this time it's different

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Grt2bOutdoors
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Re: this time it's different

Post by Grt2bOutdoors » Tue Aug 13, 2019 5:12 pm

HomerJ wrote:
Tue Aug 13, 2019 9:43 am
feh wrote:
Tue Aug 13, 2019 7:55 am
My reasoning for 2) is that if the future returns for a 60/40 portfolio are 2-3% less than they have been historically, will it be necessary to invest elsewhere to achieve returns that are sufficient for the 4% withdrawal rate?
No, 4% withdrawals already assume low returns. It's a worst-case scenario. So if we do get low returns going forward, 4% will still work.
I agree, and if we are wrong and 3% is the real number, then the individual(s) who own the portfolio will need to adjust.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

columbia
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Re: this time it's different

Post by columbia » Tue Aug 13, 2019 5:47 pm

Who knows.

I do know that thinking that the present is bound to once again be like the past is a baseless prediction.

owenmia
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Re: this time it's different

Post by owenmia » Tue Aug 13, 2019 6:16 pm

I can tell you this. Things are getting worse and worse. If things go as most experts say they will, we would be better off investing outside the stock market.

Grt2bOutdoors
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Re: this time it's different

Post by Grt2bOutdoors » Tue Aug 13, 2019 6:52 pm

owenmia wrote:
Tue Aug 13, 2019 6:16 pm
I can tell you this. Things are getting worse and worse. If things go as most experts say they will, we would be better off investing outside the stock market.
Where? Real estate? Orange Juice?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Oakwood42
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Re: this time it's different

Post by Oakwood42 » Tue Aug 13, 2019 7:01 pm

SimpleGift wrote:
Tue Aug 13, 2019 9:18 am
feh wrote:
Tue Aug 13, 2019 7:40 am
Just wondering if others feel the coming decades will be fundamentally different from the past, and how to act on it.
The fundamental difference to my mind is that the large majority of the world's economic growth in the decades ahead will be in Asia (China, India, Indonesia, etc.) — rather than the past engines of economic growth in the developed countries. Demographics alone make this almost a certainty.
How investors might capitalize on this shift in global growth toward Asia is an open question — but owning a small share of ALL global companies through broadly diversified index funds is likely about the best one can do.
"The fundamental difference to my mind is that the large majority of the world's economic growth in the decades ahead will be in Asia (China, India, Indonesia, etc.) — rather than the past engines of economic growth in the developed countries. Demographics alone make this almost a certainty."

I am inclined to believe this as well - I am not basing this on science or anything publications. I think America will continue to do great however to ignore Asia is like not saying hello to the elephant in the room. Asia is Earth's largest and most populous continent (4.5 billion people live there). So we diversify total world.

randomguy
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Re: this time it's different

Post by randomguy » Tue Aug 13, 2019 7:09 pm

YRT70 wrote:
Tue Aug 13, 2019 2:36 pm

Chances of 4% WR making it for the next 30 years: 92% according to Vanguard MC tool for 50/50. 60/40 gets 91%.

Personally I'd like higher odds; at least 95%. 3.5% WR makes it 96%.

https://retirementplans.vanguard.com/VG ... ggCalc.jsf
If you want higher odds, just pick a different MC. There are 100s of them to choose from so pick one that gives you the results you are looking for.:) Seriously look at what making small changes to set up, mean reversion, and correlation between asset classes does to you results and decide for yourself if you think a+-5% difference in Monte Carlo results is remotely useful.

And of course pretty much all monte carlo simulators in the financial industry are based on historical data.......

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zaboomafoozarg
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Re: this time it's different

Post by zaboomafoozarg » Tue Aug 13, 2019 9:52 pm

owenmia wrote:
Tue Aug 13, 2019 6:16 pm
I can tell you this. Things are getting worse and worse.
Like my grandfather used to say - things get worse and worse, and then you die.

Conditions don't seem great and I don't expect high returns for the remainder of my life, but I don't really know what else to invest in besides the normal stocks/bonds stuff. I've thought about real estate but I don't think I'm cut out for it.

So I put more time into my career and my side jobs, working 60-70 hours a week to make as much as I can. And then I save until it hurts and hope for the best.

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Re: this time it's different

Post by owenmia » Tue Aug 13, 2019 10:09 pm

:great attitude. You will succeed.

YRT70
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Re: this time it's different

Post by YRT70 » Wed Aug 14, 2019 3:00 am

randomguy wrote:
Tue Aug 13, 2019 7:09 pm
If you want higher odds, just pick a different MC.
Personally I'd rather pick a lower withdrawal rate than 4%. Each to his own I guess.

And for the record: all the other MC tools I tried came to similar conclusions as the Vanguard one. And I'm aware of the limitation of MC testing, so it's not the only thing I use.

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Re: this time it's different

Post by Valuethinker » Wed Aug 14, 2019 5:27 am

mrspock wrote:
Tue Aug 13, 2019 4:57 pm
This “secular stagnation” dogma has been hocked by the likes of Bill Bonner and John Mauldin for the last *20 years* . I’m still waiting.

In the meantime, I suspect they sold lots of books on their theories and predictions.

Get out of your own way and ignore the charlatans.
Since the Great Financial Crisis of 2008-09 economic growth has not rebounded as it normally does after a recession. This is evident across both the developed and less developed country economies.

There is a very real question whether we simply drove growth in the 2000s by raising private sector debt levels, and when that reached the point of crisis, a lot of that growth evaporated. China has reached a stage in GDP and infrastructure where its high growth rates are not a given (and official figures are clearly manipulated) - much of the 2000s was the Chinese economy (and the US consumer, by increasing debt levels) dragging up the rest of the world with it. The scale of the fiscal impulse that China entered into with the GFC will not be repeated - they had no miles of High Speed Rail, now they have 20k km+.

To my mind, there are some pretty exciting technological changes going on. AI, robotics, decarbonisation. But these don't necessarily imply an (immediate) pickup of economic growth. During the industrial revolution 1750-1850 British GDP growth has been estimated at 1% pa real, I believe.

Marc Levinson's book on the 1970s & 80s is a good introduction to the idea of a global slowdown.

A440
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Re: this time it's different

Post by A440 » Wed Aug 14, 2019 5:41 am

"Nobody knows nothing" (Bogle)
I don't know what the future holds, but I know who holds my future.

StandingRock
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Re: this time it's different

Post by StandingRock » Wed Aug 14, 2019 6:31 am

Valuethinker wrote:
Wed Aug 14, 2019 5:27 am
mrspock wrote:
Tue Aug 13, 2019 4:57 pm
This “secular stagnation” dogma has been hocked by the likes of Bill Bonner and John Mauldin for the last *20 years* . I’m still waiting.

In the meantime, I suspect they sold lots of books on their theories and predictions.

Get out of your own way and ignore the charlatans.
Since the Great Financial Crisis of 2008-09 economic growth has not rebounded as it normally does after a recession. This is evident across both the developed and less developed country economies.

There is a very real question whether we simply drove growth in the 2000s by raising private sector debt levels, and when that reached the point of crisis, a lot of that growth evaporated. China has reached a stage in GDP and infrastructure where its high growth rates are not a given (and official figures are clearly manipulated) - much of the 2000s was the Chinese economy (and the US consumer, by increasing debt levels) dragging up the rest of the world with it. The scale of the fiscal impulse that China entered into with the GFC will not be repeated - they had no miles of High Speed Rail, now they have 20k km+.

To my mind, there are some pretty exciting technological changes going on. AI, robotics, decarbonisation. But these don't necessarily imply an (immediate) pickup of economic growth. During the industrial revolution 1750-1850 British GDP growth has been estimated at 1% pa real, I believe.

Marc Levinson's book on the 1970s & 80s is a good introduction to the idea of a global slowdown.

What's the point in even talking about it, if we're going to all but kill industries, then prop them up on costly life support, and engage in every other imaginable malinvestment? Nothing is different, it's all the same.

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feh
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Re: this time it's different

Post by feh » Wed Aug 14, 2019 6:40 am

OP here.

For the record, we have a 60/40 portfolio with 2/3 of the equities in US and 1/3 in ex-US. Early fifties, semi-retired. Expected WR: 3%.

So, I'm not personally concerned about secular stagnation. Nor do I plan on making any changes to our investments because of it. The purpose of the thread was to get a sense of how many people feel the coming decades will show reduced growth compared to the last 100 years, and if so, what actions could be taken.

Anybody have ideas other than save more/spend less?

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Stinky
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Re: this time it's different

Post by Stinky » Wed Aug 14, 2019 6:47 am

UpperNwGuy wrote:
Tue Aug 13, 2019 11:26 am
So more constant change in the coming century will not be at all different. The only difference will be in the details. Throughout these constant changes in the background, the stock and bond markets have continued to function, and so they will through the next round of changes.
I agree. Change has always happened, and I expect that it will continue to happen. Every age has had its folks who say "the end is near", but somehow humans always muddle through somehow.

One thing that I note is the the rate of change seems to be speeding up. Things are changing faster and faster and faster. Product cycles are becoming shorter and shorter. For example, look at what's happened to VCRs and DVDs - which have gone from "new fad" to "mature industry" to "nearly obsolete" at a blazing pace.
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YRT70
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Re: this time it's different

Post by YRT70 » Wed Aug 14, 2019 6:48 am

EnjoyIt wrote:
Tue Aug 13, 2019 2:57 pm
Next, nothing against Mr. Swedroe as he is proven to be very intelligent and financially savvy guy, but Larry Swedroe is not an authority on predictions. He like everyone else has been wrong plenty. Plus he has a product to sell so I'm not sure what value his predictions provide us.
Just to be clear: I didn't quote Larry because he's smart or that he's an authority on predictions. I quoted him because he's making several (IMO) compelling arguments in that podcast on why 4% might be too optimistic for the future.

Dandy
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Re: this time it's different

Post by Dandy » Wed Aug 14, 2019 8:05 am

Yes I think the future will be much different - a few of my concerns/challenges:

1. Huge national debt and no appetite for addressing that (or many other critical issues).
2. Climate change - more drought, more dangerous storms -- impact on food supply, more disasters, refugees and entrenched denial.
3. Lower birth rate population trying to support aging boomers, their children without pensions, enough demand to support the economy, etc.
4. Automation accelerating decline in "good" jobs - e.g. self driving trucks, drones, more sophisticated robots.
What jobs should your grandchildren prepare for?
5. Decline in use of carbon fuels while good for climate will disrupt carbon related employment in those areas a la West Virginia
6. Growing wealth/income gap and the impact on social order.
7. Social media effect on so many things some good some bad. e.g. bullying, outside influence on elections, outside influence to keep us divided, etc.

How will these possible changes affect our already divided and somewhat non functioning politics. We have faced large
challenges in the past but we seemed to be better able to put aside differences and get some good things done 10 or 15 years ago. Lots of blame to go around including a very low voter turnout. We need to do better for our grand kids.

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hagridshut
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Re: this time it's different

Post by hagridshut » Wed Aug 14, 2019 9:04 am

I disagree that Secular Stagnation (aka long-term lack of growth) is inevitable.

From the article, proponents of Secular Stagnation operate under the assumption that everything has been invented and built, and that there's not much left to be done:
This Upside Down economy was the product, Hansen said, of a shriveling population, the closing of the frontier and the maturing of industries. The economy had basically grown up. There was nowhere left to go.

Like Hansen in the 1930s, Summers points to declining population growth as one source of stagnation. But he also points to other factors. A big one: Our economy might require less investment than it used to. Think Kodak (the old economy) vs. Instagram (the new economy). Kodak required factories and assembly line workers and trucks and film and film developers and a bunch of other resources to give us photography. Instagram basically needs just an office with laptops and a few hundred smart workers. It needs much less investment.


If the global economy is to survive, it is going to require a massive amount of investment over the next 10-25 years. The transition away from carbon-based fuels (oil, coal and natural gas) and to renewables will require unprecedented investment in energy storage. Just one Tesla Gigafactory costs about $4-5 Billion to fully construct. It's estimated that up to 100 such facilities would be needed to supply the energy storage needed for electric vehicles and renewable energy capture worldwide.

The "Kodak" vs. "Instagram" argument is also flawed, because it ignores the fact that to be used, Instagram requires a both a back-end infrastructure (servers & communications networks) and end user hardware: mobile devices and/or personal computers. Instagram itself only needs computers and workers, but someone has to design and manufacture all the hardware that the service and many other services run on. An iPhone alone contains numerous chips, sensors, and other components from probably dozens of companies.


Top99% wrote:
Tue Aug 13, 2019 8:04 am
This article ponders the same things I do (IE things seem upside down) but it certainly doesn't convince me to change my AA. Lots of things (most of which we can't discuss without getting threads locked) could happen that could change our trajectory. There is always the possibility (probability actually) some new major technical break through could alter our course. For example, if a battery breakthrough lead to really cheap energy storage.
Battery costs are falling rapidly. I also believe that advances in Machine Learning, Spaceships, and Genomics will provide huge opportunities for future economic growth.

Fears of permanent Secular Stagnation are IMO the product of economists who lack imagination. This is not to say that Secular Stagnation cannot happen. It has happened before and could happen for a period of years, but there is so much new technology in its infancy, that I think it is impossible to say with certainty that permanent Secular Stagnation is inevitable in the near future.

I am a Boglehead because I think nobody knows what the future will hold. It's best to be positioned to take advantage of big economic growth, should it occur.
First Principles: (1) Diversify (2) Low Cost (3) Stay the Course | 3-Fund Index Portfolio: S&P500; Intl; U.S.Bonds

alex_686
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Re: this time it's different

Post by alex_686 » Wed Aug 14, 2019 9:25 am

hagridshut wrote:
Wed Aug 14, 2019 9:04 am
I disagree that Secular Stagnation (aka long-term lack of growth) is inevitable.
Maybe yes, maybe no.

Wikipedia was a great boon to society. It also destroyed the encyclopedia business.

iTunes, YouTube, etc. is generating vast wealth for the few on top while gutting the middle layers if the music industry.

We could easily have Secular Stagnation and high growth if that high growth is concentrated among a few high skilled elite, which is what is currently happening.

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midareff
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Re: this time it's different

Post by midareff » Wed Aug 14, 2019 9:32 am

I've been in the market for a good 50 years and I've heard "this time it's different", maybe thousands of times. Guess what? It's a market and it goes up and it goes down in the near term - as in next few years. Over the longer term it generally goes up. The equivalent of what is now today's S&P500, in 1919 opened the year at 7.952 and closed the year at 9.6823 for an annual gain of 9.38%. Time has created a long gain from 1919 to 2019.

Time is your friend, worry less and smile more. Pay less attention to talking heads and follow your plan.

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midareff
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Re: this time it's different

Post by midareff » Wed Aug 14, 2019 9:58 am

KlangFool wrote:
Tue Aug 13, 2019 7:45 am
feh wrote:
Tue Aug 13, 2019 7:40 am
An excerpt from an article claiming we are entering a period of secular stagnation, and the reasons why: https://www.npr.org/sections/money/2019 ... pside-down

Just wondering if others feel the coming decades will be fundamentally different from the past, and how to act on it.

Invest more heavily overseas and EM?
feh,

1) Let's say that is true, why would invest in oversea and EM would be better? They would be in the worst shape.

2) Please explain why would stagnation matters to a person with a fixed AA of 60/40. It does not.

KlangFool
or 50/50 or 40/60 or any reasonably close version of those.

KlangFool
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Re: this time it's different

Post by KlangFool » Wed Aug 14, 2019 10:02 am

feh wrote:
Wed Aug 14, 2019 6:40 am
OP here.

For the record, we have a 60/40 portfolio with 2/3 of the equities in US and 1/3 in ex-US. Early fifties, semi-retired. Expected WR: 3%.

So, I'm not personally concerned about secular stagnation. Nor do I plan on making any changes to our investments because of it. The purpose of the thread was to get a sense of how many people feel the coming decades will show reduced growth compared to the last 100 years, and if so, what actions could be taken.

Anybody have ideas other than save more/spend less?
feh,

In summary, it won't matter to you either.

<<Anybody have ideas other than save more/spend less?>>

There is no silver bullet out there. Anything other than save more or spend less, the person would have to take more risk which may or may not work out. There is no free lunch.

KlangFool

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feh
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Re: this time it's different

Post by feh » Tue Sep 03, 2019 8:28 am

A short interview w/ Larry Summers on this subject:

https://www.npr.org/sections/money/2019 ... stagnation

TN_Boy
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Re: this time it's different

Post by TN_Boy » Tue Sep 03, 2019 9:47 am

owenmia wrote:
Tue Aug 13, 2019 6:16 pm
I can tell you this. Things are getting worse and worse. If things go as most experts say they will, we would be better off investing outside the stock market.
You think they will get worse than, for example, 1929 and the worldwide great depression? Or how about 1939? Somehow the world, and the world economy, survived WW II.

And those 4% backtests covered those times. This is not to say I'm sure a 4% withdrawal will succeed in the future. But it has worked across some pretty bad times.

As others asked, where would you suggest putting your money, if not in a globally diversified mix of equities? Real estate? If economies collapse, that may not work so well.

hoops777
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Re: this time it's different

Post by hoops777 » Tue Sep 03, 2019 10:30 am

News flash........investing in the stock market is not a requirement.If your future financial well being requires stock returns close to historical averages good luck.Just do not assume anything,because regardless of what stock enthusiasts wish for,this time the problems ARE totally different.Apples to oranges.Just compare WWII and try to compare that to cyber warfare as an example.Technology has been great for some and a job destroyer for many.Technology has made our lives much easier but also put us at more risk.Where it all goes nobody knows.

It is so great to invest 100,000 in the stock market and 10 years later it is 200,000 or more.Who wants to give up making huge sums of money by doing nothing but spending a few minutes making a trade.Things do not change?Just look at the negative interest rates in the world that are possibly heading here.
K.I.S.S........so easy to say so difficult to do.

owenmia
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Re: this time it's different

Post by owenmia » Tue Sep 03, 2019 1:08 pm

hoops777 wrote:
Tue Sep 03, 2019 10:30 am
News flash........investing in the stock market is not a requirement.If your future financial well being requires stock returns close to historical averages good luck.Just do not assume anything,because regardless of what stock enthusiasts wish for,this time the problems ARE totally different.Apples to oranges.Just compare WWII and try to compare that to cyber warfare as an example.Technology has been great for some and a job destroyer for many.Technology has made our lives much easier but also put us at more risk.Where it all goes nobody knows.

It is so great to invest 100,000 in the stock market and 10 years later it is 200,000 or more.Who wants to give up making huge sums of money by doing nothing but spending a few minutes making a trade.Thingmaking huge sums of money by doing nothing but spending a few minutes making a trades do not change?Just look at the negative interest rates in the world that are possibly heading here.

Newsflash:

If you believe that people who are risking their entire life’s saving and their future by investing are “making huge sums of money by doing nothing but spending a few minutes making a trade” you are a fool.

hoops777
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Re: this time it's different

Post by hoops777 » Tue Sep 03, 2019 5:47 pm

owenmia wrote:
Tue Sep 03, 2019 1:08 pm
hoops777 wrote:
Tue Sep 03, 2019 10:30 am
News flash........investing in the stock market is not a requirement.If your future financial well being requires stock returns close to historical averages good luck.Just do not assume anything,because regardless of what stock enthusiasts wish for,this time the problems ARE totally different.Apples to oranges.Just compare WWII and try to compare that to cyber warfare as an example.Technology has been great for some and a job destroyer for many.Technology has made our lives much easier but also put us at more risk.Where it all goes nobody knows.

It is so great to invest 100,000 in the stock market and 10 years later it is 200,000 or more.Who wants to give up making huge sums of money by doing nothing but spending a few minutes making a trade.Thingmaking huge sums of money by doing nothing but spending a few minutes making a trades do not change?Just look at the negative interest rates in the world that are possibly heading here.

Newsflash:

If you believe that people who are risking their entire life’s saving and their future by investing are “making huge sums of money by doing nothing but spending a few minutes making a trade” you are a fool.
Number one
Please point out where I said people are risking their entire life’s savings and their future by investing in the stock market?I have no idea what you are talking about.

Number two
The boglehead way is to invest in an index fund and leave it alone.How much time and effort does that take?Now is does take self discipline to leave it alone,but beyond that you make money on your money by virtually doing nothing.Of course most people had to work to earn the money they invest,but I am talking about money making money.

Compare Bob who earns 175,000 a year in a tech job and is able to save large sums to invest,to Joe who makes 45,000 working in whatever job full time with 2 kids.No money to invest.Joe does not have the luxury of opening an account at Vanguard and doing a few swipes on the computer and watching those savings grow at about 10 pct historically.

My point was that this time probably will be very different and there are risks that did not exist in past history.How that turns out nobody knows,but I never said anything remotely close to what you accused me of.Have a nice day and read things a bit closer before making comments.
K.I.S.S........so easy to say so difficult to do.

owenmia
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Re: this time it's different

Post by owenmia » Tue Sep 03, 2019 6:08 pm

I see.

I misread your post and thought you were saying they were getting money for nothing and didn't deserve it.

My mistake.

hoops777
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Re: this time it's different

Post by hoops777 » Tue Sep 03, 2019 6:18 pm

No problem.I may be borderline but not a complete fool. :D
K.I.S.S........so easy to say so difficult to do.

jello_nailer
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Re: this time it's different

Post by jello_nailer » Tue Sep 03, 2019 8:49 pm

True there are risks, but there are opportunities that did not exist in past history.
Every time is different, but some things are similar.
I'll stick with Buffett and go with the previous 100 year trend.

usagi
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Re: this time it's different

Post by usagi » Tue Sep 03, 2019 9:15 pm

My view, secular stagnation is why I like dividends. I looked strongly at the logic of the create your own dividend crowd and thought about how that would work in a stagnant economy. Given the the old developed country demographics I thought stagnation was/is a very probable outcome that can be offset to an extent by a dividend strategy. In such a situation, economies of scale become relevant and favor larger, established corporations, likely paying dividends, as they generally have more fat to cut.

I also think those thinking they may grow their way to a substantial portfolio via passively manged equity investments may have to contribute far more of their earnings than historically to achieve the end result.

I am fairly positive in terms of growth prospects over the next 5 years, but after that...I am less sure that the polices that have enabled this boom will persist.

This belief is also why I plan to and feel morally obligated to leave a substantial legacy, less so for my children as much as my children's children. I am less inclined to believe the work, save moderately (10-20% of your income) and invest paradigm will work as well from them as it did for previous generations. Time will tell and all, but all I can do is endeavor to try and ease the way for those who come after me.
Last edited by usagi on Tue Sep 03, 2019 10:24 pm, edited 3 times in total.

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JoMoney
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Re: this time it's different

Post by JoMoney » Tue Sep 03, 2019 9:26 pm

"The future, according to some scientists, will be exactly like the past, only far more expensive."
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

usagi
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Re: this time it's different

Post by usagi » Tue Sep 03, 2019 10:19 pm

KlangFool wrote:
Tue Aug 13, 2019 8:27 am
The answer is very simple. At a higher saving rate, return rate does not matter. But, this is not the answer that many folks like to hear. They would like an easy way out. Aka, silver bullet.

KlangFool
+1
Exactly.

mikeyzito22
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Re: this time it's different

Post by mikeyzito22 » Tue Sep 03, 2019 11:01 pm

SimpleGift wrote:
Tue Aug 13, 2019 11:07 am
alex_686 wrote:
Tue Aug 13, 2019 9:59 am
Just wanted to point out, though, that the problems of the developed world (aging populations, shrinking workforces, slow growth, negative interest rates) are not necessarily those of the emerging world.
The only sense I can make of it is to invest in a broad diversity of global index companies — then hope for the best.
I don't see this. I see a vibrant population, a positive workforce, and steady growth. People are pro-creating and have jobs. I do believe it when you say that global index companies are a good bet. Have you been in a 7th or 8th-grade classroom lately? They are going to make this special and we are all going to watch.

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feh
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Re: this time it's different

Post by feh » Wed Sep 04, 2019 7:15 am

usagi wrote:
Tue Sep 03, 2019 9:15 pm
My view, secular stagnation is why I like dividends. I looked strongly at the logic of the create your own dividend crowd and thought about how that would work in a stagnant economy. Given the the old developed country demographics I thought stagnation was/is a very probable outcome that can be offset to an extent by a dividend strategy. In such a situation, economies of scale become relevant and favor larger, established corporations, likely paying dividends, as they generally have more fat to cut.
I don't see how dividends is related to this issue. If you think dividends will somehow save a portfolio, I suggest you do a search for "dividends vs total return".

usagi
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Re: this time it's different

Post by usagi » Wed Sep 04, 2019 12:30 pm

feh wrote:
Wed Sep 04, 2019 7:15 am
I don't see how dividends is related to this issue. If you think dividends will somehow save a portfolio, I suggest you do a search for "dividends vs total return".
I am well versed in the concept and stand by my comment.

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dogagility
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Re: this time it's different

Post by dogagility » Wed Sep 04, 2019 6:40 pm

owenmia wrote:
Tue Aug 13, 2019 6:16 pm
I can tell you this. Things are getting worse and worse. If things go as most experts say they will, we would be better off investing outside the stock market.
You can tell me this... but I won't believe you.
Taking "risk" since 1995.

Ki_poorrichard
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Re: this time it's different

Post by Ki_poorrichard » Wed Sep 04, 2019 7:14 pm

feh wrote:
Wed Sep 04, 2019 7:15 am
usagi wrote:
Tue Sep 03, 2019 9:15 pm
My view, secular stagnation is why I like dividends. I looked strongly at the logic of the create your own dividend crowd and thought about how that would work in a stagnant economy. Given the the old developed country demographics I thought stagnation was/is a very probable outcome that can be offset to an extent by a dividend strategy. In such a situation, economies of scale become relevant and favor larger, established corporations, likely paying dividends, as they generally have more fat to cut.
I don't see how dividends is related to this issue. If you think dividends will somehow save a portfolio, I suggest you do a search for "dividends vs total return".
Well said.

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willthrill81
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Re: this time it's different

Post by willthrill81 » Wed Sep 04, 2019 7:25 pm

EnjoyIt wrote:
Tue Aug 13, 2019 2:57 pm
YRT70 wrote:
Tue Aug 13, 2019 2:36 pm
randomguy wrote:
Tue Aug 13, 2019 1:43 pm
YRT70 wrote:
Tue Aug 13, 2019 10:00 am
HomerJ wrote:
Tue Aug 13, 2019 9:43 am


No, 4% withdrawals already assume low returns. It's a worst-case scenario. So if we do get low returns going forward, 4% will still work.
4% worked in the past. If it will work in the future is anyone's guess.

For what it's worth, Larry Swedroe thinks 4% is probably too optimistic for the future.
viewtopic.php?t=271709
Sure but the general point is that 4% SWR require ~1% real returns which is way lower than what is being predicated . Odds are the returns over the next 30 years will be plenty to support a 4% swr. The sequence of returns might not.
Chances of 4% WR making it for the next 30 years: 92% according to Vanguard MC tool for 50/50. 60/40 gets 91%.

Personally I'd like higher odds; at least 95%. 3.5% WR makes it 96%.

https://retirementplans.vanguard.com/VG ... ggCalc.jsf
You can achieve those higher odds with a little flexibility in spending during down times.
Our plan is 4%, Actually it is probably closer to 3.5% with bursts that average out to 4%. Those bursts are things like new car, or a large home project. I am pretty sure if need be we can delay such expenditures plus a few other belt tightening and we should be fine. This is us, everyone is different, everyone needs what they need to sleep well and enjoy life.

Next, nothing against Mr. Swedroe as he is proven to be very intelligent and financially savvy guy, but Larry Swedroe is not an authority on predictions. He like everyone else has been wrong plenty. Plus he has a product to sell so I'm not sure what value his predictions provide us.

BTW, all those predictions about lower returns, how long are those predictions to last? Is it for 5 years, 10 years, or 30 years? Will we have reversion to the mean after 15 years of lower returns and then we should have higher expected returns. Let's be honest, no one knows a damn thing.

The only thing definite is how much you save, how much you spend, and how flexible you are in your plan. Expected returns is an unknown variable. But hey, we have 3 known variable and 1 unknown variable which puts us in significant control over our future. So save plenty, don't jump to conclusions, and have some flexibility in your plan.
Absolutely. Derek Tharp found that taking a 3% cut in one's withdrawals when stocks were down in the prior year boosted the historic SWR to 4.56%. That's a pretty easy and relatively painless way to add yet another layer of security to the worst case scenario for 30 year retirements in U.S. history.

But in reality, I don't really care much about whether the '4% rule' continues to hold in the future because virtually no one is actually using it. Everyone who possibly can makes adjustments to their withdrawals, loosening the proverbial belt when times are good and tightening it when times are bad.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

tibbitts
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Re: this time it's different

Post by tibbitts » Wed Sep 04, 2019 9:54 pm

owenmia wrote:
Tue Aug 13, 2019 6:16 pm
I can tell you this. Things are getting worse and worse. If things go as most experts say they will, we would be better off investing outside the stock market.
Okay I'll bite, investing passively (and no, passive doesn't include renovating kitchens and baths and replacing roofs on your rental homes) where?

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HomerJ
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Re: this time it's different

Post by HomerJ » Wed Sep 04, 2019 10:58 pm

owenmia wrote:
Tue Aug 13, 2019 6:16 pm
I can tell you this. Things are getting worse and worse. If things go as most experts say they will, we would be better off investing outside the stock market.
What if things go as other experts say they will?

And how do we know who is an "expert", anyway? Serious question.
The J stands for Jay

robertmcd
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Re: this time it's different

Post by robertmcd » Wed Sep 04, 2019 11:06 pm

HomerJ wrote:
Wed Sep 04, 2019 10:58 pm
owenmia wrote:
Tue Aug 13, 2019 6:16 pm
I can tell you this. Things are getting worse and worse. If things go as most experts say they will, we would be better off investing outside the stock market.
What if things go as other experts say they will?

And how do we know who is an "expert", anyway? Serious question.
Things are getting worse and worse, and will continue to do so. But stocks and bonds have been going up as this has already been happening for near 20 yrs, and they will continue to do well, until currencies start to collapse. The US dollar doesn’t look like it will be first.

Here is the real eye opener: Stocks going up and bond yields going down is the reason things have been getting worse.

owenmia
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Re: this time it's different

Post by owenmia » Wed Sep 04, 2019 11:19 pm

Currencies collapsing sounds scary.

When and why is that supposed to happen?

hoops777
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Re: this time it's different

Post by hoops777 » Thu Sep 05, 2019 4:05 pm

Take an honest look at the world.It is very different this time.How it ultimately effects the stock and bond market is anyone’s GUESS.Good luck to everyone.
K.I.S.S........so easy to say so difficult to do.

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