The Economy

[Becky]

We have been getting ready for the market to crash. My one and only active credit card is getting far less usage. My internet account is paid from(through) the credit card and only other charges are for my work which I get reimbursed. I do have a second CC but it gets no usage and stored safely away in a safe deposit box. My retirement account has been all transferred to bond funds and very little in stocks. And my stocks investments have been liquidated and now sitting safely in cash. I'm being a real bear.

Good point about investments. I struggle with the idea of what to do with my retirement accounts. I'm not a super-agressive investor, but I'm easily 25 years from retirement, so a good chunk is in stocks. Do I temporarily move things to more conservative funds, or do I ride this out? I really should call my financial guy ("financial panther" for you Simpsons fans ), but I'm curious what y'all think.

[Blueberry]

Good point about investments. I struggle with the idea of what to do with my retirement accounts. I'm not a super-agressive investor, but I'm easily 25 years from retirement, so a good chunk is in stocks. Do I temporarily move things to more conservative funds, or do I ride this out? I really should call my financial guy ("financial panther" for you Simpsons fans ), but I'm curious what y'all think.

Make sure your portfolio is adequately diversified (international, mix of domestic stocks, appropriate level of bonds) and ride it out. Least that's what my financial guy is telling me

CA

[smilingcat]

Hi,

I'm not a licensed broker so I can't give you any advice. my ex was a stock broker turned into a bum whole another story... anyway, read as much as you can and play a game in your head of what if games and see how the market will react in your head. And invest/position yourself in a way so that if the market does act the way you think, you will make money. You have to make your money work for you. The same man stressed in "don't trade in small quantities". You have to invest real money to make money. And you will lose real money too. But the game is to make more in the long run.

If you are looking for a long term investment with reasonable return ( I compare it to the interest rates available from the bank) and if the divident paying out is more than 3% today, you are better off with the investment. However, if you think the value of the stock drops you will come up short in the long run.

As for riding it out, I haven't bought into that idea. Why not dump it and wait until it drops then buy it back? then again you have to decide if paying out for the capital gains tax is worth while or not. Generally, if the stock doesn't tank more than 30% its not worth dumping because of the capital gain. If dumping the stock then buying back atleast "30% cheaper of your capital gain" then you are better off riding it out. so lets say you bought the stock at $10.00 and went up to $20.00 then you thought the market is going to tank so you sell. Your capital gain is $10.00 so you have to pay $3.00 in tax. To come out even, the stock must lose $3.00 or go down to less than $17.00 to make it worthwhile to sell, If the stock stays above $17.00, then you are better off holding onto the stock.

Another important concept is don't try to sell at its peak!! I've been told that "pig out and you will get roasted."

just some thoughts.

Smilingcat

[maillotpois]

We saw a pretty substantial drop in income last year (about 1/3) from prior years just due to issues involved with working for/owning small law firms. SO we did some serious belt tightening then. This year looks to be better, but I have a constant gut wrenching stress level about our financial situation and the economy as a whole.

Changes?

I'm working at home more. Driving to the office, with bridge toll, probably costs $15 - 20. So I only go in once a week. I am using the motorcycle more. DH is cycling to work more and more.

No big trips planned for this year (Of course Bend is a HUGE trip. ). But we're not taking any expensive vacations. (We are planning Hawaii in February, though.)

And I want to know who voted "never better" !!!

[Mr. Bloom]

As for riding it out, I haven't bought into that idea. Why not dump it and wait until it drops then buy it back?

Smilingcat, I hear ya'. The problem with "market timing" is it assumes that you are sitting on top of the market to execute your moves perfectly. This is far from reality for anyone but a floor trader.

I'll let you do the math (importing daily data on the Dow from YahooFinance into an excel worksheet). I just did this and here's what it reveals:

50 Years Ago, On 7/7/1958, the Dow was at 481.85. Yesterday, it closed at 11,288.53.

In the last 50 years, the 10 single largest DAILY gains were:
Date

10/15/2002- 4.80%
7/29/2002- 5.41%
7/24/2002- 6.35%
3/16/2000- 4.93%
9/8/1998- 4.98%
10/29/1987 - 4.96%
10/21/1987- 10.15%
10/20/1987- 5.88%
8/17/1982- 4.90%
5/27/1970- 5.08%

If those 10 days (out of 12,585 days) were "0" because you were sitting on the sideline, "your Dow" would have been 6,464. The cumulative effect of ONLY THOSE 10 DAYS accounted for nearly half the return on the Dow in the last 50 years.

Intuitively, the idea of timing makes sense...but for all practical purposes, it's almost impossible for ordinary people to do.

TO BE FAIR: If you also take out the worst 10 days as well, "your Dow" would be > 15,000! But, I usually hear about a bad market day when I get home...when I've already incurred the loss...then, it's too late...

[Crankin]

It's obvious that we don't represent an "average" just by virtue of our interest in cycling. Lots of people think I'm definitely nuts to spend what I spend on bikes...
To be serious, I realize I have it very easy compared to people who are really hurting. But, I think that if more people who were in my position made small changes in their habits, it would help make permanent changes. Like the thread on more people riding their bikes; do you think this phenomenon will last if gas suddenly gets a bit cheaper? Personally, I don't. We need to get a critical mass out there doing these things before they become "habits" that are part of our national personality.
And yes, vote...

[Jolt]

But, I think that if more people who were in my position made small changes in their habits, it would help make permanent changes. Like the thread on more people riding their bikes; do you think this phenomenon will last if gas suddenly gets a bit cheaper? Personally, I don't. We need to get a critical mass out there doing these things before they become "habits" that are part of our national personality.
And yes, vote...

I agree! I have seen more people riding their bikes around town lately, which is great (although I do wish they'd follow the rules of the road better). As far as how the economic situation is affecting me, I wouldn't say I've made too many major changes since I have always tried to be fairly frugal (being a student will do that to a person). However, it is stressing me out that I am having so much trouble finding a nursing job around here. So much for the supposed shortage of nurses. We new grad nurses (I just got my RN license in February and have one more year of school to become an NP) here in MA are having a hard time because there just aren't as many positions available for us--most places are just looking for experienced nurses. And because I am still in school in MA, I do not have the option of looking in other states as some people have suggested to those of us having problems finding jobs. It's frustrating and I am hoping something comes through soon (I have all sorts of applications out at a bunch of places). I also would prefer, for obvious reasons, to end up working somewhere that is close enough to walk or bike to--a couple of the hospitals are about 20 miles away (one's even further, but it looks like the train would be an option on weekdays) so biking it would be pretty tough for a slow rider like me, but others are right in the same town as I am. We'll see what happens...

[Dogmama]

Smilingcat, I hear ya'. The problem with "market timing" is it assumes that you are sitting on top of the market to execute your moves perfectly. This is far from reality for anyone but a floor trader.

...

I'm too lazy/uninterested to sit at my computer & try to time the market. I have my IRA in stocks 100% because I won't be able to access it anytime soon & the stock market seems to be the best investment for the long run. Plus, I'm re-investing my dividends, so when the market is down, I figure I'm buying stocks at a discounted price. My glass is always half full!

[Trek420]

I'm too lazy/uninterested to sit at my computer & try to time the market. I have my IRA in stocks 100% because I won't be able to access it anytime soon & the stock market seems to be the best investment for the long run. Plus, I'm re-investing my dividends, so when the market is down, I figure I'm buying stocks at a discounted price. My glass is always half full!

Agreed. If your employer has a 401k make sure you're in it. You really will not miss it each pay day. The money taken out is just being taken off of the table for the tax guy.

Every time I talk to someone living on social security alone I feel like clocking off and calling HR to increase the amount taken out of my paycheck pre-tax.

It's always been hard but now retirees are in a lot of pain.

I have a large amount being taken out each payday. It goes to a diverse group of funds. I do not request my employers stock because the company match (they match my first 8% so if I did not do at least that I'm a fool) is in our stock with dividends so I'm getting that anyway. Plus I don't want all my eggs in one basket.

You need that 3 legged stool, maybe 4 legs: 401k, pension, social security, your own investments. For one thing because we don't know which of those will be there by the time I retire.

[Dogmama]

Agreed. If your employer has a 401k make sure you're in it. You really will not miss it each pay day. The money taken out is just being taken off of the table for the tax guy.

Absolutely. They call it paying yourself first. If I had to actually move money, it would never happen.