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

Posted: Thu Oct 09, 2008 6:09 pm
by Sheepdog
I have been retired for 10 years. I am one who has said over and over again. Stay the course. Look for the long term. Yeah, sure. That's fine until today. Today did it. I am just starting to be scared so that I won't tell my wife what happened today...stocks down...bonds down...I'm down. Our retirement funds are sucking down the drain. I lost today alone a year's worth of normal distributions for expenses. I keep thinking tomorrow will be a turn around. I have said that for 30 days.
I am 25% capitulating tomorrow, maybe 50% to money markets....maybe all.

This is not me. I will see tomorrow.
Jim

Re: I can't believe I am thinking this

Posted: Thu Oct 09, 2008 6:13 pm
by Ariel
Sheepdog wrote:I have been retired for 10 years. I am one who has said over and over again. Stay the course. Look for the long term. Yeah, sure. That's fine until today. Today did it. I am just starting to be scared so that I won't tell my wife what happened today...stocks down...bonds down...I'm down. Our retirement funds are sucking down the drain. I lost today alone a year's worth of normal distributions for expenses. I keep thinking tomorrow will be a turn around. I have said that for 30 days.
I am 25% capitulating tomorrow, maybe 50% to money markets....maybe all.

This is not me. I will see tomorrow.
Jim
I have no nvestment advice to offer, although I'm sure others will chime in with some. All I will say is good luck to you, my friend, and to everyone, in these trying times.

Posted: Thu Oct 09, 2008 6:19 pm
by White Coat Investor
Move enough that you feel you did something, but not so much that your course is dramatically changed. Small course changes are much better than abandoning the ship.

Posted: Thu Oct 09, 2008 6:21 pm
by retiredjg
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!

Re: I can't believe I am thinking this

Posted: Thu Oct 09, 2008 6:21 pm
by PaPaw
Sheepdog wrote:I have been retired for 10 years. I am one who has said over and over again. Stay the course. Look for the long term. Yeah, sure. That's fine until today. Today did it. I am just starting to be scared so that I won't tell my wife what happened today...stocks down...bonds down...I'm down. Our retirement funds are sucking down the drain. I lost today alone a year's worth of normal distributions for expenses. I keep thinking tomorrow will be a turn around. I have said that for 30 days.
I am 25% capitulating tomorrow, maybe 50% to money markets....maybe all.

This is not me. I will see tomorrow.
Jim
I have been retired for over 7 years. I feel your pain. Hopefully, we will look back on this before too long and laugh with our children and grandchildren about how we almost lost it all in the gloom days of October 2008. I remember stories from my grandmother about how at one point in the 1930s her, her husband with 3 children were down to their last 10 cents but they managed to muddle through; literally their last 10 cents. Best wishes for whatever you decide to do.

.... PaPaw

Posted: Thu Oct 09, 2008 6:26 pm
by ZZ
I won't try to sway you in either direction, but you use the word 'capitulating' as if you were falling on your sword.

ZZ

Posted: Thu Oct 09, 2008 6:30 pm
by livesoft
Unfortunately, many people will have to fall on their swords for this to be over. The sooner you all capitulate, the better it will be for the rest of us. :)

Posted: Thu Oct 09, 2008 6:31 pm
by IlliniSigEp
Try this... Don't look at what the market does for another month. Impossible? Well probably, but the fact that we are all being blasted with the fact that the world is going to end is probably not helping your mindset.

-Dave

Posted: Thu Oct 09, 2008 6:32 pm
by InvestingMom
Sheep Dog....
Don't do it! Please read what Larry said today...here is his post:
http://www.bogleheads.org/forum/viewtopic.php?t=25059
Here is what he said:
We have the equity risk premium rising from two fronts now
Valuations are falling,but also the riskless alternative is now zero.

So what are investors doing--many are panicking and selling just when the expected returns are now far higher than they were when they were buying.

This type behavior is exactly why investors earn Dollar Weighted Returns well below the Time Weighted Returns of the very funds in which they invest.

The great equity returns come from very short bursts that are unpredictable, the fat tails are 6x what a normal distribution would predict.

Here is an amazing stat. From 1900-2006 if you miss the best one hundred days you have less than your original investment. And that of course ignores 107 years of inflation. Of course the other tail is wide too--if you missed the worst 100 days your return grows astronomically. But those days are less than one tenth of one percent of the days so the odds of timing the market succcessfully are terrible, which is why Lynch concluded that far more money has been lost anticipating bear markets than in bear markets and Bernard Baruch said that only liars manage to be in bull markets and out of bear markets.
Ah well, if you can no longer sleep, do what is right. But I like Emerg Docs advice...maybe harvest some losses and know that at least you won't be paying as much taxes.

Posted: Thu Oct 09, 2008 6:38 pm
by Rodc
IlliniSigEp wrote:Try this... Don't look at what the market does for another month. Impossible? Well probably, but the fact that we are all being blasted with the fact that the world is going to end is probably not helping your mindset.

-Dave
My situation was quite different in the last down turn in 2001-2003 or so, but I got through that one, my first really, by setting my new money deposits to 100% S&P 500 index fund and closing my eyes for two years. I'm not sure that was really optimal but it is what it took, and it worked pretty well in the end.

I don't think I'd walk away for that long as a retired person, but not watching to closely can be helpful.

Best of luck.

FWIW: this has strengthened by thoughts on the benefit of having enough in pensions (if lucky enough to have one), social security and annuities to put a decent floor under you so if push comes to shove you can hunker down and ride out such a storm with selling too deeply into principle, even if that means I will likely leave less to my kids.

Posted: Thu Oct 09, 2008 6:38 pm
by InvestingMom
IlliniSigEp wrote:Try this... Don't look at what the market does for another month. Impossible? Well probably, but the fact that we are all being blasted with the fact that the world is going to end is probably not helping your mindset.

-Dave
I like this idea too. Even stay off of this board. I find a lot of the posts very negative...most unintentional but some very intentional.

Posted: Thu Oct 09, 2008 6:38 pm
by edge
Yes, this is very painful and I cannot relate to a retiree who is heavily reliant on their portfolio.

However, I will say this - I have not made any changes. Time to rebalance.

Posted: Thu Oct 09, 2008 6:39 pm
by Enzo IX
Sheepdog,

Don't know your exact situation, but I have the same view as the other posters, don't completely capitulate, maybe do a partial to cover your short-term expenses. Nobody here knows the bottom but this calamity cannot last much longer. Selling now locks in that loss, by the time you know it's safe again, your reentry point will be much higher.

Take Care,

Doug

Staying the course

Posted: Thu Oct 09, 2008 6:43 pm
by Jeremiah
I feel exactly like sheepdog does. I have stayed the course since 1987 and I don't know how much of my money other people have gotten by the shares I have bought, but I have been good for them. (Note: I just now joined this forum so I am sure all this has been discussed to death, but I still need to vent, sorry). Why didn't I cash out at DOW 14K? I guess I thought it would go higher....duh. Or why not in December? Or March? Or May? In May I bought the International Stock Index in my IRA from my pension money that I moved from Nationwide. I have now lost 1/2 of it. I also bought Inflation Protected Securities which have dropped in value. I thought bond funds should be safe. I am 65 and wonder if I will ever get my money back or will end up depending on SS for my retirement. If so, it will be a short one. I am about ready to follow the panic crowd and save what I can. I can always buy back in later. (When I sell, I always wonder who is buying?) I earned good money over my career, I wish now I would have just kept it in a money market, so much of it is gone. This unprecedented worldwide crises is scary beyond belief, and if anyone thinks a worldwide depression is impossible, consider that when the Fed runs out of money, the Treasury will have to start printing it, and the U.S. credit rating will drop. Then what? The DOW hit 8500 today, and tomorrow it should drop to 8,000 or less. I guess if you are willing to wait 5 years for a DOW of 10,000 this is the time to buy. We are a long ways from the market bottom. As a Boglehead newbie, prove to me my fears are groundless....make me feel better.

Posted: Thu Oct 09, 2008 6:52 pm
by norak
I'm 24 so my portfolio is pretty aggressively set, with only 10 per cent in bonds, but I don't have hundreds of thousands invested. So far I think I've lost about $7000 or so. That's still pretty painful for me since this is the first bear market I've been through.

Posted: Thu Oct 09, 2008 6:56 pm
by CodeMaster
Whatever you do dont panic sell!!! Youll REALLY lose out!!!

Re: Staying the course

Posted: Thu Oct 09, 2008 7:14 pm
by InvestingMom
Jeremiah wrote:I feel exactly like sheepdog does. I have stayed the course since 1987 and I don't know how much of my money other people have gotten by the shares I have bought, but I have been good for them. (Note: I just now joined this forum so I am sure all this has been discussed to death, but I still need to vent, sorry). Why didn't I cash out at DOW 14K? I guess I thought it would go higher....duh. Or why not in December? Or March? Or May? In May I bought the International Stock Index in my IRA from my pension money that I moved from Nationwide. I have now lost 1/2 of it. I also bought Inflation Protected Securities which have dropped in value. I thought bond funds should be safe. I am 65 and wonder if I will ever get my money back or will end up depending on SS for my retirement. If so, it will be a short one. I am about ready to follow the panic crowd and save what I can. I can always buy back in later. (When I sell, I always wonder who is buying?) I earned good money over my career, I wish now I would have just kept it in a money market, so much of it is gone. This unprecedented worldwide crises is scary beyond belief, and if anyone thinks a worldwide depression is impossible, consider that when the Fed runs out of money, the Treasury will have to start printing it, and the U.S. credit rating will drop. Then what? The DOW hit 8500 today, and tomorrow it should drop to 8,000 or less. I guess if you are willing to wait 5 years for a DOW of 10,000 this is the time to buy. We are a long ways from the market bottom. As a Boglehead newbie, prove to me my fears are groundless....make me feel better.
It is too bad that you landed here right now because you are in panic mode. The world is not coming to an end. Jeremiah, if I were you I would turn off all media and start reading. Go to Investing-Help with Personal Investments on this forum and read Laura's sticky about Investment planning. Also check out the library on this forum and start reading the boglehead's book. You need to start by coming up with an asset allocation plan that you can live with and stick with. It seems obvious that you have been chasing the investments which have been doing well at the moment...buying high and selling low. Stop the market timing. Sheep dog is capitulating because he/she did not choose a good asset allocation plan (Sheep dog, I hope you will not be offended. Many of us are being tested to the max and even I had wished I had been more conservative...but I am still hanging in.). Here is the site on this board:
http://www.bogleheads.org/forum/viewtopic.php?t=6211

It is very difficult to understand what you own right now and so you should consider posting your investments in the same spot as well, following Lauras second sticky which tells you how to ask portfolio questions. Go here:
http://www.bogleheads.org/forum/viewtopic.php?t=6212

Do it asap, and perhaps you can get some good meaningful advice to help you make some moves right now, if appropriate.

Posted: Thu Oct 09, 2008 7:32 pm
by Rose21
Hi, Jim. Consider the judicious and temporary use of something like TBT (double inverse long-term treasuries) instead of jumping ship on your stocks and bonds at this late date. In the event that the bond market continues to decline along with stocks, it will insulate you from some of the carnage. And you'll get to enjoy some upside if we get the expected sharp rally in stocks.

Posted: Thu Oct 09, 2008 7:37 pm
by hamishdad
The market may lose another 1000 points, perhaps more. It may not begin to recover until sometime late next year, but at some point, you will hear about the biggest one day point gain in history. Since you have ridden this hell ride down, your best chance of getting it back is to hang on until it recovers.

Posted: Thu Oct 09, 2008 7:37 pm
by Ricola
Sheepdog, please post your thought after you sleep on it. Many of your posts have given me confidence. I especially enjoyed the post about the depression and men coming to the house asking for food in return for doing chores. We are a long way from that type of situation. You do what you need to do, but also suggest you read Bill Shultheis blog titled Stay the Course: http://newsite.coffeehouseinvestor.com/?p=172

Lets here from you tomorrow.
:)

Posted: Thu Oct 09, 2008 7:39 pm
by bozo
livesoft wrote:Unfortunately, many people will have to fall on their swords for this to be over. The sooner you all capitulate, the better it will be for the rest of us. :)
That was unkind. I assume you had a bad day.

Bozo

Posted: Thu Oct 09, 2008 7:46 pm
by dmcmahon
What will you do if you run to 100% cash and the end result of this mess is that the printing presses run flat out until things reflate and/or inflate? In that scenario, you'll be crushed on the other end. I'm not suggesting a particular course of action here, but I think it's useful to be hedged against different scenarios.

If we crash into a world-wide depression, everyone's out of work, and the prices of stocks, houses, etc. all tank, well, what does that say about the price of food, energy, or hiring a plumber? Think those costs will be going up? Your fixed-income investments should last much much longer in purchasing power terms if that unhappy scenario unfolds.

On the flip side, if we see a resurgence of inflation, then ownership of tangible assets and vital industries is your only real protection against going broke in purchasing power terms in your old age. Think about the worst-case here - a gallon of milk costs $20, etc. Now what (if you're all cash)? Is it possible that in this scenario the shares of companies that produce these things are still heading to zero? Supposing that a huge number of companies in the S&P 500 go bankrupt, including really big household names. Have any of them survived? Do you think (for example) Proctor & Gamble is going to go bankrupt? Johnson & Johnson? Exxon? Caterpillar? Monsanto? Wells Fargo? Berkshire? I could go on and on.

The sad reality is that, at least in a taxable account, you have no chance of beating inflation using safe fixed-income investments because taxes are levied annually and are levied even on the portion of the return that is purely inflation. Think taxes are going to go down from here?

Sheepdog, I don't know your situation. Certainly, you should only have a level of risk exposure that you're comfortable with. My mom's been all cash since the S&P was at 1350. She's 79 and has an inflation-indexed pension from the US government, so, frankly, she can afford to thumb her nose at the second scenario. I can't, so I'm riding this out.

Posted: Thu Oct 09, 2008 7:47 pm
by jh
...

Posted: Thu Oct 09, 2008 7:51 pm
by Linda
Sheepdog,

Don't forget the advice you gave to "my 72 y/o worried mom" yesterday.

I know you must have a LOT more in this fund then she does and her circumstances are different then yours. I wish you the best in whatever you end up doing.

Linda

Posted: Thu Oct 09, 2008 7:53 pm
by Jethro2007
Hey all,

Sorry to hear about your circumstances and your choices..

I tried to do one shift, today, in asset classes from Bond to MM and had to sell off some of another fund to complete the deal...I thought another $100 worth of the equity fund was sufficient to sweeten the pot...ahahahahhahahahah...

The market went down so much...The redemption fee was included and I ended up coming up short by about $4-8...ahahahahahhahahaha...I sat down and thought; How much I had lost by this deal, earlier in the day...The email from the company never showed up...Hence, the deal never went down...

I was estimating an $800 loss to save $3000, to cash...Yikes, pricey...Now, I haven't lost anything and am still holding my bond fund...Lesson learned...I am holding at all costs, now...

I still say, Bring it!!! I am down less than the market, stilling holding cash, which is becoming a larger percentage of portfolio...and have time on my side...

Best of luck to all in these trying times...More cross winds coming...

My solace is that macdaddy2 has lost more today than the equity portion of my portfolio...ahahahahhahahahahahahahhaa...Nice market timing, mac...ahahahahahhahaa...

Re: I can't believe I am thinking this

Posted: Thu Oct 09, 2008 7:53 pm
by Hemispheres
Sheepdog wrote:I have been retired for 10 years. I am one who has said over and over again. Stay the course. Look for the long term. Yeah, sure. That's fine until today. Today did it. I am just starting to be scared so that I won't tell my wife what happened today...stocks down...bonds down...I'm down. Our retirement funds are sucking down the drain. I lost today alone a year's worth of normal distributions for expenses. I keep thinking tomorrow will be a turn around. I have said that for 30 days.
I am 25% capitulating tomorrow, maybe 50% to money markets....maybe all.

This is not me. I will see tomorrow.
Jim
I think it's perfectly appropriate to re-evaluate your investment strategy when there's a crisis. This bear has been particularly grinding. It's also not reassuring to see unprecedented measures being taken by the government to stop the bleeding. Things really do seem different this time.

Maybe you should sell a small percent of your stock, say 10%. See if that helps relieve the stress a bit (doing something, even a relatively little bit, seems to help me).

I think there's going to be a direct government intervention in the stock market tomorrow morning. President Bush is going to have some sort of statement, too. We saw this sort of thing in the 1990s.

Ask not should you panic but how can you avoid panicking

Posted: Thu Oct 09, 2008 7:56 pm
by djw
Your bond interest income will not change unless a bond issuer goes belly up.
How much of your current expenses can be met by your semi-annual bond interest?

Your stock dividends and capital distributions WILL change some, but if you're invested in lots of different stocks through a mutual fund, that will temper the change. Immediately change your elections with all of your mutual funds to have your divs and cap gains sent to your checking account or money market fund. This will provide some more of the money you'll need to meet your expenses.

Need more money to meet your expenses? How about looking first at what has gone down the LEAST instead of what's gone down the MOST? If I needed a big chunk of cash right this minute, the first thing I'd sell are my TIPS, which don't mature for 5 years but will fetch a good price today.

The LAST thing I'd sell is my VEIEX (Emerging Markets Index) which is down 57% from its 52-week high. I'm expecting that fund to come roaring back sometime in the next few months and I don't want to miss the upside. I can always buy more TIPS later in the secondary market and I won't have missed out on very much in the meantime.

The reason most AA's stress having a substantial percentage invested in bonds for retired folks is to carry you through difficult times like these. Your bonds are your life jacket, so take advantage of them while you wait patiently for your submerged equity investments to return to the surface. Always remember to sell high and buy low, not the other way around.

Posted: Thu Oct 09, 2008 7:58 pm
by Judsen
Sheepdog, I've read your posts for a while now and I will be very surprised if you capitulate.
I just can't believe that "panic late" is your style.
My encouragement is: Do what you must but let your head rule your heart.
Regards, Jud
PS I'm down 31% and waiting on S&P 800 to add.

Re: Staying the course

Posted: Thu Oct 09, 2008 8:00 pm
by ZZ
Jeremiah wrote:As a Boglehead newbie, prove to me my fears are groundless....make me feel better.

No one can prove your fears are groundless.

I have/had a box in my closet from 1987. On the side in a mark-a-lot is/was written 'panic 87 open only in emergency only' (I have a warped futuristic/note to self humor). After 20 years, I opened it 2 weeks ago.

I at this point, don't even trust banks.

Inside were 3 VHS tapes of the market crash '87 recorded from the only financial TV show then called FNN- Financial News Network and a lot of notes on 3"x5" paper. I called a friend who still had an old VHS player and borrowed it. 2 aged tapes busted on start up and one worked for about 10 minutes before popping. One of the news anchors was Bill(something) who I saw on some TV channel just last week. If you could have seen the FEAR in his eyes on that fuzzy old tape as he reported the DJIA on that day, everything you see & hear now would seem mundane. Another guy came on and said 'we have just witnessed the shortest bear market in history' (he has been proven correct) then the clown Robert Prector of Elliot Wave came on predicting the end of life as we know it. Then the tape popped, so I can't post it on UTube.

Most of the notes were about dealing with customers in panic mode, that I will not bore you with except the last one in a sealed envelope. It said... if you are reading this, you are freaking out. Always bet on the U.S.A.

I am archiving this on Google titled - ZZNote To Self in future 2008. If everything works out for you, that's you business. If it doesn't, don't call me to complain after 6PM, I'll be drinking fine wine while cleaning my shotgun.

ZZ

Re: Staying the course

Posted: Thu Oct 09, 2008 8:04 pm
by newport1
ZZ wrote:
Jeremiah wrote:As a Boglehead newbie, prove to me my fears are groundless....make me feel better.

No one can prove your fears are groundless.

I have/had a box in my closet from 1987. On the side in a mark-a-lot is/was written 'panic 87 open only in emergency only' (I have a warped futuristic/note to self humor). After 20 years, I opened it 2 weeks ago.

I at this point, don't even trust banks.

Inside were 3 VHS tapes of the market crash '87 recorded from the only financial TV show then called FNN- Financial News Network and a lot of notes on 3"x5" paper. I called a friend who still had an old VHS player and borrowed it. 2 aged tapes busted on start up and one worked for about 10 minutes before popping. One of the news anchors was Bill(something) who I saw on some TV channel just last week. If you could have seen the FEAR in his eyes on that fuzzy old tape as he reported the DJIA on that day, everything you see & hear now would seem mundane. Another guy came on and said 'we have just witnessed the shortest bear market in history' (he has been proven correct) then the clown Robert Prector of Elliot Wave came on predicting the end of life as we know it. Then the tape popped, so I can't post it on UTube.

Most of the notes were about dealing with customers in panic mode, that I will not bore you with except the last one in a sealed envelope. It said... if you are reading this, you are freaking out. Always bet on the U.S.A.

I am archiving this on Google titled - ZZNote To Self in future 2008. If everything works out for you, that's you business. If it doesn't, don't call me to complain after 6PM, I'll be drinking fine wine while cleaning my shotgun.

ZZ
ZZ,
What a great post. I am going to find a way to memorialize the crash of '08.

Posted: Thu Oct 09, 2008 8:05 pm
by Raybo
I've been retired for 8 years and am only in my mid-50s. It is hard to watch years of expenses evaporate in one day, day after day. The only thing that makes this palatable is that I have several years expenses in cash or equivalents (Cash, CDs, or I-bonds). While I hate seeing my retirement pile ooze money, I know that I can hold on for several years before I have to even consider selling mutual funds.

I keep this much cash precisely for this reason.

Ray

Posted: Thu Oct 09, 2008 8:08 pm
by Ilovevolleyball
Hello Sheepdog,

My first thought when I head about the market being down today is how I would feel if I were retired and my losses were magnified x 10 or by 30 times the amount now down.

I think I would feel terrible. And I am sure that you must feel horrible.

Good luck to you.


Mike

Posted: Thu Oct 09, 2008 8:15 pm
by Sheepdog
Ricola wrote:Sheepdog, please post your thought after you sleep on it. Many of your posts have given me confidence. I especially enjoyed the post about the depression and men coming to the house asking for food in return for doing chores. We are a long way from that type of situation. You do what you need to do, but also suggest you read Bill Shultheis blog titled Stay the Course: http://newsite.coffeehouseinvestor.com/?p=172

Lets hear from you tomorrow.
:)
Ricola,
Thank you for that. I do so remember those coming to the basement door in the late 30s asking for a sandwich. I was born with nothing, but I don't want to go down with nothing. Tomorrow morning will be another day......
Like I said, this is not me..
I have always (at least after 1987) said Stay The Course and I have. I have said that to so many since I first appeared at the Diehard forum in 1999. I believed it and practiced it.

Okay, I'll sleep on it and be back tomorrow. In any case, I feel I will cash out on at least 2 to 3 years of expenses so that I won't have to think about doing more....just wish I had done that 3 months or better than that a year ago.
Thanks to all of you for your comments and support.

I'll sleep (like a baby) on it.

Sigh.

Another sigh, I can't even make a Manhattan to sleep on it. I have no bourbon.
My Old English Sheepdog is lying at my feet though, looking at me not caring a bit about any of this. A dog is happy if she has a warm home, food in her dish, and someone who loves her and has someone she can love. Dogs know how to live. We should all follow their lead.
Sigh.
Jim

Posted: Thu Oct 09, 2008 8:17 pm
by retired at 48
Hi sheepdog.

C'mon Jim, first and most importantly, your moniker picture with that dog is always a pleasure to view. That dog seems pretty stable.

I know it's tough, as I am in consumption phase, too. But here's a few thoughts:

Warren Buffet says he buys businesses. The stock price is simply a quote/bid one is making each day for his businesses. Most days he ignores the quotes. Some days the quotes are even ludicrous. But every once in a while, someone makes an overvalued quote. Then he sells.

Consider your portfolio as a collection of businesses. The return is usually returned earnings (dividends) and perhaps some real growth, especially if one expands the company. Total future return is strongly dependent on dividends and dividend growth (Professor Seigel studies, and others.)

So let's get back to basics. What undergirds a portfolio is the dividend return. This is the safety cushion. Albeit such dividends may be lowered, we are reaching a point where dividends alone are exceeding anything you could earn in a money market or many bond funds.

Where will you run to with your money? I suggest you review your portfolio, and perhaps make some same day switches into businesses (stock funds) with high dividend payouts, is the answer. Steer clear of high financial based funds. By doing this, you would get the same returns as bond funds, but with a great chance for equity appreciation.

You would not be capitulating. Rather, performing a continuing portfolio assessment, which says: Gee, I'm retired, I should have been more cognizant of the protections afforded by dividend paying stocks. I'll switch into some now. You pick up safety, increase income returns, and maintain equity positions.

Gee, sounds so good I may do this :!: No, I am doing this.

And keep a little international in mind, as a candidate to switch into, as these funds are getting killed. Here's one, EFV, iShares MSCI EAFE Value Index (EFV) with about a 7% current dividend yield. Similar USA based funds exist.

Then, sit back with that dog and watch the hedge funds forced liquidation selling. In about 30 days it should be done, and a huge one-day rally probably ensue. But your comfort will be in owning businesses that will pay you for owning them...dividends.


To a fellow retiree, good luck.

retired at 48

Posted: Thu Oct 09, 2008 8:19 pm
by superlight
I feel for you guys who are seeing this in your retirement. I can't say what I'd do ... and certainly not what anyone else should do.

I do think things are seldom all one thing or another. People tend toward false dichotomies. There is a lot of 1930's talk, Great Depression talk, etc. ... I don't think we're all that. But neither are we, necessarily, at the best buying opportunity "evar!"

I think there is a good possibility that we could have a not too terrific decade in front of us (esp. if we start the clock in 2006), but anything can happen. When it does it will probably be a variation on an old theme, rather than a rerun of any old movie.

So, given that basic uncertainty, the possibility of gains ... and market prices that are lower than in a while ... the Boglehead strategy might be a good one.

... we just need to start our clocks again, at an S&P 500 at 900 ... and think that's where we "bought" the portfolios we just "inherited" this afternoon.

Posted: Thu Oct 09, 2008 8:57 pm
by SteveB3005
Money is moving from weak hands to strong hands. The markets rise precedes the economies recovery because valuations become so attractive the strong money moves in. Bow up friend, have the strong hands.

Posted: Thu Oct 09, 2008 9:01 pm
by RTR2006
Truth is, this is the first time for probably most or all of us. It's simple math:

Probably none (and I do mean NONE of us at all except for maybe 12-24 people in total who post on this board) of us have ever been through this before. How long have we all been Bogleheads? A year? A month? Ten years? This is probably the first test of what we've been believing we believe for all these months or years.

Well, do we believe it? We believe this because we believe we believe what John Bogle, Taylor, Mel, Larry, Rick, Laura, and countless others have expressed over all these hundreds of thousands of posts over so many years:

1. Develop a proper asset allocation based on your age and risk tolerance (ah, we're all testing that one these days, aren't we...?)

2. Buy low cost, index mutual funds because you can't really time the market.

3. Stay the course.

4. Read #3.

5. Read #4.

and so on.

If we believe all this, then these are the times we've been planning for. It's Part B on this great investing test we're taking called preparing for retirement.

Don't capitulate. It's all right here. It's always been right here.

Don't panic. This too will pass. Not tomorrow and not next week. But it will.

You have my word.

RTR

Posted: Thu Oct 09, 2008 9:02 pm
by Eureka
Sheepdog wrote:Another sigh, I can't even make a Manhattan to sleep on it. I have no bourbon.
Man dad loved manhattans. I still have half a bottle of bourbon in the cupboard that he left here the last time he visited in fall 2000. He died at age 68 in spring 2001. You're just in the next state over. If you want to drive to "the college home of President Ronald Reagan," I'll give the bottle to you. :)

This is the best thread I've ever seen on Bogleheads, because it shows we really are in crunch time. I retired in February 2007 with a 50/50 balanced portfolio, but I've lost a huge amount of money. I have had thoughts similar to yours.

The fact that you, Sheepdog, are thinking about capitulating gives me hope that we really are close to the bottom, because stout hearts are weakening under this relentless pounding of bad news. I'm just saying what livesoft said, but in a more sensitive way.

At the very least, this is not a time to make all-in or all-out moves. Whatever you decide, I wish you the best.

Posted: Thu Oct 09, 2008 9:09 pm
by SkepticalGuy
Hey sheepdog,

Do what you gotta do, but please do consider the notion of doing it in steps instead of a big bang.

I'm sure none of us retired folks would hold it against you whichever way you decided to go, though. It's just flat-out tough to watch what this market is doing to our accounts.

Good luck.

Posted: Thu Oct 09, 2008 9:11 pm
by Lbill
Nothing can be said that will help. One lesson only - if you can't survive in retirement with 20% or less in stocks then it's too early to retire. I've always believed the risk isn't worth the reward and that sooner or later somebody besides me would believe it too. Sadly, we're becoming a community of believers...

Posted: Thu Oct 09, 2008 9:14 pm
by renditt
Sheepdog
I feel for you, I really do, but it would be a HUGE mistake if you move money out of stocks in a big way now.

Imagine someone would have told you 1 year ago when the market reached all time highs, that you could buy stocks with a 40% discount - how much would you have bought???

Sure the economy will have a rough time and we will most likely have a global recession, but do you really think the future earnings power of the US and the rest of the world has changed so dramatically in the last year? Of course not. If anything, you should be buying more stocks to get back to your target AA, not selling.

The problem is the mental accounting in our heads, that we are thinking about all those losses and how bad they make us feel. Just forget about the past and imagine you would invest your money fresh now in the market. Surely you would put something into stocks at these levels.

Good luck!

Posted: Thu Oct 09, 2008 9:16 pm
by renditt
This article in the NYT might help as well:

http://www.nytimes.com/2008/10/09/busin ... ref=slogin

Posted: Thu Oct 09, 2008 9:28 pm
by leonard
sheepdog wrote:My Old English Sheepdog is lying at my feet though, looking at me not caring a bit about any of this. A dog is happy if she has a warm home, food in her dish, and someone who loves her and has someone she can love. Dogs know how to live. We should all follow their lead.
Sheepdog - you say "we should follow their lead". My advice would be to take your own advice literally. Grab the lead (leash) first thing tomorrow morning, get the dog, and take the dog on a walk to her favorite place.

Leave the computer off.
Leave the TV off.
Don't read the paper.

Just grab the dog and go first thing. Pets are shown to lower blood pressure for owners. And, I would guess that it would be nearly impossible for you to worry about all this stuff if you are having a good time with your dog.

It will let you take your mind off this for a few hours. Then, I would guess you might view all of this a bit differently.

Re: I can't believe I am thinking this

Posted: Thu Oct 09, 2008 9:29 pm
by RobG
Sheepdog wrote: I am 25% capitulating tomorrow, maybe 50% to money markets....maybe all.
Individual Tips and CDs are looking pretty good. Why not migrate some of your bond funds to those items... a perfectly logical move that will ensure safety and returns better than MM.

When worried, I sometimes do a weird thing that works for me... move a small amount (say 2-5%) of the volatile investment into money market.

Fixate on that move. For me, I feel real smart if the market continues to tank for making the right call. On the other hand if the market goes up I feel real good for not selling all of it. This is totally irrational, but it works for me.

rg

Posted: Thu Oct 09, 2008 9:41 pm
by bearcub
Ricola, thanks for the link to the coffeehouse investor.Bill S. is a that slap in the face I sometimes need when I get delusional thinking.

Posted: Thu Oct 09, 2008 9:45 pm
by BlueEars
Don't know if this data for the SP500 in recessions will make you feel better or worse:

Code: Select all

1973  down 38%  in 21 months  (understated because of inflation)
1980  down 27%  in 13 months		
1990  down 19%  in  3 months		
2000  down 49%  in 31 months	(growth bubble, SP500 loaded with it)	
2007  down 42%  in 12 months to date	
The low in 2002 was on Oct 9th and here we are another Oct 9th but 6 years in the future. Would you have sold on Oct 9th 2002? If so, you'd have timed the low perfectly.

I'm retired too. This hurts but my actions are to make sure the FI side is rock solid (been buying TIPS too) and decided not to rebalance. Retirees have a natural rebalance since they sell some FI to live on. Right now my theory is to rebalance several months into the start of the recession (we're probably in it but only for a few months now).

Hope some of these thoughts helps others.

YOUR RESPONSES

Posted: Thu Oct 09, 2008 10:28 pm
by Jeremiah
Are very interesting. First, my allocation for a long time has been 33% cash (Prime MM, 33% bonds (Intermediate and High Yield Munis ,) and 33% stocks ( Index 500 and Health Care fund) for the most part. I invested in most of these funds about 10 years ago, except for the Index 500 in which I have been invested since 1987, and have never sold any shares. Even today, if I sold them, I would show a capital gains profit, but not as much as compared to a year ago. Short term panic is one thing, considering looking back at 5 year periods in which there were actually negative returns, there are only 3. However, who of you have seen financial crises in all markets, including China and Russia, like we are seeing now? This is not a normal bear market of the U.S. stock market, but a worldwide capital liquidity freeze the likes of which we have never seen before, including during the 1929 depression. This depression was largely limited to the U.S., and now is not. it appears to me all the pundits are trying to gloss over the reality of the situation, and are unrealisticallly optimistic. Is it the end of the world? No, but it is the end of the investing environment as we have known it for a long time, and it will take many years to recover. In my opinion those who sell even at this juncture and who have cash in hand will be the winners for a long time. Right now, to my mind, the crowd knows something I don't, and I think I will follow it. My only regret is that I didn't do it sooner. But sheepdog and I will be at our computers at the opening bell, and we can always get back into the market when the Index 500 goes back up to $84 (closed today @$83.84). Yes I admit 20 years from now none of us will remember this, but in my case, that will most likely be because I am dead, LOL.

Please stay calm!

Posted: Thu Oct 09, 2008 10:34 pm
by DiehardDoc
Quote:
Brama says this is barely a bear market. That is not completely true, it is not a bear market at all, not even barely. It just reached the definition of a "Correction" which is a 10% downturn. We have a good ways to go before we are in a bear market.
Just taking this poll shows non experience with volatility when investing in stocks and bonds. You were evidently not around in October 1987 when the US Market dropped 22.6% in one day on Oct. 19. By the end of that October, stock markets in Hong Kong had fallen 45.8%, Australia 41.8%, Spain 31%, the United Kingdom 26.4%, the United States 22.68%, and Canada 22.5%. Many sold everything and said that they would never invest again. Never.
Interestingly, 1987 ended the year with a gain for the entire year. The high that year had been in August, though. It did take 2 years to return to that August high.
The point is the market has always recovered. I don't know when, and no one else does either. We could have a major terrorist attack to our country and the market would go down precipitously. It did in 2001. We recovered then and we would recover again. The Dow Jones average has gone from the 10/17/87 closing of 1,739 to yesterday's closing of 11,347 even with the recent downturn. That is in just barely over 20 years. Notice I did not say recent losses, I said recent downturn. We have lost nothing unless we sell


Rereading your post has helped me to stay calm and given me courage and confidence to stay the course.

Dieharddoc
Sheepdog,

This is what I posted last night to specifically thank you.

Younger generation is seeking wisdom and guidance from experienced investors like you.

Please know that we are here to support you, just like you were there to support us when we needed it.

People have gone crazy, they are not thinking right now, they are having a panic attack.

When this panic subsides, I believe this downturn will reverse the course quickly.

DiehardDoc

( I too have paperlosses of over 10 years of my annual expenses so far.)

Posted: Thu Oct 09, 2008 10:54 pm
by diasurfer
Hang in there buddy!

Posted: Thu Oct 09, 2008 11:11 pm
by mephistophles
Stay the course, old friend. That is the logical thing to do. That is the right thing to do. Have you ever been sorry for doing the right thing.

Regards,
ole meph