I can't believe I am thinking this [Panic and Survival 2008-09]

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
bigH
Posts: 957
Joined: Wed Mar 19, 2008 10:18 pm

Post by bigH » Mon Mar 15, 2010 9:11 pm

Gekko wrote:this was the thread that started to scare me. interesting to read now in retrospect.
Gekko,
this brings back memories (bad ones). I would have never bought cheaps stocks and then stayed the course without this board. It's my financial therapy.

I feel as though the worst is over but this story will take years more to play out. I know though that this board will help me weather future storms.

User avatar
Opponent Process
Posts: 5157
Joined: Tue Sep 18, 2007 9:19 pm

Post by Opponent Process » Mon Mar 15, 2010 9:25 pm

from the date Sheepdog (age 75 at the time) sold out a portion of his portfolio, 10/10/08, to today, the S&P 500 is only up about 5%. and I believe he still had (has?) a working spouse. I can't find any major flaws in his logic in regards to his personal situation. he just took some risk off the table.
30/30/20/20 | US/International/Bonds/TIPS | Average Age=37

User avatar
jeffyscott
Posts: 8242
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Post by jeffyscott » Mon Mar 15, 2010 9:40 pm

It's up over 30% actually. M* growth of $10,000 chart for VFINX shows $10,000 on Oct 10, 2008 would be worth $13,252.
Time is your friend; impulse is your enemy. - John C. Bogle

User avatar
Topic Author
Sheepdog
Posts: 5384
Joined: Tue Feb 27, 2007 3:05 pm
Location: Indiana, retired 1998 at age 65

Post by Sheepdog » Tue Mar 16, 2010 12:03 am

Interesting that you revived this. I enjoyed rereading it. When I started that conversation on 10/9/2008, I was in a bind, as you can read in my comments, but I did learn something and perhaps other retirees or near retirees did as well. When a person must take distributions to meet expenses, and I do monthly, an adequate "cash" account should be maintained so that they don't "have to" sell at market lows. Keep a sizeable cushion. I am doing what I said I would do.....I maintain the "cash" account from which I take distributions at a minimum of 3 years of needs. I sell stocks and bonds every few months to keep it up. When the next big downturn occurs, and it will, I will not have to sell any investments for at least 3 years. I won't get caught again.



(Note to Opponent Process: My spouse was not and is not employed. She was retired as was I.)


Jim
Just because it isn't your fault doesn't mean it isn't your responsibility....Josh Reid Jones

Eureka
Posts: 1123
Joined: Thu Apr 05, 2007 10:24 pm
Location: Illinois

Post by Eureka » Tue Mar 16, 2010 2:23 am

Sheepdog wrote:Interesting that you revived this. I enjoyed rereading it. When I started that conversation on 10/9/2008, I was in a bind, as you can read in my comments, but I did learn something and perhaps other retirees or near retirees did as well. When a person must take distributions to meet expenses, and I do monthly, an adequate "cash" account should be maintained so that they don't "have to" sell at market lows. Keep a sizeable cushion. I am doing what I said I would do.....I maintain the "cash" account from which I take distributions at a minimum of 3 years of needs. I sell stocks and bonds every few months to keep it up. When the next big downturn occurs, and it will, I will not have to sell any investments for at least 3 years. I won't get caught again.



(Note to Opponent Process: My spouse was not and is not employed. She was retired as was I.)


Jim
I've always had a healthy respect for cash, and I still do, despite the low yields.

Those of us who lived through it have learned a lot about our own risk tolerance the past 18 months. I have neither added nor subtracted money from my stock holdings since retiring in February 2007. Haven't sold any bonds, either, but bought some with cash. My asset allocation was 50/50 in April 2007. Now, it's 43 percent stocks.

neverknow
Posts: 2392
Joined: Fri Jun 05, 2009 4:45 am

Post by neverknow » Tue Mar 16, 2010 6:10 am

..
Last edited by neverknow on Mon Jan 17, 2011 10:56 am, edited 1 time in total.

User avatar
jeffyscott
Posts: 8242
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Post by jeffyscott » Tue Mar 16, 2010 7:06 am

Sheepdog wrote:When a person must take distributions to meet expenses, and I do monthly, an adequate "cash" account should be maintained so that they don't "have to" sell at market lows. Keep a sizeable cushion.
I agree, but it appears that you sold far above the low, actually...stocks went down another 25% by the following spring.

I would assume that when you are retired and taking distributions, you can count on dividends from bonds/bond funds as well as cash to avoid the need to sell in a decline. For example, if you have 40% bonds, 40% stock, 20% cash and the bonds yield 5% that would give you 2% of your portfolio value in dividends. If you are spending 4%, you could supplement that with 2% annual withdrawals from cash. This would mean, neglecting inflation, you would have about a 10 year cushion before being forced to sell stocks.
Time is your friend; impulse is your enemy. - John C. Bogle

User avatar
Dan-Fl
Posts: 204
Joined: Wed Jan 02, 2008 9:06 am

Interesting

Post by Dan-Fl » Tue Mar 16, 2010 8:26 am

I clicked onto this thread and thought what are we talking about. I just looked at my account and things seemed good. Than I noticed the dates. Yes, it was a frightening time, but I know by staying the course, I have survived well.
I have a very conservative AA, 80% fixed and 20% Equity, but through it my portfolio did well with less loss than most. It is now looking pretty much at all times highs. My Equity is almost back to peak and other amounts are high. So, staying the course worked for me. I am thankful to all of you and this site for helping in difficult and good times.
Dan-Fl

User avatar
DRiP Guy
Posts: 2241
Joined: Tue Feb 20, 2007 4:54 pm

Post by DRiP Guy » Tue Mar 16, 2010 9:18 am

I will use myself as a guinea pig so that hopefully any young savers, or aspiring near-early retirees can take stock, and consider.

Image

Now, my personal situation is that I have a paid-for home, (value ~250K), several autos, including one brand new, all paid for (~90K total depreciated value), all of the furnishings, fixings, accouterments, play toys, big screen, brand new front loading wash/dry and other appliances, etc, that will last me 5 to 10 years into retirement.

The reason I bring all those 'incidentals' up, is not to brag or anything (especially in this august body of wealth!) but to establish that with my single, LBYM lifestyle, and the basics covered, and no looming major known expenses out there, I had calculated that having 750 -800K investment assets would allow me to give a green light to early retirement. I would rather have had a million, to give some safety factor but who wouldn't? Even if my balance dipped some, I would have been confident, but this crash took me to just over 500k -- down nearly 30% right off the bat! So when I read this thread real-time, I understood the compulsion to 'stop the bleeding' and to move to safety. Some in the thread told OP to wait a month (from Oct 2008) and then if the market slumped even more (it had!) to then move to money markets. Folks, had I followed that advice, then that would have locked in my losses almost exactly at the ebb tide, and destroyed my own chances to start/maintain early retirement safely.

Instead, I stayed the course. It was not fun. But I did it. And look at what had to happen to correct the loss, and put me right -- thank goodness, the markets recovered, but 30%, the size of the original slump, would not have done it!!!!

Newbies in particular: We need to be sure to always calculate our percentages correctly. The correct formula is to look a the percentage change from what you started with, to what the result was. Many people do this basic operation wrong, and are not comparing apple to apples.

My balance is now up nearly 50% from the trough, yet I am just barely at my own 'go' threshold for pulling the ER plug.

Lesson: Losses hurt. A lot. The only thing that hurts worse, IMHO, is locking them in by trying to time the market at the worst possible time, in terms of outcome, and in terms of human behavior.

Stay the course.

User avatar
rustymutt
Posts: 3756
Joined: Sat Mar 07, 2009 12:03 pm
Location: Oklahoma

Post by rustymutt » Tue Mar 16, 2010 9:35 am

Sheepdog, we all feel your pain and are worried about the future of this nation and world. I took steps yesterday myself to ease my mind. I went from a 60/40 allocation to a 50/50. I switched from low cost funds, to lower costing ETF's. At least now if the market crashed, i can bail in mid day. Not sure if I would, but thats an option.
The other thing I suggest sheepdog, try to see the glass as half full, rather than half empty.
I'm amazed at the wealth of Knowledge others gather, and share over a lifetime of learning. The mind is truly unique. It's nice when we use it!

User avatar
xystici
Posts: 314
Joined: Thu Nov 19, 2009 4:40 pm
Location: San Diego, Boston & Barcelona

Post by xystici » Tue Mar 16, 2010 10:29 am

DRiP Guy wrote:I will use myself as a guinea pig so that hopefully any young savers, or aspiring near-early retirees can take stock, and consider.

Image

Now, my personal situation is that I have a paid-for home, (value ~250K), several autos, including one brand new, all paid for (~90K total depreciated value), all of the furnishings, fixings, accouterments, play toys, big screen, brand new front loading wash/dry and other appliances, etc, that will last me 5 to 10 years into retirement.

The reason I bring all those 'incidentals' up, is not to brag or anything (especially in this august body of wealth!) but to establish that with my single, LBYM lifestyle, and the basics covered, and no looming major known expenses out there, I had calculated that having 750 -800K investment assets would allow me to give a green light to early retirement. I would rather have had a million, to give some safety factor but who wouldn't? Even if my balance dipped some, I would have been confident, but this crash took me to just over 500k -- down nearly 30% right off the bat! So when I read this thread real-time, I understood the compulsion to 'stop the bleeding' and to move to safety. Some in the thread told OP to wait a month (from Oct 2008) and then if the market slumped even more (it had!) to then move to money markets. Folks, had I followed that advice, then that would have locked in my losses almost exactly at the ebb tide, and destroyed my own chances to start/maintain early retirement safely.

Instead, I stayed the course. It was not fun. But I did it. And look at what had to happen to correct the loss, and put me right -- thank goodness, the markets recovered, but 30%, the size of the original slump, would not have done it!!!!

Newbies in particular: We need to be sure to always calculate our percentages correctly. The correct formula is to look a the percentage change from what you started with, to what the result was. Many people do this basic operation wrong, and are not comparing apple to apples.

My balance is now up nearly 50% from the trough, yet I am just barely at my own 'go' threshold for pulling the ER plug.

Lesson: Losses hurt. A lot. The only thing that hurts worse, IMHO, is locking them in by trying to time the market at the worst possible time, in terms of outcome, and in terms of human behavior.

Stay the course.
Good for you... Impressive... I wonder what % of your total 750K have been your own contributions (approx)...

User avatar
DRiP Guy
Posts: 2241
Joined: Tue Feb 20, 2007 4:54 pm

Post by DRiP Guy » Tue Mar 16, 2010 11:17 am

xystici wrote:Good for you... Impressive... I wonder what % of your total 750K have been your own contributions (approx)...
Terrific question! Again, talking for a moment to the youngsters out there -- both your contributions and the earnings your earnings make (the miracle of compounding), plus the company match if any (get it all - it's free money!!!!) need to drive your own 'savings engine' and one or the other can pick up slack for a bit at different points that the other might falter (bad market conditions, or temporary job loss). But save you must, and the earlier you start the better.

Now to specifics:

I used to have that data spelled out directly and elegantly for the IRA portion when TRowe Price was our 401(k) custodian, but they changed, and I failed to keep tracking it. I suppose I could go back and recalculate it, but at this point, I have a nice reservoir to water ski in; I am not as concerned anymore what part was rain and what was influx from the creek.

I do remember the excitement and sense of awe that occurred the day that investment returns from the account finally started adding back MORE to the account than my own biweekly contributions did -- my money was now working as hard for me as I was!

One of the last statements I think I have that info on, as a snapshot, was in Sept 2006 (all balances of course include prior investment gains for amount in the category):

Employee before tax contributions: $283,088

Employer contributions -
Company match: $78,701
[defined contribution phase out plan]: $11,358
[old defined contribution balance carried forward]: $46,394
Total: $419,542

(this is just my 401(k), does not include market investments and savings outside of 401(k) )

User avatar
xystici
Posts: 314
Joined: Thu Nov 19, 2009 4:40 pm
Location: San Diego, Boston & Barcelona

Post by xystici » Tue Mar 16, 2010 2:20 pm

I do remember the excitement and sense of awe that occurred the day that investment returns from the account finally started adding back MORE to the account than my own biweekly contributions did -- my money was now working as hard for me as I was!
This my goal now. I do own (no mortgage) a home and was planning on buying a second (weekend) home in about 5-10 years from now with a 80-100% down-payment but not anymore after spending time on this forum. If I had to buy a second home, I would not make my money work for me as you are obviously.

Thanks for your posts.

User avatar
Orion
Posts: 512
Joined: Mon Feb 19, 2007 11:52 pm

Post by Orion » Tue Mar 16, 2010 2:46 pm

Good for you, DRiP Guy! I've been retired for some time already and have developed some hobbies that keep me from spending much time on the financial stuff. While I sometimes had the urge to pull some amount out, "stay the course" coupled with being too darned busy kept me from ever doing anything about that urge. Not paying too much attention has helped my net worth on several occasions now.

User avatar
DRiP Guy
Posts: 2241
Joined: Tue Feb 20, 2007 4:54 pm

Post by DRiP Guy » Tue Mar 16, 2010 2:59 pm

Orion wrote:Good for you, DRiP Guy! I've been retired for some time already and have developed some hobbies that keep me from spending much time on the financial stuff. While I sometimes had the urge to pull some amount out, "stay the course" coupled with being too darned busy kept me from ever doing anything about that urge. Not paying too much attention has helped my net worth on several occasions now.
It's funny, I wanted to see just how sweaty my palms were at the nadir, and so I searched for all my posts in Oct/Nov '08, and then esp around mid Nov '08.

the first I ran across I was gonna throw out as proof I was thinking LBYM, not about account balance, and how cool-handed I was:
http://www.bogleheads.org/forum/viewtop ... 060#332060

Yup, looking like Cool Hand Luke there... but then I saw this - was posted within days of my personal worth low point. My palms were plenty sweaty after all!
When I looked at my 401(k) balance this AM, I howled. I don't mean I figuratively was awfully upset, or that I said "damn" or something. No, I mean I LITERALLY uttered a low, long, sustained, guttural animalistic howl.

So, let no one mistake my stance, I am certainly in pain.
http://www.bogleheads.org/forum/viewtop ... 890#329890

Twarn't comfy, but I pulled through. Here were some slightly earlier posts:
http://www.bogleheads.org/forum/viewtop ... ht=#310714
http://www.bogleheads.org/forum/viewtop ... ht=#310675
http://www.bogleheads.org/forum/viewtop ... ht=#297473

8)

Ron
Posts: 6548
Joined: Fri Feb 23, 2007 7:46 pm

Post by Ron » Tue Mar 16, 2010 3:30 pm

Sheepdog wrote:...an adequate "cash" account should be maintained so that they don't "have to" sell at market lows.
I've often said "in retirement, cashflow is everything" - something I really did not understand before I retired.

I did set within my retirement IP a 3-5 year gross "cash bucket" that I would not have to sell during down periods. I sold some profits at the end of 2007 (I retired in the early part of that year) to "top off" my cash.

I just didn't plan on testing my "theory" so early in retirement. Part luck, part dumb luck, a little bit of planning.

My wife (still working, but could retire any day) also has this bucket approach set up at the same time as me (early 2007) so she holds a bit more cash than one would consider prudent, but that's OK.

Sometimes things do work out. Hopefully some pre-retirees understand how cash can be more than insurance - it lets you sleep well at night during troubled market periods.

- Ron

User avatar
Tyrobi
Posts: 697
Joined: Thu Jun 04, 2009 12:29 pm
Location: Florida
Contact:

Post by Tyrobi » Tue Mar 16, 2010 3:48 pm

Thank you for sharing the experience in this thread. I wasn't a member of the board back then, and it's very educating to reread this thread.
Three-fund portfolio | "Simplicity is the master key to financial success." John C. Bogle

User avatar
spam
Posts: 907
Joined: Tue Jun 10, 2008 9:47 am

Post by spam » Tue Mar 16, 2010 3:49 pm

retiredjg wrote:No Sheepdog. No!

If you capitulate, you will lose money. If you stick, it will eventually pay off. I'm sure your plan will survive this. As I recall, you have a very conservative AA, right?

So, you plan to sit it out, all in cash, after losing a big chunk? No, Sheepdog. No. Sit. Stay! Good dog!
Holy cow, what miserable and lousy advice this turned out to be.

User avatar
BlueEars
Posts: 3782
Joined: Sat Mar 10, 2007 12:15 am
Location: West Coast

Post by BlueEars » Tue Mar 16, 2010 7:20 pm

You can see above my previous posts during that awful Oct 08 period. My plans were also in disarray as I'd plan to buy more TIPS but with stocks down a huge amount (and no bottom in sight) the AA had me filled up with my TIPS allocation prematurely. To top it all off the TIPS were dropping (Larry did add a key word somewhat belatedly that TIPS "tend" to go up when stocks go down) big time too. Hopefully we will never have to experience another extreme stock episode as the 2008 decline, but my current plans take this lesson into account.

Thanks to Jim (Sheepdog) for being so open about his thoughts during those troubling times. Many of us were loath to expose the degree of fear and the portfolio mistakes we were grappling with. There are some posters that have a "professional" or "semi-professional" posting approach. I do not think that they are completely intellectually honest about investing. If your job depends on being rock solid when all around you are wringing their hands then I can understand wanting to be a rock-of-Gilbraltar type of guy. But otherwise we could all learn a lesson from Jim's candidness.

User avatar
DRiP Guy
Posts: 2241
Joined: Tue Feb 20, 2007 4:54 pm

Post by DRiP Guy » Tue Mar 16, 2010 8:23 pm

Les wrote: we could all learn a lesson from Jim's candidness.
Do you think my own links to quotes of my postings at the time, provided above, were somehow less than candid? Not sure I get what you are driving at.

User avatar
market timer
Posts: 6160
Joined: Tue Aug 21, 2007 1:42 am

Post by market timer » Tue Mar 16, 2010 8:26 pm

Sheepdog wrote:When a person must take distributions to meet expenses, and I do monthly, an adequate "cash" account should be maintained so that they don't "have to" sell at market lows. Keep a sizeable cushion. I am doing what I said I would do.....I maintain the "cash" account from which I take distributions at a minimum of 3 years of needs. I sell stocks and bonds every few months to keep it up. When the next big downturn occurs, and it will, I will not have to sell any investments for at least 3 years. I won't get caught again.
What if the next crisis is a loss of confidence in the dollar?

User avatar
BlueEars
Posts: 3782
Joined: Sat Mar 10, 2007 12:15 am
Location: West Coast

Post by BlueEars » Tue Mar 16, 2010 8:52 pm

DRiP Guy wrote:
Les wrote: we could all learn a lesson from Jim's candidness.
Do you think my own links to quotes of my postings at the time, provided above, were somehow less than candid? Not sure I get what you are driving at.
Hi DriP Guy, I'm not talking about any specific response and not about this thread in particular. It's just a pet peeve of mine, that some Bogleheads want to present a know-it-all front. Just would like to see the sort of humility and honesty that Jim gives us. Of course, we all have some strongly held beliefs and there is some good data to present and we all want to try to find a way through the wildness and find something to hang our hats on.

User avatar
DRiP Guy
Posts: 2241
Joined: Tue Feb 20, 2007 4:54 pm

Post by DRiP Guy » Tue Mar 16, 2010 9:09 pm

Les wrote:
DRiP Guy wrote:
Les wrote: we could all learn a lesson from Jim's candidness.
Do you think my own links to quotes of my postings at the time, provided above, were somehow less than candid? Not sure I get what you are driving at.
Hi DriP Guy, I'm not talking about any specific response and not about this thread in particular. It's just a pet peeve of mine, that some Bogleheads want to present a know-it-all front. Just would like to see the sort of humility and honesty that Jim gives us. Of course, we all have some strongly held beliefs and there is some good data to present and we all want to try to find a way through the wildness and find something to hang our hats on.
Fair enough. "Excessive Humility" is the rarest of crimes that we see prosecuted!

8)

MWCA
Posts: 2820
Joined: Fri Nov 30, 2007 4:21 pm
Location: A wonderful place

Post by MWCA » Tue Mar 16, 2010 9:57 pm

Someone who shows information about staying the course. Then you have another person who spouts off about great market timing and how they knew all along.

Thanks for providing the data Dripguy! :)
We are all worms. But I believe that I am a glow-worm.

User avatar
Boglenaut
Posts: 3090
Joined: Mon Mar 23, 2009 7:41 pm

Post by Boglenaut » Tue Mar 16, 2010 10:02 pm

My graph looks a lot like DRIP Guy's, just a different scale..

I had the opposite problem as Sheepdog. I was soooooooo tempted to break my AA and put more into stocks in March 2009 ("if I get out now, all this would have been for nothing...let's take advantage of it!"). But I realized that was an emotional response and resisted. As it was, my new money was going to 100% stocks and I had re-balanced into stocks several times already.

Even though I'd be further ahead if I broke my AA and bought more in March 2009, I am glad I did not. It would have been simply reckless. I watched "Cinderella Man" (Depression era movie) a few weeks later, and realized it could have gotten that bad!

So, just staying with the AA worked well and I am better off now than before it all began. I did wait a year and changed my AA 1% more conservative, but not in the heat of things. My main regret going in wasn't that my stocks went down, but that my aggressive AA didn't leave me much bonds to sell to buy stocks when I rebalanced. I delayed some major planned consumer purchases (TV, Landscaping, Etc.) so I could buy more stocks without breaking the AA.

User avatar
daytona084
Posts: 858
Joined: Mon Feb 01, 2010 10:47 pm

Post by daytona084 » Tue Mar 16, 2010 10:41 pm

Boglenaut Wrote:
My graph looks a lot like DRIP Guy's, just a different scale..
Me too! It's quite a familiar shape. It sure looks good today compared to 1 year ago. So happy I stayed the course!

clock98
Posts: 141
Joined: Wed Aug 20, 2008 11:22 pm

Website

Post by clock98 » Wed Mar 17, 2010 1:30 am

jeffyscott wrote:It's up over 30% actually. M* growth of $10,000 chart for VFINX shows $10,000 on Oct 10, 2008 would be worth $13,252.

Is there a website that calculated this for you or did you do it by hand?. I know that the adjusted historical prices on yahoo make this easy to determine, but I was just wondering if there wa sa website that lets you enter in various buy dates to run a hypothetical.

Thanks!

Gekko
Posts: 3779
Joined: Fri May 11, 2007 5:00 pm
Location: USA

Post by Gekko » Wed Mar 17, 2010 7:11 am

pretty good Bloomberg Radio show yesterday discussing this -

"Snapshot backwards one year – we couldn't see past Armageddon. We all need to come to grips with the idea that not a single one of us knows the future. We're all doing some educated guessing. And the fact is - history is replete – decades of it – where the masses are convinced of what's going to happen in the future and consistently they are wrong. It's why many people don't make money in the market - it's why mutual funds don't meet their indexes. Contrary thinking is going to keep you where the surprise is most likely. That doesn't mean the surprise will happen – it just means when it does your outsized returns will outweigh those paltry returns during those trading ranges." – Michael Williams – Genesis Asset Management – March 16, 2010

http://media.bloomberg.com/bb/avfile/Ma ... .B.XJw.mp3

User avatar
jeffyscott
Posts: 8242
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Website

Post by jeffyscott » Wed Mar 17, 2010 9:41 am

clock98 wrote:
jeffyscott wrote:It's up over 30% actually. M* growth of $10,000 chart for VFINX shows $10,000 on Oct 10, 2008 would be worth $13,252.

Is there a website that calculated this for you or did you do it by hand?. I know that the adjusted historical prices on yahoo make this easy to determine, but I was just wondering if there wa sa website that lets you enter in various buy dates to run a hypothetical.

Thanks!
I just used the chart feature at morningstar (M* is shorthand for Morningstar):

http://quote.morningstar.com/fund/chart ... ture=en-US
Time is your friend; impulse is your enemy. - John C. Bogle

clock98
Posts: 141
Joined: Wed Aug 20, 2008 11:22 pm

Re: Website

Post by clock98 » Wed Mar 17, 2010 8:17 pm

jeffyscott wrote:
clock98 wrote:
jeffyscott wrote:It's up over 30% actually. M* growth of $10,000 chart for VFINX shows $10,000 on Oct 10, 2008 would be worth $13,252.

Is there a website that calculated this for you or did you do it by hand?. I know that the adjusted historical prices on yahoo make this easy to determine, but I was just wondering if there wa sa website that lets you enter in various buy dates to run a hypothetical.

Thanks!
I just used the chart feature at morningstar (M* is shorthand for Morningstar):

http://quote.morningstar.com/fund/chart ... ture=en-US
Wow this is nice to have. Thanks~~!!

User avatar
Will do good
Posts: 869
Joined: Fri Feb 24, 2012 8:23 pm

Re: Thank you all..this is what I am doing

Post by Will do good » Fri May 27, 2016 1:23 pm

Sheepdog wrote:Thank you all so very much for talking to me. It helped being reminded what I have said in the past.
This is what I did and why. If I had followed the advice of many here, and sometimes myself, I would have kept 3 to 5 years of normal annual distribution for expenses in cash so that when times like this occur, I would not have to sell. I had mostly depleted my cash account last year. I had not kept it up. I just could not expect a 1929 type drop, not today.... So, I exchanged 3 years of our normal annual needs from my stock and bond funds to money market. This amount is 20% of our present IRA stock and bond investments. (It would have been a much less percentage a year ago....even a month ago.) This cash will remain in my IRAs and some will be pulled out monthly beginning in January. When the market improves I will replenish the cash account fully. I hate selling today, but I would have to sell some in January anyway and there is no way to expect things to improve by then, or even next year.
With luck I won't have to sell anymore stock or bond funds for three years.
Thanks again.
As I head toward retirement at end of year and thanks to this old post from Sheepdog, I plan to have 3 years expense in cash + 3 years in CD.
I fear history will repeat itself.
Last edited by Will do good on Fri May 27, 2016 7:33 pm, edited 1 time in total.

User avatar
BlueEars
Posts: 3782
Joined: Sat Mar 10, 2007 12:15 am
Location: West Coast

Re: Thank you all..this is what I am doing

Post by BlueEars » Fri May 27, 2016 2:54 pm

Will do good wrote:....

As I head to retirement at end of years and thanks to this old post from Sheepdog, I plan to have 3 years expense in cash + 3 years in CD.
I fear history will repeat itself.
One could also consider 3 years in a Treasury ladder instead of cash. Or even a short term Treasury fund. Treasuries did pretty well in 2008 and 2009.

User avatar
Will do good
Posts: 869
Joined: Fri Feb 24, 2012 8:23 pm

Re: Thank you all..this is what I am doing

Post by Will do good » Fri May 27, 2016 7:32 pm

deleted
Last edited by Will do good on Fri May 27, 2016 7:33 pm, edited 1 time in total.

User avatar
Will do good
Posts: 869
Joined: Fri Feb 24, 2012 8:23 pm

Re: Thank you all..this is what I am doing

Post by Will do good » Fri May 27, 2016 7:32 pm

deleted

david99
Posts: 658
Joined: Sat Mar 03, 2007 11:56 am

Re: I can't believe I am thinking this

Post by david99 » Fri May 27, 2016 8:18 pm

I agree that history will repeat itself. I also think that a CD ladder or treasury ladder is a good idea. You can always take some money out of a CD and pay the penalty.

User avatar
fortyofforty
Posts: 1620
Joined: Wed Mar 31, 2010 12:33 pm

Re: I can't believe I am thinking this

Post by fortyofforty » Fri May 27, 2016 8:49 pm

Market crashes are exhilarating to those with low balances and long horizons. For people with a lot of money in volatile assets, and who aren't psychologically prepared to ride out the storm (or, better yet, buy into it), crashes are hellish. I think, having lived through several crashes and much worse long-duration downturns, we can remind each other that markets have always come back, though sometimes it's taken many years to do so. I hope we don't see another crash (even though I have some cash to deploy in such a case) because it happens so fast it's hard to react, but given the choice I'd take the crash over the long bear. We'll see what happens, but remember that nobody knows nothin'.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

User avatar
munemaker
Posts: 4144
Joined: Sat Jan 18, 2014 6:14 pm

Re: I can't believe I am thinking this

Post by munemaker » Fri May 27, 2016 11:27 pm

fortyofforty wrote:Market crashes are exhilarating to those with low balances and long horizons. For people with a lot of money in volatile assets, and who aren't psychologically prepared to ride out the storm (or, better yet, buy into it), crashes are hellish.
Fortunately I don't know anyone like that.

User avatar
Topic Author
Sheepdog
Posts: 5384
Joined: Tue Feb 27, 2007 3:05 pm
Location: Indiana, retired 1998 at age 65

Re: I can't believe I am thinking this

Post by Sheepdog » Sat May 28, 2016 12:42 am

I awoke at 1 am, turned on the computer, and opened this continued thread of mine from 2008. It must have been buzzing around to get me to look at it at this time of night.
There is this little new story to tell:
I must have been having a premonition that this was coming back a few days ago.
I had written this in the opening thread in 2008
Today did it. I am just starting to be scared so that I won't tell my wife what happened today
and just a couple of days ago I told my wife for the first time about what had happened then...yes, not then, but just now. I didn't want her to feel the pain of the time. I read to her what I wrote then and told her about what happened and about the so called "cash" accounts which were setup. She knew about them, of course, but just didn't know what instigated them She said she had no idea of the panic I was feeling at that time.
Anyway, I am ready for the next time with plenty of safety, especially plenty for this 83 year old. I really don't have "cash" other than our checking account, but instead 1.5 years of equivalent normal distributions in the short term investment grade bond fund available when needed and about 1 year of normal distributions in 5 year 3% CDs which I should not now need for expenses (except for maybe a new auto when they mature in Jan. 2019) because I purchased in 2012 and 2013 SPIAs from the "cash" accounts which along with SS are covering all of our normal annual spending. That is great for us, especially, my lady's future well-being if I become incapacitated. We are all set.
Just because it isn't your fault doesn't mean it isn't your responsibility....Josh Reid Jones

xxd091
Posts: 92
Joined: Sun Aug 21, 2011 4:41 am
Location: UK

Re: I can't believe I am thinking this

Post by xxd091 » Sat May 28, 2016 4:55 am

Hi Sheepdog
Never underestimate the good you do.
As a long time Boglehead from across the Pond -reading you thread again steadies the ship as UK enters Brexit mode-admittedly not a worldwide meltdown I hope but could be tough for UK citizens.
Staying the course,diversified(relying on the US!) and having enough cash in hand is the way to go.
Your thread should be mandatory reading for us all!
You helped a lot of people
Well done and thanks again,
xxd09

User avatar
AtlasShrugged?
Posts: 699
Joined: Wed Jul 15, 2015 6:08 pm

Re: I can't believe I am thinking this

Post by AtlasShrugged? » Sat May 28, 2016 6:27 am

Sheepdog...This was a great thread, I have to tell you. As I read it, it brought me back in time to then, 2007-2010. I had a job (still with same BigCorp today) but it was an absolutely terrifying time. Enough about that. Now I have some questions for you. I am hopeful that you will see this and have an opportunity to answer.

Looking back, and knowing what you know now - would you have done the same thing (sell off assets to cover 3 years of expenses)?

Looking back, would you have had enough cash assets to 'ride out' the worst of the market storm? I define market storm as September 2008 through April 2009. I am asking if you had enough cash to meet expenses had you done nothing back in 2008.

Looking back, and knowing what you know now - what would you have done differently, and why? I am not talking about market timing, but I am wondering about things like, 'when I saw that things were starting to head south, I started making sure my asset allocation was X' or something similar. I am interested in how you as a retiree and investor 'thought and acted'. We can be our own worst enemy, right? So from a behavioral perspective, I am interested in the 'thoughts' and 'behaviors from those thoughts' as you recall them.

Now for the big question. I am 15-20 years from retirement (age 50) - maybe sooner if I get a little lucky. It is highly likely that I will experience 1-2 'big bears' in this time. And after I retire, 1-2 more 'big bears'. If there was one thing to tell a younger man about how to behave through those periods of market turbulence - what would that one thing be?

If Taylor Larimore sees this....I hope he answers the last question as well. What is 'the one thing'?
“If you don't know, the thing to do is not to get scared, but to learn.”

Eureka
Posts: 1123
Joined: Thu Apr 05, 2007 10:24 pm
Location: Illinois

Re: I can't believe I am thinking this

Post by Eureka » Sat May 28, 2016 6:56 am

That was all pretty unpleasant to read again. We all learned a lot about our risk tolerance during the meltdown. I came through it without selling or buying more equities. I have taken 1 or 2 percentage points off the table from time to time over the past few years of bull market as my asset allocation has exceeded 50 percent stocks.

It's fortuitous that this thread popped back up now, as I'm at about 52+ percent equities now and have been pondering whether to lighten up. They say pain has no memory, but Bogleheads does. I think I'll be doing a little rebalancing next week.

I've been retired nine years now, and I'm 62. So far, so good, I guess.

User avatar
empb
Posts: 783
Joined: Tue Aug 11, 2009 1:22 pm
Location: E1W

Re:

Post by empb » Sat May 28, 2016 8:13 am

PlainJane wrote:
I hear it's amazing how much a small part-time job will do for you in situations like yours. Even $5000 a year is the equivalent of having an extra $125,000 in your portfolio, cash-flow-wise. Not talking CEO here, maybe small retail store, greeter, light maintenance, whatever.
That is an amazing statement and one I had never really thought of before. Somehow it gives me a lot of comfort. I am going to add this to my list of things I am learning during this adventure.

-Jane
The above is a real gem that may have been lost in this discussion. Obviously, it takes a little bit of mental chicanery, but the notion that earning $10,000 is putting $250,000 'back' into your portfolio just when you need it most I also find very comforting.

dbr
Posts: 30577
Joined: Sun Mar 04, 2007 9:50 am

Re: Re:

Post by dbr » Sat May 28, 2016 11:31 am

empb wrote:
PlainJane wrote:
I hear it's amazing how much a small part-time job will do for you in situations like yours. Even $5000 a year is the equivalent of having an extra $125,000 in your portfolio, cash-flow-wise. Not talking CEO here, maybe small retail store, greeter, light maintenance, whatever.
That is an amazing statement and one I had never really thought of before. Somehow it gives me a lot of comfort. I am going to add this to my list of things I am learning during this adventure.

-Jane
The above is a real gem that may have been lost in this discussion. Obviously, it takes a little bit of mental chicanery, but the notion that earning $10,000 is putting $250,000 'back' into your portfolio just when you need it most I also find very comforting.
That looks like a mathematical fallacy to me. The extra income is only equivalent to that large an increment to the portfolio if that income is sustained for an entire retirement, thirty years time or more. I don't think the suggestion is to work part-time from age 65 to age 95. It would be true if it really were sustained income, such as a higher Social Security benefit or obtaining a larger pension payout. What would also have that effect would be reducing expenditures by that amount for the entire thirty years.

User avatar
iceport
Posts: 4118
Joined: Sat Apr 07, 2007 4:29 pm

Re: I can't believe I am thinking this

Post by iceport » Sat May 28, 2016 11:35 am

JCE66 wrote:Looking back, and knowing what you know now - would you have done the same thing (sell off assets to cover 3 years of expenses)?

Looking back, would you have had enough cash assets to 'ride out' the worst of the market storm? I define market storm as September 2008 through April 2009. I am asking if you had enough cash to meet expenses had you done nothing back in 2008.
Hi JCE66,

I'm not as wise nor as experienced as Sheepdog and Taylor Larimore, but hope you will indulge my comment.

This question introduces the risk of drawing a false conclusion. As the market history has unfolded, we know now that the broad US equity market recovered (including dividends) in less than two years. There was no way that eventual fact could have been known at the time.

More important for you to consider now: There is now way for us to know today how long the next recovery will take. You should not expect — not for one second — that the next market crash will be as short-lived. It could be ten months, or ten years. In this instance, "recency bias" extends all the way back to 2008/2009, in considering the most recent crash. It would be wise not to expect the next crash to be the same as the last, even though our brains want to assume it will be.
"Discipline matters more than allocation.” ─William Bernstein

User avatar
AtlasShrugged?
Posts: 699
Joined: Wed Jul 15, 2015 6:08 pm

Re: I can't believe I am thinking this

Post by AtlasShrugged? » Sat May 28, 2016 11:50 am

Iceport....Great point,
There is now way for us to know today how long the next recovery will take. You should not expect — not for one second — that the next market crash will be as short-lived. It could be ten months, or ten years.
I remember 73-74, but I was a little guy then. And I distinctly remember 81-83. And 01-03 just did not have the 'feel' of the others, though in some ways it was probably worse.

I am interested in the behavioral aspects of investing, more than anything else. What were people thinking and feeling, how did it influence their behavior, and in hindsight - was there anything they would change (and why). What I do know is that we will see more 'big bears', so I want to make certain that I can recognize behavioral pitfalls early, and try my best to avoid them.
“If you don't know, the thing to do is not to get scared, but to learn.”

scone
Posts: 1457
Joined: Wed Jul 11, 2012 4:46 pm

Re: I can't believe I am thinking this

Post by scone » Sat May 28, 2016 11:51 am

Thank you, Sheepdog. You had the guts to tell it like it is, even if it was very unpleasant. I've learned a lot from you, especially about the value of cash, which, quoting Yogi, "is just as good as money!"
:sharebeer
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

User avatar
iceport
Posts: 4118
Joined: Sat Apr 07, 2007 4:29 pm

Re: Thank you all..this is what I am doing

Post by iceport » Sat May 28, 2016 11:56 am

Will do good wrote:
Sheepdog wrote:Thank you all so very much for talking to me. It helped being reminded what I have said in the past.
This is what I did and why. If I had followed the advice of many here, and sometimes myself, I would have kept 3 to 5 years of normal annual distribution for expenses in cash so that when times like this occur, I would not have to sell. I had mostly depleted my cash account last year. I had not kept it up. I just could not expect a 1929 type drop, not today.... So, I exchanged 3 years of our normal annual needs from my stock and bond funds to money market. This amount is 20% of our present IRA stock and bond investments. (It would have been a much less percentage a year ago....even a month ago.) This cash will remain in my IRAs and some will be pulled out monthly beginning in January. When the market improves I will replenish the cash account fully. I hate selling today, but I would have to sell some in January anyway and there is no way to expect things to improve by then, or even next year.
With luck I won't have to sell anymore stock or bond funds for three years.
Thanks again.
As I head toward retirement at end of year and thanks to this old post from Sheepdog, I plan to have 3 years expense in cash + 3 years in CD.

I fear history will repeat itself.
Thank you, Will do good, for reviving this thread. Still deep in the accumulation phase at the time, and with lots of other issues going on, I hadn't followed this thread. Now within a year of my earliest possible retirement, it has more meaning to me, personally.

Sheepdog's experience supports my chosen approach of having 20% of the portfolio broken out into "safe" (cash, and cash-like) investments, and the remainder invested as it was in the accumulation phase (70/30 equities/fixed income). That 20% is roughly 5 years of 4% annual withdrawals. Sometimes when I read posts observing that using a bucket approach is nothing more than a behavioral frailty*, I question the wisdom of a cash-like bucket. The kind of first-hand, real-world experience documented here lends credibility to the concept.

Thanks Sheepdog.

* Those with portfolios several multiples larger than needed might have the luxury of disregarding the types of cash flow issues the rest of us could encounter in a severe market crash.
"Discipline matters more than allocation.” ─William Bernstein

sport
Posts: 8432
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: I can't believe I am thinking this

Post by sport » Sat May 28, 2016 12:13 pm

A market decline like this is the reason my allocation in retirement is 35/65. If there is a really bad stock market decline, say 60%, that would give me about a 20% decline in my portfolio. I can live with that type of situation indefinitely. In that situation, I could buy more stocks, or I could just "sit tight" and wait for an eventual recovery. In 2008, I did not buy more stocks because the crisis was a very scary situation.

User avatar
BlueEars
Posts: 3782
Joined: Sat Mar 10, 2007 12:15 am
Location: West Coast

Re: I can't believe I am thinking this

Post by BlueEars » Sat May 28, 2016 12:37 pm

iceport wrote:
JCE66 wrote:Looking back, and knowing what you know now - would you have done the same thing (sell off assets to cover 3 years of expenses)?

Looking back, would you have had enough cash assets to 'ride out' the worst of the market storm? I define market storm as September 2008 through April 2009. I am asking if you had enough cash to meet expenses had you done nothing back in 2008.
Hi JCE66,

I'm not as wise nor as experienced as Sheepdog and Taylor Larimore, but hope you will indulge my comment.

This question introduces the risk of drawing a false conclusion. As the market history has unfolded, we know now that the broad US equity market recovered (including dividends) in less than two years. There was no way that eventual fact could have been known at the time.

More important for you to consider now: There is now way for us to know today how long the next recovery will take. You should not expect — not for one second — that the next market crash will be as short-lived. It could be ten months, or ten years. In this instance, "recency bias" extends all the way back to 2008/2009, in considering the most recent crash. It would be wise not to expect the next crash to be the same as the last, even though our brains want to assume it will be.
I totally agree with your thoughts Iceport. I've done a chart that lines up 3 bad declines (starting in 1929 and 1987 and 2008) at their peaks. About 9 months out from the peak they were pretty much indistinguishable. As we know now, the outcomes were quite different further out from those declines.

Miriam2
Posts: 2666
Joined: Fri Nov 14, 2014 11:51 am

Re: I can't believe I am thinking this

Post by Miriam2 » Sat May 28, 2016 1:10 pm

Sheepdog wrote:I awoke at 1 am, turned on the computer, and opened this continued thread of mine from 2008. It must have been buzzing around to get me to look at it at this time of night.
There is this little new story to tell:
Sheepdog - :happy
I appreciate so much all your posts and the mountain of help you have given everyone over the years.
Your posts also reveal your incomparable personal warmth and a delightful sense of humor.
I, like many others, never knew this thread existed, but I'm so grateful you created it and continue to add your thoughts. :happy

Post Reply