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Everything posted by EdLaFave

  1. Why’d you move to 85/15? Were you previously 100% stock?
  2. This is my first bear market with significant assets. Cold logic is winning over emotion and it isn’t even close. So I am happy that I properly assessed my psychology before the crash. However, this is absolutely painful...I cringe thinking about the possibility of losing another year or two worth of wealth. I began my career in early 2007 and I basically just hit the financial ceiling, which means my salary tracked the stock market those years. Therefore, most of my money was invested during the back half of the bull market. I cringe thinking about the possibility of losing every penny of profit and eventually going negative overall. But such is the stock market and whenever the next bull market comes, I’ll have a large enough portfolio to truly benefit (something I didn’t really have last time). I basically hit my FIRE number earlier this year. I considered retiring in mid-September (when I was switching jobs), but the new job offer was too good and I felt foolish contemplating retirement at the tail end of a record setting bull market without having experienced a single bear with significant assets. Plus the FIRE movement tells you sequence of returns is critical and starting retirement in a bear market is really bad news. So I’m still a firm believer in FIRE, but it gives me real heartburn to see how my true FIRE date is getting pushed back each time the market opens. I want independence and I no longer believe I have it. Had I retired at the actual peak...I’d either be losing my mind or I’d be back at work already. Overall I feel good about the economy. Sure we have stupid self inflicted headwinds like the trade war (which hopefully ends in 2020 with a new President), but I haven’t read of anything structural like the dot com crash or the housing bubble. So as things stand now I consider this to be nothing more than a return to sane prices, but I guess we will see. Who knows?
  3. The S&P500 is officially in bear market territory, VTSAX (Vanguard Total Stock Market) is down approximately 20.15% since 9/21/2018, and the Schiller PE ratio is now at 26.02. For context, from 2011 to 2016 the Shiller PE ratio was usually pretty close to the 22-24 range. From the close on 12/3 to closing today, VTSAX is down roughly 15%! This rapid December decline is unsettingling and makes me wonder if the market is entering an overly negative emotional state and will therefore keep declining well past a "reasonable" price. I guess we'll see what happens. Good luck to everyone out there!
  4. As is usual, I have contrarian thoughts. I don’t think we need to spin the truth to argue that things aren’t bad. We should embrace the reality that the market, just like life itself, sometimes sucks! Let’s accept that reality and commit ourselves to not making it worse than it needs to be. 1. Whether or not you sold stock, the loss is 100% real. It’s good to acknowledge and live with that pain, but it doesn’t mean you can or should do something about it. Lick your wounds, they hurt...I know mine do. 2. I don’t think we need to spin a loss as a buying opportunity any more than we’d spin a gain as a selling opportunity. I suspect a boom-bust economy may be inferior to a hypothetical steady as she goes economy. I think we simply accept the pain that a decline brings in the same way we accept the joy a boom brings.
  5. The total US stock market is down 18% since it peaked on September 21st. We’re 2% away from official bear market territory. The Shiller P/E has fallen to a more reasonable 26.75, I’m not sure where it peaked, maybe 35-ish. I’m somewhat arbitrarily looking for it to get below 25. Either way I’m feeling better about stock valuations now...I think most folks (like Vanguard) acknowledged that stocks were pretty expensive. So how’s everybody feeling? Personally... I’ve lost roughly 130k from the peak. For me, that is worth roughly 1.3 years of savings. So if you account for growth during a normal/calm market, I’ve been set back roughly a year by this downturn. I’ve continued to buy stock with every paycheck. I don’t feel too much negative emotion and I think I’ll have the same disposition if I lose another 130k-250k. However, this feeling isn’t great, waking up each morning and basically expecting another 1% - 2% decline, and then having those expectations met! It isn’t great to have invested roughly 4K yesterday only to lose roughly double that in the market that day. I tend to cope using dark humor among my friends/coworkers. So far I’m proving to be worthy of an extremely aggressive portfolio and that is quite a relief. A couple years ago I allocated roughly 9% of my portfolio to bonds so I could pay for a home renovation we never did. Each day I’ve shifted closer and closer to abandoning the idea of a renovation altogether. If I haven’t fully abandoned the renovation when/if we hit negative 20%-25% then the temptation to swap bonds for stocks will likely be too great. A two fund portfolio is on the horizon!
  6. “What goes up must come down, and that might finally be happening now” We may have a crash soon/now, but the implication that we’re guaranteed one is ridiculous. The market could remain flat (or have very little growth) for a period of time. That would bring the price of stocks in line with companys’ earnings. Today’s high valuations do not guarantee a crash, there is more than one way to get to a reasonable valuations.
  7. People walked Greenspan through the broken incentive structure and the Wild West of credit default obligations and credit default swaps. He recognized the danger and had full authority to regulate the derivative market, but chose to nothing because he was an ideologue who ignored facts/data. We all paid the price when the financial/housing crisis hit. He later explained his inaction by saying, “I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms." I’ll tell you one thing about the rich/powerful...often enough, they’re addicts who are willing to burn the world down for an extra dollar even though their wealth already surpasses any functional purpose. So it is laughable that Greenspan couldn’t conceive of people being willing to profit off the destruction of their own firms. Now we’ve got Greenspan telling us he knows what the market will do as he advocates market timing...”Former Fed Chair Alan Greenspan said in an interview with CNN aired Tuesday that it would be a “surprise” to see the market stabilize here and take off, but even if it did, the outlook would be bleak. “At the end of that run, run for cover,” he said.” I can’t roll my eyes hard enough at this man and I hope his god-like reputation as the Fed Chairman who could do no wrong doesn’t prevent others from doing the same.
  8. Buying homes for other people is a level I won’t reach. Good for you 😀👍
  9. I’m sure this point has been made a million times, but I think consumerism requires far more hardship, bravery, and struggle than minimalism or FIRE does.
  10. Points to anybody who can provide a link. I’d like to know if this extends beyond 403b accounts. I’d like to see it dropped to 0.06%, but this reduction has been long overdue.
  11. I agree that the transition from pensions to 401ks has been an abject failure.
  12. I’ve spent months seeking out FIRE criticisms and cautionary tales, but I think this article will be the last that I read. If you’ve got 33x yearly expenses and are willing to go all in on stocks (or close to it) then I haven’t heard a reasonable argument for not pulling the trigger.
  13. I read his first 3 or 4 posts where he spoke from two different personas (MMM and the Skeptic). I fully understand he is trying to be an interesting showman and intentionally outrageous. I just don’t like it. I like my finances the same way I like my physics, math, and science. Teach me the facts, explain why it is useful, and show me how to apply it. If you attempt to play on my emotions (especially without thoroughly arguing/proving the facts), promise the world, or present yourself as some kind of savior...then I’m instantly going to dislike you and not trust you. It’s a hardwired physiological response. I also believe he is wildly out of touch with the circumstances of tens of millions (maybe more) of Americans. In the Playing With Fire trailer he said he accidentally built a cult. After reading those posts it seems hardly accidental. He seemed destined to be ignored or develop a cult like following...his presentation didn’t allow for many other outcomes. These quotes illustrate why I feel this way.. You will suddenly be able to fly freely through the world, free from having to work for a living, able to start living life as you choose, doing exotic things like spending time raising your young children, taking a 3-week vacation each month, or just enjoying understated shows of leisure like sweeping your driveway in pajamas at 11am on a sunny Thursday morning. Everyone can do it. But most people think they can’t because they’re still stuck in the Matrix. They blame “the economy” or other external factors, when really the only problem is they aren’t listening hard enough to Mr. Money Mustache. But there also a fine line between staying afloat and rising up quickly to become very wealthy. What if the person breaking even above found a way to save $10 a day instead of spending $25 more than she made each month? Even if you work in Wal-Mart, you make more money than I did, you get to walk around in a huge fancy store, and you can save almost everything you earn if you don’t get ridiculous and waste it all.
  14. One of the metrics I keep track of is my profits. I’m down 80k from my high watermark and I’m psychologically preparing to lose another 100k during 2019. If we hit a downturn I’ll be studying the emotional affect it has on me. So far I feel nothing about losses as long as I think about them in terms of dollars. However, if I think of losses in terms of how it affects my FIRE date (assuming a 5 year decline/recovery cycle), then I feel some real negative emotions. It’ll be an interesting ride and I look forward to seeing what affect a potential recession has on other investors. I will be staying the course simply because there isn’t another viable option.
  15. Took a quick glance at the market and we are in correction territory. I guess we will find out soon enough if we are heading towards bear market territory. If you believe in such things, the shiller p/e is a shade above 29, which is historically high and gives us plenty of room to fall. Once again, I feel like we are in the beginnings of a downturn.
  16. Today is the first time I read MMM’s blog and I was surprised by just how much I disliked it. Now I understand some of the people criticizing FIRE. I’m looking forward to that FIRE documentary though. @sschullo, any idea when that is coming out?
  17. Two reasons. When people hold concentrated risk, it is always interesting to see how it turned out. I love the threads on investment forums where somebody goes all in Tesla or shorts the S&P500. Having concrete comparison results makes the gamble more interesting. Also it sounded like you were happy with the performance when you had it and maybe a bit envious of the returns after you sold it. It looks like you should have felt the opposite...unhappy with the returns when you had it and happy you avoided subpar future returns when you sold it. Although I can’t say that for sure because my calculations used insufficient data (dividend data and time span data). At any rate, we agree. Total market index funds....buy them, hold them, and love them.
  18. The holding period isn’t explicit, but an investment in Vanguards S&P500 index fund nearly tripled in nominal terms from Jan 1998 to Dec 2015 (18 years). From Jan 2016 until now the S&P500 is up 42.3% compared to the listed 3M gain of 20.5%. ...although in both of these calculations it doesn’t sound like you’ve accounted for dividends in the individual stock whereas the S&P500 calculations do. So the 3M stock probably did better than described above. ...either way, what’s done is done and you’re so clearly right that concentrated risks are to be avoided with the use of total market index funds.
  19. What did they mean by that? My parents didn’t have money, which means they couldn’t teach me anything. I suspect children born into wealth have a huge head start on learning about money.
  20. I frequently day dream about a society that only steps away from personal free time to pursue activities that are truly necessary (healthcare, education, housing, utilities, food, art, safety, technology, etc). I suspect it would require an entirely different economic system. I suspect there will be more people than jobs and I suspect many won’t have the necessary skills or aptitude. I suspect we aren’t sufficiently civilized to deal with that possibility...I suspect we’d see movements to “cut the dead weight among us.” I imagine we’d have more success if virtually all of the work was done by robots...but maybe we’d just see even more wealth in the hands of whoever owns the robots. ...my view of people is dark. This thought experiment almost always turns to a dystopian future.
  21. The stuff you buy ends up owning you. A minimalist friend told me that their rule of thumb is to get rid of anything and to refuse to buy anything that: 1) Isn’t regularly used (maybe at least once a month) 2) Isn’t generating additional happiness/health/wealth. People think I’m crazy, but do we really need much more than clothing, shoes, toothbrush, dishes, phone/computer, tv/monitor, blanket, pillow, transportation, and a place to live?
  22. Option 1: Keep all of your available assets invested and add to your portfolio whenever you have surplus income. As a result, your portfolio always reflects your ideal asset allocation. Option 2: Keep a significant portion of your portfolio in cash and slowly invest the cash over a fairly significant time period (a year?). Your portfolio will initially be far more conservative than your desired asset allocation until it gradually falls in line. I’d argue option 1 isn’t employing a scheme, they’re just keeping a constant asset allocation. I’d argue option 2 is employing a risk mitigation scheme, which results in a drastically different and variable asset allocation for a period of time. In my mind these two approaches are sufficiently different that we can’t accurately say they’re both doing the same thing even if they both invest regularly. Sure, they aren’t in 100% direct conflict. I suppose one would have to use leverage to short the market to be in direct conflict, but their philosophies are sufficiently different in my view. If somebody needs to employ an inferior and illogical investment scheme to handle a very rare event (windfall) and if that scheme has a limited duration (a year?)...then I suppose they aren’t committing the worst sin, which is why I’ve never argued strongly that somebody shouldn’t do it. My passionate argument is more reserved for a semantic pet peeve and illogical behavior. However, I worry the need for the mental gymnastics stems from a portfolio that is too risky for them to handle. I use market timing to refer to any investment scheme that causes you to change your portfolio based on your perception of the market or your beliefs/fears/greed regarding the market’s fluctuations. Perhaps other people use a different definition. There are certainly more harmful forms of market timing than DCA. At least DCA has a fixed time window and doesn’t encourage taking risky/concentrated positions. I’ve felt the same way my whole life.
  23. DCA isn’t a method of calculation, it’s an investment technique. Words evolve and eventually mean whatever people use them to describe. In my view people are destroying the meaning of DCA just as they have the word “literally”. In my view, Wikipedia has correctly defined DCA. In my view, we don’t need a special term to describe investing on a regular basis whenever you have surplus income. That is by default, plain old investing. To withhold cash from the market for some future time out of fear the market will decline is called market timing. Within that subcategory there are lots of schemes of which DCA is just one. We really don’t need a term to describe non-market timers just like we don’t really need a term to describe non-diabetics (although perhaps there is one). That risk exists regardless of whether you have new money or existing money. Basing future actions on exactly how you got into a particular situation isn’t logical because you are where you are regardless of how you got there. To think otherwise brings us errors like the sunk cost fallacy. If I spent the last 10 years slowly building up a million dollar portfolio then there is a chance that tomorrow the market will begin a huge decline. If I inherited a windfall, spent the last six months DCAing, and now have a million invested there is an equal chance that tomorrow the market will begin a huge decline. If I inherited a windfall today then there is an equal chance that tomorrow the market will begin a huge decline. ...in each scenario, I have to decide today (and every day) what percentage of my assets should be invested in the market. Each scenario is absolutely identical. People would correctly criticize me as a self-destructive market timer if I moved my portfolio into cash with the intention of spending 6 months DCAing and they’d simultaneously and incorrectly consider me a reasonable investor if I kept an inheritance in cash and slowly dripped it into the market over six months. If people plan to behave differently in functionally identical scenarios, it reflects a misunderstanding of reality on their part. DCAing does provide risk mitigation, but using DCAing to mitigate risk isn’t reasonable. That’s what bonds are for and if the risk profile of your portfolio is too high for you to stomach 100% of your assets being invested then your asset allocation is inappropriate and you need more bonds. You don’t need to keep arbitrary percentages of your portfolio uninvested for arbitrary periods of time. You don’t need a portfolio with an arbitrary asset allocation that changes at arbitrary times to arbitrary degrees.
  24. Alright everyone, as they say, I’ve predicted 30 of the last 2 down markets...so is this the moment we begin our return to more (historically) normal prices for stocks? (purely rhetorical because nobody knows anything, this is just meant to commiserate with anybody feeling the pain of losses) The past couple months have been tough. I hope we’re all riding it out well!
  25. I don’t blame the author too much, but I was repeatedly told I couldn’t access my 401k penalty free until an advanced age and it discouraged the notion of FIRE or the use of a 401k. Luckily the FIRE and investing community provided the correct information.
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