RE: Here's hoping you didn't miss the bottom of the market...

Flagpole wrote:

One thing my wife and I have decided is that the house will be paid for before my oldest enters college, so that just frees up cash.

You can expect a high FAFSA number.

Most wanted wrote:

Flagpole wrote:

One thing my wife and I have decided is that the house will be paid for before my oldest enters college, so that just frees up cash.

You can expect a high FAFSA number.

Could be. I don't care so much about that. We should be able to cash flow college if we so choose -- the kids are expected to pay for some of it too. Some degree of scholarship is a real possibility for them, so hopefully that will happen too, but it is definitely not something to PLAN for.

Flagpole wrote:

Could be. I don't care so much about that. We should be able to cash flow college if we so choose -- the kids are expected to pay for some of it too. Some degree of scholarship is a real possibility for them, so hopefully that will happen too, but it is definitely not something to PLAN for.

Everybody gets some form of a scholarship/grant. No one pays everything. As for being able to "cash flow college," I assume you mean you would take out no loans. This may be possible for state schools, but if your child(ren) goes to a private school you would have to be quite wealthy to afford to pay for that out of pocket.

Planning for the FAFSA, etc. makes as much sense as planning for college.

Been there, done that wrote:

[quote]Flagpole wrote:

Everybody gets some form of a scholarship/grant. No one pays everything. As for being able to "cash flow college," I assume you mean you would take out no loans. This may be possible for state schools, but if your child(ren) goes to a private school you would have to be quite wealthy to afford to pay for that out of pocket.

Planning for the FAFSA, etc. makes as much sense as planning for college.

No, I mean paying for college out of pocket -- based on our income at the time. My wife and I both have advanced degrees (she as two Master's degrees) and we have the ability to make big income when our salaries are combined. She's been a stay at home mom for about 11 years now and only just recently went back to work on a VERY part-time basis, but by college time for the kids, she will be back to working full time. We will have the house paid off by then and absolutely NO debt whatsoever (barring some big medical emergency or something) and we will be able to cash flow college, even to expensive colleges out of our income. It's not that hard. The hardest year would be the ONE year that both kids overlap in college if they are both going to an expensive school and paying full price, but I don't see that happening. If we were both working full time right now, we could easily afford $45,000 per year for tuition if we wanted to, and we still have a mortgage; sans mortgage, it is even easier. If for one year when the kids overlap we have to pay the equivalent of $90,000 today, we could do it.

There is no way though that my kids will be paying full price to any university, and it is highly unlikely they will choose the most expensive ones. One of them is set on going to an expensive school though and they have very good reasons for wanting to go, then we would likely allow them to. Also, while we COULD pay for any school they want to attend, they WILL have to pay for some of it so that they appreciate it, AND any graduate school is all on their dime.

Flagpole wrote:

The problem is that people will always keep going back to that IRA and take money out if they think like you suggest.

Like I said, you can make a phsychological argument like the one above for not using your Roth IRA as an emergency fund, but from a purely financial point of view it makes sense. You will end up with more money whether or not you actually have to use the emergency fund.

dukerdog wrote:

Like I said, you can make a phsychological argument like the one above for not using your Roth IRA as an emergency fund, but from a purely financial point of view it makes sense. You will end up with more money whether or not you actually have to use the emergency fund.

I get what you're saying, but I will still have to disagree. Emergency Fund Money is for emergencies -- that can be in a Money Market Account or even a non-retirement mutual fund, so it can still bring some returns. It's amazing how often little "emergencies" can come up, and if you're always taking it from the Roth, then it isn't growing. That's for retirement. Again, I get what you're saying, but it's such a bad idea I can't recommend it in any way (and I know you're not necessarily recommending it).

This was a great post, especially the part about a lack of climactic volume and Europe.

A little anecdote... my wife's former general counsel who is now just in a handsomely-paid, administrative figure-head role just pulled his political levers at the expense of some top brass in the firm to "buy" himself five more years. In other words, here's a guy whose scorched earth lifestyle that we are all feeling the brunt of is overlevered, still clings to his grandiose retirement plans, and has yet to really grasp what is on the horizon. In short, he has yet to panic, and just wait until he is forced to "salvage" what's left of his portfolio. Just how many stories like him do you think are out there and how many people have yet to adapt to the new paradigm? That's what I thought. Is this a 100% certainty? Of course not, but I would personally assign a fairly high probability to it.

This is not investment advice, just a cute little thesis. The world's banking system is insolvent, European banks are in worse shape than US banks (hard as that may be to fathom), the IMF has only "special drawing rights (think IOUs)" as a lever to pull, and politicans and monetary authorities the world over have yet to FULLY acknowledge the gravity of the crises, choosing instead to ignorantly, whimsically, and short-sightedly leverage the very same tools that created this calamity to begin with.

So what do you suggest we do? I am 55 and i have reallocated to 50/50 stocks to bonds. If we sell off all of our stock funds, don't we get killed on losses? what advice could you give us to do with retirement within 10 years?

thanks

Long term 5% CD and local credit union.

As I said, this is not an investment thesis. Candidly speaking, I am not a registered investment advisor and not in a position to "give portfolio advice," just share my general ruminations as a former market strategist for an S&P 500 firm and an individual trader/consultant. Sounds like you have already adjusted your portfolio some. Nobody has a crystal ball, but you need good risk management tools in place. Make sure you have a good investment advisor.

I am younger than you, and, personally, we are averaging down in my wife's IRA, which is about one-fifth of our portfolio, and we are exclusively in fixed income isntruments in another life policy which is about one-fifth. But, as for the other 60%, I am in cash, with a short-bias, trading mentality exclusively. Again, that's not advice. Just my personal orientation.

By the way, this will be a crazy week to be sure, what with the stimulus, options expiration, and the auto plan.

To be fair, I don't believe the vast majority of INFORMED investors on here are "fear-mongering," and I would be remiss if I didn't tell you that I've been exploring plan B options for my money for quite some time. But you need to read everything on here with a grain of salt and have your own plan tailored to your risk tolerance, age, and unique circumstances. 10 years is both long and short.

J.R. wrote:

Long term 5% CD and local credit union.

Try 2.75% for long-term

The highest rate for a 5 year CD is 3.85%.

Thanks for the responses. I am not that well informed; but if I were to get out of my stock funds (sell them); don't you take a huge loss? Is this a wise decision.

Thanks in advance.

HSB wrote:

Thanks for the responses. I am not that well informed; but if I were to get out of my stock funds (sell them); don't you take a huge loss? Is this a wise decision.

Thanks in advance.

If you don't plan to retire for 10 more years, then I would keep the 50/50 balance you currently have (I might even keep a 50/50 balance after retirement). If you had stocks when the DOW was at 14,100 (in October of 2007) and you sell them now, then YES you will incur big losses. Personally I would NOT sell now, but do what you must. Some people are selling now because they figure they have enough to live on even if it is all transferred to bonds...Fine. Many more though are selling either because they are tired of seeing their bottom line go down or because they think they can do better with that money elsewhere (while taking a loss to get out of stocks). I think those two ways of thinking are misguided.

Warren Buffett has started to by stocks again. Jeremy Grantham of GMO says the next 7 years will be great for stocks and he predicts a much better than average return on stocks during that time. Would be a shame to miss it.

But, do what you must. If you have $5 million and are going to retire in 10 years, then who cares what the losses are? I'd consider putting it all in bonds then and just making a little and using the next 10 years to make sure I was completely debt free (house paid for too) with my income. If you have only $500,000 or so and need to make some over the next 10 years to ensure a decent retirement, then I would stay with the 50/50 split, still work to be completely debt free, and hope the market does what Grantham predicts it will. It's your money though brother -- you need to do the research and decide what to do based on how much you have now, what kind of debt you expect to have when you retire, how much risk you are willing to take, and what you want your post-retirement lifestyle to be like.

HSB wrote:

Thanks for the responses. I am not that well informed; but if I were to get out of my stock funds (sell them); don't you take a huge loss? Is this a wise decision.

Thanks in advance.

If you MUST own something, this is what you might call a growth investors security blanket. These are stocks that did NOT go down (most went up) in the bear market and have takent off in the last 3 months or so:

COCO

ESI

NFLX

PALM

AIPC

MYGN

ISRL

SEMFF

NTCT

SXL

THM

NMB

THH

CVGW

UWE

I'm not recommending any one in particular (the first 4 are midcaps and the remainder are smaller) but the whole list has gone up while people like Flagpole have lost their veritable shirt. Note: I am STILL short the SP500 futures from 1401 in January of last year (a SP contract is worth $250/point; Do the math, and this is the value of following the prevailing trend rather than sitting there like an ignoramus and losing half your money in one year). I will not be buying anything until long term moving averages like the weekly MACD and 20week/40week moving averages indicate that the trend is up. Until that happens, I rather enjoy chewing on Flagpole's net worth.

Listening to people like Flagpole is every bit as intelligent as a 29:00 guy getting a training plan from Richard Gibbens.

You have ALREADY taken a huge loss if you just sat there in a mutual fund. If you have a capital (tax) loss, you can move into cash for now, book that loss so that you can use it to offset income in the future. And get some advice from somebody who has actually MADE some money in the market (don't use Warren Buffet as an example unless you plan to ditch mutual funds for a few good stocks).

In my stock list above THH should be TNH.

Coach D wrote:

...but the whole list has gone up while people like Flagpole have lost their veritable shirt.

Ha! That's great brother; look up stocks that have gone up over the last little bit and then pretty much say "you could have had those". Dude, hindsight is 20/20 vision. Also, you like to mention that I've "lost my shirt" when really it isn't true. I've not lost anything as I haven't sold. The value of my stuff today is still higher than it was in 2002 after the Dot Com bust as 2003, 2004, 2005, 2006, and 2007 were all VERY positive years for me. Only 2008 in that group has been down, and not even close to bringing me back to 2002 levels. Besides, I've gotten VERY good dividends over the last year which just get reinvested, and I've been able to buy stock cheaply. No shirt loss for me brother. Not sure why you wish it for me or think I have lost my shirt, but neither is true. I put money away for RETIREMENT, and don't count on that money for anything until then. I'm actually in better shape financially since October 2007 as I have a bigger income and less debt (as I keep paying down my mortgage). I've also increased my emergency fund to about 8 months of expenses (from 6 months) just because the economy is a bit unsure, so even there I'm doing better. I would like to just sink that extra money in the stock market, but I'm doing more than enough of that, so I'll keep it liquid...in this economy cash is king.

In this economy, cash is about to become worthless.

Flagpole wrote:

...in this economy cash is king.