U.S. stocks in free fall

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VictoriaF
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Re: U.S. stocks in freefall

Post by VictoriaF »

nisiprius wrote:That doesn't quite feel right to me... my own contributions, I'm pretty sure, were bimodal. Actually built a very important foundation in my earlier earnings years, slacked off when we acquired kids, a mortgage, and college tuition expenses, then increased again. Too bad they don't give a source or say where the data came from.
With time, duration in a job becomes shorter, periods of unemployment longer, and the pressure to cash a 401(k) plan stronger. These factors may account for a shorter investment horizon.

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Re: U.S. stocks in freefall

Post by wesgreen »

Maybe this stat is influenced by the many cases when investors don't stay the course and fiddle around. Then the clock probably resets? Anyway, holding stocks past age 65 seems crucial to me. I think a study of bogleheads might come up with different results.
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Re: U.S. stocks in freefall

Post by livesoft »

nisiprius wrote:That doesn't quite feel right to me... my own contributions, I'm pretty sure, were bimodal.
Perhaps, but I recall being limited by maximum contribution levels when I was younger. I have a 403(b) that I contributed the max possible from 1987-1993 and it has remained essentially untouched since. The reality is that this account is only about 10% of our current total portfolio value. And IRAs in those days were also relatively limited in contribution level.
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Re: U.S. stocks in freefall

Post by wesgreen »

The buy-and-hold investor need not contend with just the "fear factor," wesgreen, but actual *risk* as the market can remain low longer than the buy-and-hold investor can remain solvent. And that risk is higher the shorter one's duration of savings.

(Addressing the risk requires recognizing valuation, of course, and that way madness lies.)


Or you could address it with a more conservative AA, right? I think I got it now, thanks again.
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Re: U.S. stocks in freefall

Post by JW-Retired »

wesgreen wrote:Maybe this stat is influenced by the many cases when investors don't stay the course and fiddle around. Then the clock probably resets? Anyway, holding stocks past age 65 seems crucial to me. I think a study of bogleheads might come up with different results.
I don't think so. We did polls here until they were discontinued for moderator reasons. This old poll shows plenty of Bogleheads hold lots of stocks past age 70.
http://www.bogleheads.org/forum/viewtop ... 2#p1224012

Given the poor bond returns Boglehead stock holdings are probably a bit more now.
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Re: U.S. stocks in freefall

Post by pbv »

<edit>
Last edited by pbv on Thu Jan 28, 2016 12:40 pm, edited 1 time in total.
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Re: U.S. stocks in freefall

Post by james22 »

Thanks for finding, nisiprius.


What is the Time Horizon of a DC Plan Participant?

Assumptions:
Starting Salary: $50,000
Salary Increase: 1%/year
Retirement Age: 65

Effective Investment Horizon Duration of Savings: (Time- and Dollar-Weighted)

25-Year Old (Contribution rises gradually over time from 9.5% to 13.3%): 12.01 Years

35-Year Old (Contribution rises gradually over time from 10.8% to 13.3%): 10.35 Years

45-Year Old (Contribution rises gradually over time from 11.4% to 13.3%): 7.97 Years

55-Year Old (Contribution rises gradually over time from 12.6% to 13.3%): 4.72 Years

nisiprius wrote:That doesn't quite feel right to me...
I don't believe most begin to save for retirement before 45. Should they count on any 8 year period to give them the long-term market average return?
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Re: U.S. stocks in freefall

Post by HomerJ »

james22 wrote:I don't believe most begin to save for retirement before 45. Should they count on any 8 year period to give them the long-term market average return?
I guess I understand what they are saying... Someone who starts at 45 and only saves 10% isn't going to have a good pile of money until 57 or so.

But by then, they are too close to retirement to put a lot in the stock market, so they better stick with bond returns, and hope they can live on Social Security...

I'm not getting the 25-year-old stats though... Even saving only saving 10%, they should have a decent amount saved by 40, which gives them 25 years in the market...
For example, consider the scenario of a 25 year-old plan participant who earns $50,000 in her first year, gets a 1% real raise every year and gradually increases her 401(k) contributions from 9.5% of salary in the first year to 13.3% of salary in the final year.
So this is about as accurate as assuming stock market rises 7% each year every year, and planning around that.

Many people get large raises/promotions over their lifetimes. Not a steady slow increase. Plus they assume the savings rate barely goes up at all over 45 years. All you have to do is save half your big raises, and the savings rate goes up very fast.

My wife and were making 90k together 18 years ago, and living a 80k lifestyle (11% savings rate)... 5 years later we were making $150k together and living a $100k lifestyle (33% saving rate). Our lifestyle still increased quite a bit, but our savings rate tripled.
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Re: U.S. stocks in freefall

Post by HomerJ »

From that article

Image

Are those both in 2000 dollars? $9,627 was worth the same as $17,263 in 2000.

Also, if one DIDN'T take an annuity, the person retiring in 1984 got to watch their nest egg grow far beyond a million dollars, even while taking out 5% a year. I think the Safe Withdrawal rate for someone who retired in 1984 was around 8%-9%.

We have people here who retired in the early 80s... Was it the most terrible time in the history of the world to retire, like this article suggests?
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Re: U.S. stocks in freefall

Post by james22 »

HomerJ wrote:I'm not getting the 25-year-old stats though... Even saving only saving 10%, they should have a decent amount saved by 40, which gives them 25 years in the market...
Only that amount will have 25 years in the market, of course, future savings will have fewer years.
HomerJ wrote:Many people get large raises/promotions over their lifetimes. Not a steady slow increase. Plus they assume the savings rate barely goes up at all over 45 years. All you have to do is save half your big raises, and the savings rate goes up very fast.
Sure, it's an example.

But how many at 25 earn $50k and save 9.5%?

And how many are unemployed at some point during their careers? How many live paycheck-to-paycheck?
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Re: U.S. stocks in freefall

Post by Leif »

james22 wrote:
I don't believe most begin to save for retirement before 45.
Could be true. I know when I went to the company retirement seminar at 25 I was the only person there without gray hair. I guess I was a Boglehead even then.
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Re: U.S. stocks in freefall

Post by VictoriaF »

HomerJ wrote:We have people here who retired in the early 80s... Was it the most terrible time in the history of the world to retire, like this article suggests?
An important factor is that people retiring until about the 1990s had defined benefit pensions and relied less on their savings. They also had a greater job security and fewer periods of unemployment.

Victoria
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Re: U.S. stocks in freefall

Post by Leeraar »

VictoriaF wrote:
HomerJ wrote:We have people here who retired in the early 80s... Was it the most terrible time in the history of the world to retire, like this article suggests?
An important factor is that people retiring until about the 1990s had defined benefit pensions and relied less on their savings. They also had a greater job security and fewer periods of unemployment.

Victoria
I retired on Oct 31 2008. Does that count as a bad day?

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Re: U.S. stocks in freefall

Post by VictoriaF »

Leeraar wrote:
VictoriaF wrote:
HomerJ wrote:We have people here who retired in the early 80s... Was it the most terrible time in the history of the world to retire, like this article suggests?
An important factor is that people retiring until about the 1990s had defined benefit pensions and relied less on their savings. They also had a greater job security and fewer periods of unemployment.

Victoria
I retired on Oct 31 2008. Does that count as a bad day?

L.
Ask livesoft, he's an RBD expert.

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Re: U.S. stocks in freefall

Post by Average »

Leeraar wrote: I retired on Oct 31 2008. Does that count as a bad day?

L.
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Re: U.S. stocks in freefall

Post by patrick »

james22 wrote:
wesgreen wrote:If you think of 16 years as a " very long period of time", Bogle's strategy probably isn't for you.
The time- and dollar-weighted investment horizon of a 25 year-old is only about 12 years.

http://www.pimco.com/LeftNav/Viewpoints ... 8-2007.htm
It looks like they are assuming that the portfolio ends at 65. Actual investors aren't going to spend every penny then but will usually keep much of it invested quite a bit longer, which should make the duration estimate longer. Even in the extremely rare case of an investor who actually will annuitize everything at 65, the annuity payout itself is dependent on interest rates at the time of annuitization, so you shouldn't assume the duration goes only to 65 even then.

Furthermore, since this is averaging in the duration of funds that will be invested when the investor reaches age 60, it isn't clear why this should reflect what investments should be made at age 25 or even 30 or 40 when much of the funds that are going into the average aren't available yet.
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Re: U.S. stocks in freefall

Post by wesgreen »

"You shouldn't buy an index fund because you think it's a hot performer. Buy it because you're going to hold it forever," Bogle recently told Money magazine.
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Re: U.S. stocks in freefall

Post by VictoriaF »

wesgreen wrote:"You shouldn't buy an index fund because you think it's a hot performer. Buy it because you're going to hold it forever," Bogle recently told Money magazine.
I don't understand the "holding forever" argument. My financial planning is based on the assumption that my assets must serve me well into my 100s, or provide resources for dealing with expensive but treatable medical conditions. If I die before that, my heir will get the leftover assets. If I have a long life, she would be spared from helping me financially. As I don't know when exactly I will die, I keep a conservative asset allocation, which means that I will be selling stocks as I go.

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Re: U.S. stocks in freefall

Post by Taylor Larimore »

I don't understand the "holding forever" argument.
Victoria:

The primary use of "holding forever" in taxable accounts is primarily because if we exchange a profitable fund we usually must pay a capital-gain tax, leaving that much less to invest in a new fund.

I agree that it doesn't make much difference in tax-advantaged funds assuming no trading costs.

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Re: U.S. stocks in freefall

Post by VictoriaF »

Taylor Larimore wrote:
I don't understand the "holding forever" argument.
Victoria:

The primary use of "holding forever" in taxable accounts is primarily because if we exchange a profitable fund we usually must pay a capital-gain tax, leaving that much less to invest in a new fund.

I agree that it doesn't make much difference in tax-advantaged funds assuming no trading costs.

Best wishes
Taylor
Thank you, Taylor,

I am selling stock funds in a taxable account and simultaneously buying equivalent funds in Roth IRA. My strategy is to get rid of taxable assets by the time I reach the age of 70 and start collecting Social Security. I am paying significant taxes now in expectation that it will minimize my future payments for a combination of income taxes and Medicare Part B premiums.

Victoria
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Re: U.S. stocks in freefall

Post by Leif »

VictoriaF wrote:
wesgreen wrote:"You shouldn't buy an index fund because you think it's a hot performer. Buy it because you're going to hold it forever," Bogle recently told Money magazine.
I don't understand the "holding forever" argument. My financial planning is based on the assumption that my assets must serve me well into my 100s, or provide resources for dealing with expensive but treatable medical conditions. If I die before that, my heir will get the leftover assets. If I have a long life, she would be spared from helping me financially. As I don't know when exactly I will die, I keep a conservative asset allocation, which means that I will be selling stocks as I go.

Victoria
+1.

Probably a bit of hyperbole. Its addresses Jack's very real concern about this age of rapid turnover in portfolios. Perhaps also a bit borrowed from the Oracle of Omaha.

Due to genes I'm not assuming living to 100+. I'll be selling equity in both taxable and tax preferred accounts as time goes on. I certainly am not planning to hold forever. Hold forever also ignores TLH and TGH. I'm planning to keep most of my taxable funds, however. That, along with my Roth and cash, I believe gives me more flexibility on my tax marginal rate.
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Re: U.S. stocks in freefall

Post by scone »

Another day, another hissy fit by Mr. Market, and futures looking like another gap down tomorrow. So is this a correction, or a bona fide bear? 8-)
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Re: U.S. stocks in freefall

Post by oldzey »

More cat food on sale!
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Re: U.S. stocks in freefall

Post by GoldenFinch »

oldzey wrote:More cat food on sale!
Okay. This cat food inside-joke comes up a lot.

Please explain for those of us who missed it. :happy
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Re: U.S. stocks in freefall

Post by oldzey »

When I see cat food, bottled water, or laundry detergent (things that I can buy and hold forever) go on sale, I stock up.

I'll lay off the cat food references as they are getting a little old, I see. 8-)
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Re: U.S. stocks in freefall

Post by GoldenFinch »

oldzey wrote:When I see cat food, bottled water, or laundry detergent (things that I can buy and hold forever) go on sale, I stock up.

I'll lay off the cat food references as they are getting a little old, I see. 8-)
Thank you and meow.
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Re: U.S. stocks in freefall

Post by Grogs »

oldzey wrote:When I see cat food, bottled water, or laundry detergent (things that I can buy and hold forever) go on sale, I stock up.

I'll lay off the cat food references as they are getting a little old, I see. 8-)
I always thought it was a reference to some retirees being forced to eat cat food because it was the only thing they could afford. Of course, if you're like me and your cats are on the special prescription urinary-tract formula, it probably costs more than a lot of people food.

Also, I've thrown out both cat food and bottled water because they were seriously (like multiple years) past the expiration date.
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Re: U.S. stocks in freefall

Post by mcblum »

well, try a little dab on a triscuit or ritz cracker. It worked well at my last cocktail party...
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Re: U.S. stocks in freefall

Post by nisiprius »

Here is some noise for you to tune out.

A correspondent pointed this out to me: Jeremy Siegel saying I was too bullish and here's why. It is rather amazing to me coming from Siegel. (Jeremy Siegel is the noted professor, famous author of Stocks for the Long Run, consultant at the Wisdomtree fund company, and often characterized as a "permabull.")

He characterizes deflationary pressures as "scary." He says they are “spooking the markets,” and that he "completely understands why" (I take this to mean: "I am spooked myself.")

The article quotes him as saying "Can these central banks counteract all these deflationary forces?” but on the video, it sounds to me more like “My God, can these central banks counteract all these deflationary forces?” in a rather emotional way.

(I think Stocks for the Long Run is an excellent book and I learned a lot from it. I never bought onto Siegel's intense degree of permanent optimism so I don't feel obliged to react to his surprising burst of pessimism now. In short... yes... tune out the noise).
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Re: U.S. stocks in freefall

Post by Wayson »

mcblum wrote:well, try a little dab on a triscuit or ritz cracker. It worked well at my last cocktail party...
*makes note never to eat unlabeled spreads at cocktail parties*
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Re: U.S. stocks in freefall

Post by scsiguru »

oldzey wrote:When I see cat food, bottled water, or laundry detergent (things that I can buy and hold forever) go on sale, I stock up.

I'll lay off the cat food references as they are getting a little old, I see. 8-)
And let's not forget about TP and paper towels..my garage is full of them.
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Re: U.S. stocks in freefall

Post by flyingaway »

Has anyone seen blood on the street yet?
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Re: U.S. stocks in freefall

Post by FullYellowJacket »

S&P500 is about 14% off of it's peak. That's a decent haircut.

International is down twice that. Now that seems like a bit of blood.
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Re: U.S. stocks in freefall

Post by scone »

The ten year at 1.7% or thereabouts. Are people really that freaked out? Seems overdone to me.
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Re: U.S. stocks in freefall

Post by lack_ey »

scone wrote:The ten year at 1.7% or thereabouts. Are people really that freaked out? Seems overdone to me.
Here's the thing: the ten-year Treasury started the year at 2.24% and dropped to 1.75% for the last close, a few bp lower than that now. Over the same period, the ten-year TIPS went from 0.69% to 0.52%.

Part freakout, part inflation expectations dropping.
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Re: U.S. stocks in freefall

Post by scone »

lack_ey wrote:
scone wrote:The ten year at 1.7% or thereabouts. Are people really that freaked out? Seems overdone to me.
Here's the thing: the ten-year Treasury started the year at 2.24% and dropped to 1.75% for the last close, a few bp lower than that now. Over the same period, the ten-year TIPS went from 0.69% to 0.52%.

Part freakout, part inflation expectations dropping.
Yes, I've been watching it, but it still doesn't make sense. Unemployment is lower, some wage increases. Oil is the only thing that's dropped dramatically. Yet car sales have been pretty good, vehicle miles up. The market isn't looking through the bad news.
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Re: U.S. stocks in freefall

Post by Taylor Larimore »

scone:

I like your timely signiture.

Best wishes.
Taylor
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Re: U.S. stocks in freefall

Post by scone »

Taylor Larimore wrote:scone:

I like your timely signiture.

Best wishes.
Taylor
I steal from the best. 8-)
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Re: U.S. stocks in freefall

Post by Leif »

Taylor Larimore wrote:scone:

I like your timely signiture.

Best wishes.
Taylor
Do you like mine?
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Re: U.S. stocks in freefall

Post by livesoft »

flyingaway wrote:Has anyone seen blood on the street yet?
Most things are trading at higher prices than a couple weeks ago, so if you bought then, you still have a chance to sell for a profit.

You have to look at intraday prices though to see the lows.
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Re: U.S. stocks in freefall

Post by Taylor Larimore »

Leif wrote:
Taylor Larimore wrote:scone:

I like your timely signiture.

Best wishes.
Taylor
Do you like mine?
Leif:

Definitely!

Best wishes.
Taylor
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Re: U.S. stocks in freefall

Post by fortyofforty »

flyingaway wrote:Has anyone seen blood on the street yet?
Not yet rivers of blood.
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Re: U.S. stocks in freefall

Post by james22 »

Taylor Larimore wrote:scone:

I like your timely signiture.

Best wishes.
Taylor
So do I.
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Re: U.S. stocks in freefall

Post by ge1 »

Time to bump this thread, futures were down 2% earlier... 8-)
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Re: U.S. stocks in freefall

Post by technovelist »

fortyofforty wrote:
flyingaway wrote:Has anyone seen blood on the street yet?
Not yet rivers of blood.
As Harry Browne once said, that quotation is incomplete.

Some people are looking for a trickle of blood, others wait until it is up to their ankles, and still others will want to check the blood type. :D
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Re: U.S. stocks in freefall

Post by bradshaw1965 »

duplicate, edited.
Last edited by bradshaw1965 on Thu Feb 11, 2016 8:28 am, edited 1 time in total.
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Re: U.S. stocks in freefall

Post by bradshaw1965 »

duplicate, edited.
Last edited by bradshaw1965 on Thu Feb 11, 2016 8:27 am, edited 1 time in total.
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Re: U.S. stocks in freefall

Post by bradshaw1965 »

VictoriaF wrote:
HomerJ wrote:We have people here who retired in the early 80s... Was it the most terrible time in the history of the world to retire, like this article suggests?
An important factor is that people retiring until about the 1990s had defined benefit pensions and relied less on their savings. They also had a greater job security and fewer periods of unemployment.

Victoria
From 1980 through 2008, the proportion of private wage and salary workers participating in DB pension plans fell from 38 percent to 20 percent (Bureau of Labor Statistics 2008; Department of Labor 2002).
https://www.ssa.gov/policy/docs/ssb/v69n3/v69n3p1.html

That's a big decline but pension holders were still a fairly substantial minority. I'm unclear on the decline of pensions in the public sector.

[sorry about the duplicates, I'm not able to delete forum messages]
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Re: U.S. stocks in freefall

Post by scone »

Maybe that Kyle Bass "China Doom" letter has freaked people out. Let's see if Janet can pour oil on troubled waters. Got popcorn? :D
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Re: U.S. stocks in freefall

Post by broadstone »

S&P on its way to 1600. I'm still 100% cash.
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