I suspect the market would make progress from there after no more than a couple years. I know the xpurts are saying the sky is falling, but I swear we've been here and worse before. Of course, what do I know?

[W2R]

It is not likely that the economy would delay my retirement, but then I have never retired before and I am a little concerned that I might make some crucial error in planning. I have been spending too much time trying to imagine worst case situations so that I can plan for them. Nothing real could even touch the economic disasters I have imagined.

There are too many unknowns right now to get a handle on what is really going to happen with our economy. How do we know if our fears for the future are based on reality, or on possibilities that may be circumvented? We don't know who will be President and whose administration will be falling into place in four months, and even the bail-out is still uncertain. World events over which we have no control could also profoundly influence our futures.

So, while I am imagining terrible things and trying to devise alternative plans for them if they should become necessary, I am not expecting these terrible things to actually happen (if that makes any sense). I am optimistic and think that eventually the market will recover, as it always does. Our fears are being whipped up by and manipulated by the media, who stand to profit from our terror.

As for the present, I am in an easier situation than others here - - for me, next Tuesday is payday and either way I am FI. To me the present drop in the market is not pleasant, but has not caused me to alter much. Life is fine (though it will be finer once I can finally retire). I got to work by 6:00 AM, on my lunch break I signed a contract for $1,500 (ouch!) to have my hurricane-damaged tree and stump removed, and then after work grilled some salmon for dinner. Live goes on.

[ST in London]

I find the concept of imagining terrible things and being optimistic a bit difficult.

I do think one needs to consider that recession carries a connotation of short term and this one, which I think even the most optimistic person must now admit is upon the US, might be a bit longer than recent past recessions.

It appears to be most probable to me that it will take a minimum of 6 years and likely closer to 10 years to recover. My opinion on this is not far different than the very man himself, Warren Buffett.

My investing will be adjusted accordingly. The UK 1974-78 recession is vivid in my memory. Batten down the hatches, indeed.

[freebird5825]

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Originally Posted by Goonie Like freebird, I also ER'd in April '07....but at a much older age....50. Of course I should add a brief disclaimer here also, since I'm currently living off a fully-funded, COLA'd DB gov't pension. Even with that being said, I still don't want to lose any of my @$$ets.......retirement or otherwise. So I'm just riding out the storm waiting for the break in the clouds....kinda like that guy down in Surfside Beach TX did with Hurrican Ike: I've got a bottle of Jack Daniels tucked away for cooking & 'medicinal' purposes.

hmmmm...i usually do my winter stockup shopping this time of year. i see another item for the list......but i just crossed that age 50 line, Goonie. so does that mean i'm "much older" now too? <loaded question, answer carefully> LOL
ditto on COLAd pension and fixed annuity, so income is stable. cutting spending even more than usual, especially for food. my garden was a real flop. i may have to "force" dh2b to eat less meat!
total portfolio loss is running at 15%. still not freaking out.
All hatches secure, Cap'n.

[Goonie]

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Originally Posted by freebird5825 hmmmm...i usually do my winter stockup shopping this time of year. i see another item for the list......but i just crossed that age 50 line, Goonie. so does that mean i'm "much older" now too? <loaded question, answer carefully> LOL

Regardless of your current age, I'm still much older than you. How's that for answering carefully?

[toofrugalformycat]

I do not regret ERing and my behavior is changing a little but not much.
I ERed on April 1, 2000. So I had an immediate trial by fire back then, which may be moderating my emotions on this latest plunge.
DH and I each bought some Vanguard index on the first big drop day, not a huge amount but just sticking to our principles because we knew we'd be out of allocation by the end of the day.
I was already frugal before this started, spending much less than our life plan spreadsheet says we can, and we have at least 5 years cash reserve, but even so when gasoline prices rose we cut down on driving our cars, combining trips and bicycling when possible. I'm going to put up those plastic shrink-to-fit storm windows on a couple of our old leakiest windows to save on heat bills. We normally grow a lot of our food in our garden and dipnet for salmon so our chest freezer is full (hope the electricity doesn't fail!). We buy beans, rice, and oats in 25-pound bags. Having a full pantry is quite comforting.
We were contemplating buying a new car to replace our 20-year-old rice rocket, but instead we spent $500 to make the necessary fixes for it to pass inspection and keep going.
Probably we won't go overseas to travel this winter but we might not have anyway.
One of my friends has had four of her friends die recently, all about our age. She tells me repeatedly that DH and I made the right decision to live frugally, ER and enjoy our lives. I agree with her.

[freebird5825]

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Originally Posted by Goonie Regardless of your current age, I'm still much older than you. How's that for answering carefully?

if you ever run for office, you have my vote! LMAO

battening down the spending hatches is reminding me of my shoestring college days... i can't help but wonder how the folks on the lawn tractors "in debt up to their eyeballs" are faring. in any case, from reading all the posts here, we folks are not in danger of that. whew!

[Hamlet]

I wouldn't discount the possibility of inflation. This bailout bill, and whatever follows it (stimulus II?) are likely to have inflationary effects. The Senate loaded this up with $150 billion more in tax cuts with no off-setting spending cuts.

At some point, I have to imagine that somebody is going to start questioning the government's ability to re-pay all that borrowed money.

Frankly, I think all this talk about the credit markets being frozen are mistaken. The credit markets are looking for a reasonable rate of return for the risk they are taking in lending.

It's the ridiculously low rates in treasuries that are wrong, IMO, not the credit markets.

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Originally Posted by dex Many of the post I've read mention inflation - that will not be the issue. The dollar will strengthen - the USA is ahead of the world in this finance problem. It has lowered its rates - the other have to follow. People are buying dollars for safety - look at the FX markets. Commodities should come down because of the economic slowdown. The issue over the next few years will be low interest rates and low stock market rates of return.

[audreyh1]

Inflation will occur. But not in the immediate future! It's well established that pumping money into the system while the private sector is going through a credit crisis/deleveraging like crazy is NOT inflationary.

Two, three, five years from now? Maybe.

Audrey

[lazygood4nothinbum]

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Originally Posted by Walt34 If anything, we're spending more since I got a job that nearly doubles our income. Somehow, it's different when I know that working is forever optional.

especially now, that’s my idea of safe early retirement planning. gotta job for me?

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Originally Posted by dex Let me know if you want me to start another thread on this….All this talk about delaying retirement brings up the question: Do those people have two years of spending in cash or cash equivalents? Do those people have another two years of spending in a short term bond funds?...

no problem by me with either directly relevant or even tangential thinking.

even with all pre-advised safeguards in place, i’d think twice about retiring early off a cushy, depression-secure job right before this house vote or ramifications become clear. during threat of extraordinarily tough times, how much power does an “i told you so” have as indictment of perceived poor planning for what likely would have survived normally bad times? nuclear winter is also, hopefully, just (if at all) a once in a 100-year event. so what’s that plan? when does a 3-year cash bucket look reasonably safe or silly? how many early retirees on a 15-year cash bucket look down their noses at those with what could, under just the right circumstances, be a substandard 8-year bucket? who has time to dig a hole in the side of a mountain?

why wouldn’t i have reasonably thought (even while I was thinking under extreme emotional duress at the time) that i could soon enough replenish my 3-year cash bucket with after-tax dollars, not yet invested in the market, within at least two years of trying to sell a house (in a prime location) which i’ve continually priced well below even a falling market so that now it is below where it should have been had there been no bubble at all, yet still no buyers? tough to plan for a terrorist setting off a dirty bomb in your neighborhood; sometimes we’re just taking our chances. meanwhile, as long as i can hold on--with simply a low wage job or hopefully, depending on the severity of this thing, just some cost cuts--i’m not giving it away like i see others do. so how odd to highlight perceived fault with past preparations as an attack of current efforts to remain intact. whatever floats your boat. meanwhile, maybe more appropriate to the winds of the day: reef early and reef often.

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Originally Posted by Achiever51 Our plan was to sell this…Unfortunately the market didn't simply drop, it disappeared, and our house is now assessed for more than $100,000 less than we paid for it ten years ago

stunning to learn that i’m not in the worst of situations even among those doing better than most, that housing might actually have fared far worse elsewhere. how many could ever afford or might have had forethought that? which bucket should that have gone in, the one ya kick? my sympathies, achiever51.

so sometimes, especially when you can’t control world events, ya make do with what ya got. it becomes less constructive, for the moment, to look at what went wrong and more to find out how to survive from here, just like congress is hopefully trying to do. while the ship sinks is not the time to do a thorough structural inspection of the hull. given enough time, see if you can readily plug the hole. also, it is less important to see what you hit and more important to grab your ditch bag and ready survival. smooth sailing all.

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Originally Posted by Want2retire There are too many unknowns right now to get a handle on what is really going to happen with our economy…Our fears are being whipped up by and manipulated by the media, who stand to profit from our terror.

as much as i watch news, i look less at the media which i am well trained to see beyond and which didn’t even know how to explain the nature of this crisis, nor its possible fix, as this unfolded, rather, more at the interviewed economists and at politicians themselves. even if i didn’t have a lifetime’s experience of reading body language, it should have been fairly obvious to the untrained eye upon announcement of the senate vote that they walked up to the podium having had just shat in their pants. since these confidence guys are putting forth to the public such measures to build back the faith of this economy, which most people didn’t even know was falling apart until recently, i gotta suspect the story is bigger & scarier than what even the media reveals. my worst case scenerio, the more wrong i am, assuming this is not the time for paranoia, the safer i'll be.

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Originally Posted by ST in London I find the concept of imagining terrible things and being optimistic a bit difficult.

simple enough, plan for the worst, hope for the best. i’m an optimist in the long-run. though i realize that doesn’t always shine through all my fear-mongering.

[ST in London]

Uhhhh, I use "expect the best" for optimism and "no idea of what I speak" for hope.

Trans-Atlantic thingy maybe.
ST

[Hamlet]

Agreed. I'm just saying that the deflation we see short term is likely to be outweighed down the road by the inflationary effects of the vast amounts of money being pumped into the system.

It is interesting to watch the hedge fund selling crush the commodities and related stocks. I suspect that there will be an opportunity there at some point soon.

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Originally Posted by audreyh1 Inflation will occur. But not in the immediate future! It's well established that pumping money into the system while the private sector is going through a credit crisis/deleveraging like crazy is NOT inflationary. Two, three, five years from now? Maybe. Audrey

[audreyh1]

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Originally Posted by Hamlet Agreed. I'm just saying that the deflation we see short term is likely to be outweighed down the road by the inflationary effects of the vast amounts of money being pumped into the system.

I'm not sure about the "outweigh" argument.

1. We have to survive the next year or two first.
2. Money/Liquidity can be removed from the system.

Seriously, until we are back at a global expansion again, we can only "hope" for inflation.

Audrey

[template]

My wife and I are driving less due to the increased price of gasoline, but haven't made changes due to the recession at this point. We have been pretty frugal all along.

As I posted a few years ago, I confess to being more risk averse than most forum members. I reduced my stock mutual fund holdings to about 13% back about 2005 and have slept better since then.

Most of our portfolio is in US government insured assets.

My net worth (excl. house, cars, etc.) is down about 2.6% from its peak in May 2008 because stock mutual funds lost money, but my main concern is inflation.

[Gearhead Jim]

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Originally Posted by audreyh1 ... Seriously, until we are back at a global expansion again, we can only "hope" for inflation. Audrey

Well, the 1970's managed to have stagflation, we could do the same again now. Somewhat different causes but same results?

[Hamlet]

I just bought an old comic book for $300. That probably won't win me any frugality awards.

[audreyh1]

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Originally Posted by Gearhead Jim Well, the 1970's managed to have stagflation, we could do the same again now. Somewhat different causes but same results?

In the 1970s, we had forces (strong unions, etc.) that created a "wage inflation spiral". No such forces now.

Even though we had strong commodity inflation from the past two years, that did not translate into wage inflation at all. And now with a commodity bubble burst, that force is gone. We'll start to see disinflation on that front. And with the massive deleveraging going on now there are strong deflationary forces at work. In this kind of environment government pumping money into the system does not contribute to inflation.

Not saying it's going to be a cake walk - not by any means. But rampant inflation in the near future is not one of them.

Audrey

[dex]

Quote:

Originally Posted by audreyh1 Not saying it's going to be a cake walk - not by any means. But rampant inflation in the near future is not one of them. Audrey

I have to agree. Those with cash will be able to get great deals on everything in the near future.

[ziggy29]

Quote:

Originally Posted by audreyh1 In the 1970s, we had forces (strong unions, etc.) that created a "wage inflation spiral". No such forces now.

There still is in the public sector -- not so much huge increases in wages but huge increases in the cost of retiree health insurance and pensions. More and more cities and states could get Vallejo'd if they don't adapt.

[Zoocat]

Lazy, all your plans/what you're doing sound entirely sane and prescient, given the current econ climate. Today DOW was down 800 points at one moment. Things don't look good. I think it's wise to have Plan B, plan C, and plan D.

As for battening down the hatches

1. Mortage: I can't get rid of the mortgage until I sell and if I try to in this market, I'd lose money. So that's out for now, to be revisited in the spring when I see how things look.
2. Health Insurance: I can't go without health insurance and even if I got a job w/bennies, I doubt I'd feel certain that I would keep that job. So it's better that I keep my expensive individual health insurance.
3. Travel: that's out now. I'm glad I took some savings and earnings from my investments and did a lot of traveling last year.
4. Work: will be making further attempts to earn more money $$$. All of it will be saved. But it really makes me ill to think of taking a full-time, desk job and give up my freedom. The idea of having a boss again makes me nauseous.
5. Little savings: reduce restaurant meals, no clothing purchases, watch out for incidentals. All these can add up to a few hundred a month.


In the worst case scenario; sell the townhome, move to a cheaper location, take a job at Target. Well, it could be a lot worse. There could be no Target stores anymore, or jobs.