Worst year ever for the S&P....

[Lusitan]

Target Retirement 2035 here. Yay for me....

Well, yeah ... you're not going to escape the downturn with a target retirement fund. But chin up - that fund is automatically rebalancing for you.

I'm glad I don't have to rebalance during this market, because my target retirement fund is doing it for me. I just try not to look ...

 

[FinanceDude]

A bounce will come. Feeling better?

Dead Cat, or otherwise?

 

[haha]

I want to comment on the chart I posted above. For most of us, our entire investing lives have been spent with the idea that data from prior to WW2 is probably not very meaningful, because of institutional changes, smarter investors ( this was asserted by James K Glassman from the Washington Post who wrote Dow 36,000.) Ithink Jermey Siegal also promoted this idea. "Investors have finally igured out that the equity risk premium should be zero", blah, blah.

In light of this, I find it interesting that our current bear is the deepest fall from any peak since WW2. The other deep falls were during the long bear in the first 2 decades of the 20th century. And of course, El Oso Mayor 1929-1932.

By some other metrics since as smoothed PEs, those bottoms were much cheaper than today. And the bottoms in 1982 and 1974 although coming after a less steep fall, took valuations as measured by smoothed PEs lower than today's. It always looks hard when confronting it as a future; and incredibly obvious when looked at from the other side

It is like it always is, maybe the market will turn up soon, or maybe this is going to test those old levels which no longer seem so antique.

The only really simple way to invest is to use a conservative and appropriate AA, and let 'er ride.

Since this relentless crash, we tend to come up with all kinds of ad hoc prescriptions that appear as if they would have helped us avoid this mess. And they would have, had we been been able to know in advance just how this mess would unfold

An idea has become popular on the board lately that had we not been so dumb we would have pulled out last fall. Maybe, but it wohuldn't have been due to anything other than a hunch. Values last fall were pretty similar to values during the huge bull market of the 90s that enabled many of us to ER in the first place.

Suddenly Prof. Shiller is a hero, but all during early and middle parts of this decade any mention of Shiller attracted the obvious retort- "He would have got you out in 1996, and you would have missed the whole super bull market."

How many of us would be retired if we had rolled over our CDs year to year? (ignoring recients of early pensions.)

Ha

 

[harley]

How many of us would be retired if we had rolled over our CDs year to year? (ignoring recients of early pensions.)

I always ignore recipients of early pensions.

 

[freebird5825]

Firebird and 2B,
Thanks for the smiles! Yeah, I feel a tad bit better this a.m. Of course, the market hasn't opened yet. lol.

YW
i actually played the Disney site Tigger Bounce game. it was fun! once i got through 2 boards, the game got super fast. i need to practice more!

 

[DblDoc]

Bounce!

S&P up 6.3%
FTSE ex US up 8.4%

Enjoy it all weekend cuz who knows what will unfold next week...

DD

 

[Bestwifeever]

Yay! The Dow is down only 5 percent this week!

 

[newporttony]

An idea has become popular on the board lately that had we not been so dumb we would have pulled out last fall. Maybe, but it wohuldn't have been due to anything other than a hunch. Values last fall were pretty similar to values during the huge bull market of the 90s that enabled many of us to ER in the first place.

Suddenly Prof. Shiller is a hero, but all during early and middle parts of this decade any mention of Shiller attracted the obvious retort- "He would have got you out in 1996, and you would have missed the whole super bull market."

Ha

What irritates me the most is the large number of people now saying "it was obvious, you should have listened to Shiller, Roubini, Rosenberg, Schiff". It seems to me that these guys are ALWAYS bearish. In fact, Rosenberg, having revised his target for the S&P from 775 - 650 on Monday, took it down to 450 today!! I don't know, is he still right? Should I sell now? Schiff was on NPR last night talking about DOW below 5000 and gold at at least $5K. Is he still going to be right?

I know there are no answers. I am just frustrated and feeling pretty stupid for being apparently one of the only people that didn't see it coming.

 

[chinaco]

Let's focus on the positive! 1931 may have been the worst year for equities ever, but 1933 was the beat year for equities ever (+54%)! So I am still hoping for a very strong rally in 2009 or 2010!

54% would help. It would get us back to only a 25% loss from the peak.... in 2000 and 2007. We can hope!

 

[Moemg]

I want to comment on the chart I posted above. For most of us, our entire investing lives have been spent with the idea that data from prior to WW2 is probably not very meaningful, because of institutional changes, smarter investors ( this was asserted by James K Glassman from the Washington Post who wrote Dow 36,000.) Ithink Jermey Siegal also promoted this idea. "Investors have finally igured out that the equity risk premium should be zero", blah, blah.

In light of this, I find it interesting that our current bear is the deepest fall from any peak since WW2. The other deep falls were during the long bear in the first 2 decades of the 20th century. And of course, El Oso Mayor 1929-1932.

By some other metrics since as smoothed PEs, those bottoms were much cheaper than today. And the bottoms in 1982 and 1974 although coming after a less steep fall, took valuations as measured by smoothed PEs lower than today's. It always looks hard when confronting it as a future; and incredibly obvious when looked at from the other side

It is like it always is, maybe the market will turn up soon, or maybe this is going to test those old levels which no longer seem so antique.

The only really simple way to invest is to use a conservative and appropriate AA, and let 'er ride.

Since this relentless crash, we tend to come up with all kinds of ad hoc prescriptions that appear as if they would have helped us avoid this mess. And they would have, had we been been able to know in advance just how this mess would unfold

An idea has become popular on the board lately that had we not been so dumb we would have pulled out last fall. Maybe, but it wohuldn't have been due to anything other than a hunch. Values last fall were pretty similar to values during the huge bull market of the 90s that enabled many of us to ER in the first place.

Suddenly Prof. Shiller is a hero, but all during early and middle parts of this decade any mention of Shiller attracted the obvious retort- "He would have got you out in 1996, and you would have missed the whole super bull market."

How many of us would be retired if we had rolled over our CDs year to year? (ignoring recients of early pensions.)

Ha

Thanks for explaining the chart . I've been through several of these markets but this has been brutal probably because now I'm actually using some of the money before it was just on paper and occasionally paid for expensive travel now it is paying for groceries so even though I probably will not do it . I would like to think that next time and their will always be a next time I'll cut my losses at 20% and park a huge chunk until the market starts to recover . I know that goes against everything I've ever read but so does watching my hard earned money go down the drain .

 

[Bestwifeever]

I think planning in advance when you might want to cut your losses is as important as planning your asset allocation.

 

[2B]

I think planning in advance when you might want to cut your losses is as important as planning your asset allocation.

There's always the issue of when panic is the correct response. I am totally sure of one thing. I can't predict the future. I've reduced my equities to the point I can survive a non-end of world scenario with my CD stash for an indefinite period of time. DW (the real best wife ever ) may not like the lifestyle but we will be ok.

 

[Nords]

... but so does watching my hard earned money go down the drain .

Have you lost the principal you've invested in the market, or have you "lost" reinvested earnings?

You probably worked hard for the former, but not so much for the latter...

 

[ERD50]

I think planning in advance when you might want to cut your losses is as important as planning your asset allocation.

Easy to say - but how does one actually do this?

If you get out whenever there is a, say, 20% dip - how do you know when to get back in? You are very likely to have sold low, and then miss the swing back up, possibly buying high. Print out a chart of the S&P for 50 years, and try it - not looking in hindsight, but use some predetermined formula, and move forward in time. Cover up the 'future' and just make the buy/sell decision based on past/"current" numbers.

Let us know if you come up with a system that even worked in the past, let alone will apply to the future.

I know a lot of people promote the idea of "stop-loss" orders on their stocks. Sure it might save you from a big loss, but it also assures a lot of small losses, and missing some run-ups. If it was a winning strategy overall, I'm sure the mutual funds would use it and report amazing above-market returns with lower volatility.

-ERD50

 

[Bestwifeever]

Erd, argue at will (and I know you enjoy that ), but I'm not talking about getting out when the market is down 20 percent and predicting which way it will go. I'm talking about getting out when your nest egg drops 20 percent (if that's one's comfort number) and putting what's left into CDs, at the most basic level, or other holdings where you at least won't lose principal. No one can predict the markets but we can protect what we have and decide where that is.

Cutting your losses is a totally different concept from buying high, selling low or market timing--it's a personal factor imho. And for people who are past the accumulation phase, like me, it seems to be an important consideration--maybe I'll decide to forego potential run-ups to preserve the bulk of our capital at this point.

That is a good point Nords about hard working savings vs. earnings and growth on those savings--that is something we have always kept in mind when viewing gains and losses.

 

[youbet]

Bestwifeever..... Consider having an AA you can stick with through the ups and downs. Selling low to "protect" yourself will indeed preserve your remaining capital but it also manifests the decision to permanently accept that new, lower life style based on a smaller retirement portfolio.

What are your thoughts for Monday? "forego potential run-ups to preerve the bulk of your capital" or make a purposeful decision to hang on a little longer and wait and see?

I echo ERD50's sentiment. It's easy to look back over the past couple of years and see what you should have done. It's more challenging to say what you'll do Monday. BTW, what will you do Monday?

 

[Bestwifeever]

From Moemg: I would like to think that next time and their will always be a next time I'll cut my losses at 20% and park a huge chunk until the market starts to recover .

This is what I was responding to re determining your comfort level in advance for "cutting your losses." I don't see it as an asset allocation issue (we have an incredibly conservative AA, by the way). Maybe other people don't believe in cutting your losses--that's fine.

Personally on Monday I won't do anything other than get ready for Thanksgiving--what will you do? Reallocate?

 

[ERD50]

Erd, argue at will (and I know you enjoy that ), but I'm not talking about getting out when the market is down 20 percent and predicting which way it will go. I'm talking about getting out when your nest egg drops 20 percent (if that's one's comfort number) and putting what's left into CDs,

Not sure why you see it as arguing, I'm just trying to understand what it is you are proposing. Once I understand it, if it sounds good, I may want to follow your lead.

From what you just said, why would you wait for a 20% drop to go into CDs? - that means you lost 20%. If you want to be in CDs (or whatever), just do it. And, it also begs the question, 20% from where? It sounds like you are saying, once you retire, if your NW drops 20%, go to safety, is that it?

Honestly, I don't understand what your plan is.

-ERD50

 

[CuppaJoe]

....
Personally on Monday I won't do anything other than get ready for Thanksgiving--what will you do? Reallocate?

You're reading my mind. I'm defrosting the refrigerator as we speak, how retro is that? Let the holidays begin!

 

[2B]

Erd, argue at will (and I know you enjoy that ), but I'm not talking about getting out when the market is down 20 percent and predicting which way it will go. I'm talking about getting out when your nest egg drops 20 percent (if that's one's comfort number) and putting what's left into CDs, at the most basic level, or other holdings where you at least won't lose principal. No one can predict the markets but we can protect what we have and decide where that is.

That was the basis for me moving to 40% cash/CD in Aug 2007. I realized I was FI with that amount in cash. DW and I would have a modest but decent retirement on just that amount. That is all 100% FDIC insured or in a federal money market. I don't like the market's 50% tank but I am only seeing my luxuries in retirement being threatened and not my ability to retire.

note - I am now about 55% in cash and I am not going to rebalance out of cash into equities. The dollar amount in cash/CDs is a minimum number. It's only a question of rebalancing out of equities into cash when they recover to over 60% of my portfolio. I will move the equity portion around between large cap, small cap and foreign.

 

[youbet]

This is what I was responding to re determining your comfort level in advance for "cutting your losses." I don't see it as an asset allocation issue (we have an incredibly conservative AA, by the way). Maybe other people don't believe in cutting your losses--that's fine.

Personally on Monday I won't do anything other than get ready for Thanksgiving--what will you do? Reallocate?

Awwww.... just giving you a hard time cuz most of us are hypothesizing about what we should have done and few of us know what we'll do on the next trading day. If you do believe in cutting your losses, have you taken any action so far this downturn? If not, when will you? What's your trigger?

All I've done so far is to make a conscious decision to not rebalance yet. So, my AA has shifted from 62/38 to 44/56 over the past year or so. That makes me more conservatively postioned, but I haven't actually sold equities and bought fixed.

The decision grating on me is when to rebalance and to what level. History is history....... Monday is real.....

 

[Bestwifeever]

Not sure why you see it as arguing, I'm just trying to understand what it is you are proposing. Once I understand it, if it sounds good, I may want to follow your lead.

From what you just said, why would you wait for a 20% drop to go into CDs? - that means you lost 20%. If you want to be in CDs (or whatever), just do it. And, it also begs the question, 20% from where? It sounds like you are saying, once you retire, if your NW drops 20%, go to safety, is that it?

Honestly, I don't understand what your plan is.

-ERD50

You posted while I was posting my my post above your post.

Plan, schman--just made a comment re figuring out when one might want to consider cutting one's losses in advance. Sorry.

Standing by the comment re arguing....

 

[Bestwifeever]

Awwww.... just giving you a hard time cuz most of us are hypothesizing about what we should have done and few of us know what we'll do on the next trading day. If you do believe in cutting your losses, have you taken any action so far this downturn? If not, when will you? What's your trigger?

All I've done so far is to make a conscious decision to not rebalance yet. So, my AA has shifted from 62/38 to 44/56 over the past year or so. That makes me more conservatively postioned, but I haven't actually sold equities and bought fixed.

The decision grating on me is when to rebalance and to what level. History is history....... Monday is real.....

Or as I like to say, History is history and Monday is mystery. Or something like that .

I do believe in cutting one's losses--we did it several years ago regarding company stock when everyone else was just waiting for it come back up (it never did, of course)--but have not had to consider it in this downturn since we're at 10/90 since early summer (the 10 is all within Wellesley and Wellington--we are financial fraidy cats in our late 50s) so we are not down a material amount. I think we have about a 30% cushion over our barebones budget right now that figures in the worst case financial scenario for us.

I'm thinking we'll reconsider in two years, but for us personally I just don't see any point in moving anything soon.

(I know no one will ever invest in the BWE Investment Newsletter!)

 

[REWahoo]

(I know no one will ever invest in the BWE Investment Newsletter!)

Nope. Not until you can explain your criteria for recognizing when to pull the trigger on cutting one's losses.

 

[Bestwifeever]

Right now I'm concentrating on cutting celery and apples....