I have arbitrarily  assumed that we are going to be in 3 year bear market and therefore we are now only 1/3 of the way to the next bull market.  Here's my situation: Although I was down 19% at the end of the year I still beat the Lipper Balanced Fund index by 7 percentage points. So I'm grateful it didn't get any worse. I pulled out enough from my IRA account  in 2008 so that at this time I have 2 years of living expenses to draw on without worrying about the market's direction. I plan to draw less this year than last year simply because the 4%  withdrawal  rate is what I continue to follow. In the event of an emergency I still have some individual securities, but no mutual funds, that I could sell at this time at a profit to free up more cash if I need it for contingencies. As bad as the market was I'm inclined to believe that 2009 won't be as bad.

Good luck to all in 2009,

Tony

Happy New Year, Tony. Congratulations on going to cash last spring, good position for a bear market. The markets will be back: low interest rates, low fuel prices, low real estate prices and going lower, they will bottom out and drive a big boom. Fall 2009 or early 2010? Maybe. Now is the time to buy. Best wishes.

I'm finding it difficult to find undervalued securities. I've been selling today stocks I bought in October and November and did very well. I'm thinking that we may have a short term rally in January and have made my sell orders harder to execute. For example, I moved my target on GE to 18 from 17. That may not seem like much, but GE usually trades in a narrow range on any given day. I sold today a small position in USO and  a larger one in Alcoa and did well considering I had them two months. USO is one of the most volatile ETFs around. I had a great 4th quarter trading and cut my total losses by one third. I'm continuing to leave my funds alone and am strictly looking at trading opportunities. My strategy runs counter to what most do on this  forum, but it's working for me.  I think I've been sucessful in what I'm doing is because I have the time since I'm retired. I told my wife it's like another job, but I'm working for myself. I'm trading in an IRA account so I don't have to worry about keeping track of a lot of paper.  I really like what I'm doing. 

Tony Towers:

I have arbitrarily  assumed that we are going to be in 3 year bear market and therefore we are now only 1/3 of the way to the next bull market.  Here's my situation: Although I was down 19% at the end of the year I still beat the Lipper Balanced Fund index by 7 percentage points. So I'm grateful it didn't get any worse. I pulled out enough from my IRA account  in 2008 so that at this time I have 2 years of living expenses to draw on without worrying about the market's direction. I plan to draw less this year than last year simply because the 4%  withdrawal  rate is what I continue to follow. In the event of an emergency I still have some individual securities, but no mutual funds, that I could sell at this time at a profit to free up more cash if I need it for contingencies. As bad as the market was I'm inclined to believe that 2009 won't be as bad.

Good luck to all in 2009,

Tony

I currently have 5 years of living expenses in cash.  I am looking to invest some of that cash in balanced funds to leave me with about 3.5 years of living expenses in cash.  Waiting for a retest of the Oct/Nov lows to make that move.

 

Tony Towers:

I'm trading in an IRA account so I don't have to worry about keeping track of a lot of paper.  I really like what I'm doing. 

Tony, I trade in my IRA, too.  I stopped doing it in November because things got too crazy with the market and I got too busy with my part time work and the holidays.

I am really tempted to sell again today.  I sell first and then buy back lower so I am in effect shorting a stock in the short term that I am long on for the long term only using shares I already own to short the stock short term instead of borrowing someone else's shares.

I have made a small profit doing this.  The risk I run is that I will not be able to buy it back lower.  That doesn't seem like much of a risk in this market.

Tony Towers:

I have arbitrarily  assumed that we are going to be in 3 year bear market and therefore we are now only 1/3 of the way to the next bull market.  Here's my situation: Although I was down 19% at the end of the year I still beat the Lipper Balanced Fund index by 7 percentage points. So I'm grateful it didn't get any worse. I pulled out enough from my IRA account  in 2008 so that at this time I have 2 years of living expenses to draw on without worrying about the market's direction. I plan to draw less this year than last year simply because the 4%  withdrawal  rate is what I continue to follow. In the event of an emergency I still have some individual securities, but no mutual funds, that I could sell at this time at a profit to free up more cash if I need it for contingencies. As bad as the market was I'm inclined to believe that 2009 won't be as bad.

Good luck to all in 2009,

Tony

 

Hi Tony,

What created the 4% SWR was a study that included both the '29 Depression and 1967 - 1981 inflation crash. The current bear market might be as bad, maybe even possibly worse, but the SWR was created using the worst beginning periods, 1929 and 1967. Per this, you should have been able to draw 4% adjusted for inflation starting in 2000.

The 4% withdrawal rate based on this would mean you would draw more, not less, adjusted for inflation. Inflation has been 4% plus for the trailing year. You do not need to adjust your portfolio down per empirical results, but I do understand the psychological effects of a bear market, and would never suggest you do not cut spending if you can during difficult markets.

If you are doing this, it is likely you set yourself up with a comfortable retirement based on the 4% SWR, and this makes the SWR that much safer - the fact you can adjust your spending.

As far as the 3 yr. Bear Market, take a look at 1929 - 1932;

http://www.gummy-stuff.org/returns.htm

I don't suggest others look at it this way, but it gives me comfort knowing the SWR of 4% would have made it through 1929 - 1941, and inflation adjusted, 1967 - 1981. One retiring in 2000 at 4% inflation adjusted, should still be OK now - maybe not psychologically, but financially.

Chin

Lele,

I congratulate you for having the foresight to have such alarge cash reserves in these turbulent times. Neither one of us has any problem sleeping because of stock market worries. I don't know how old you are, but anyone who's retired should have planned to raise plenty of cash for what might be the worst bear market since the Great Depression.  I don't know whether we'll retest the October lows, but it certainly wouldn't surprise me. So far this recession doesn't strike me as having reached the midpoint. That I believe will come later, possibly this summer. I plan to be ready to make more investments whenever that time comes. What I'm saying is that I don't plan to be fully invested for now.

Tony Towers:

Lele,

I congratulate you for having the foresight to have such alarge cash reserves in these turbulent times.

I don't know if it was foresight so much as being self-employed.  So I have to be prepared for the worst.  My clients don't pay me a severance package if they leave me and I have to pay for my own health insurance.

 

Tony Towers:

Neither one of us has any problem sleeping because of stock market worries.

You know, I wish that were true.  Right now I am worried about what to do with cash I had in a CD.  I can't stand the thought of locking it in for a year to get 3.25% interest.  But then, I don't want to be fooled by buying into a bear market rally.  So instead, I leave it in a money market fund for now, which is probably the worst option, lol!

Even though I know I am covered to wait this out, it still is tough watching my total net worth decline some due to the equities I do hold.

And during the boom times, I was struggling with the fact that I had all this cash and others were making so much more than I was. 

I think I will always worry about this stuff. 

 

Tony Towers:

I don't know how old you are, but anyone who's retired should have planned to raise plenty of cash for what might be the worst bear market since the Great Depression.

I still work part time.  My port was set up to provide me with enough dividends/income so I don't have to sell anything BUT with dropping interest rates on CDs, that leaves me having to move some of my cash to bonds and/or dividend producing stocks or cut down my spending (which I am not opposed to).  Now if the dividends get cut, that will leave me with another problem.  So far so good with the dividends.  Who knows what tomorrow will bring, though.

 

Tony Towers:

 

I don't know whether we'll retest the October lows, but it certainly wouldn't surprise me. So far this recession doesn't strike me as having reached the midpoint. That I believe will come later, possibly this summer. I plan to be ready to make more investments whenever that time comes. What I'm saying is that I don't plan to be fully invested for now.

If we get to Dow of 9.5k, I am selling some stock and then will buy it back.  No way do I see us breaking Dow of 10k in January.

Hi Chin,

Thanks for posting that table. It was very interesting to see the changes year by year. With regard to my withdrawal rate I think that one consideration for determining the amount are the tax consequences that can result when you  start  RMDs and might be forced to take larger withdrawals than you want. I plan to draw no more than 4% this year and might even drop it  to 3% depending on how the year develops.  I maintain a long term forecast of withdrawals year by year based on a given average return. At this time I'm still okay through age 95. At the start of 2008 it was age 100.

Good luck,

Tony

Hey, Tony.

I hope you are right about the bear only lasting for three years. I am planning for this secular bear to last a bit longer through 2015 - 2017 (and plan to take advantage of any cyclical bulls in the short run). As always, I acknowledge that "my opinion and a nickel is worth about 5 cents."

I like your optimism and thank you for sharing your "strategy" and wish you good luck in the new year.

d
 

Tony Towers:

Hi Chin,

Thanks for posting that table. It was very interesting to see the changes year by year. With regard to my withdrawal rate I think that one consideration for determining the amount are the tax consequences that can result when you  start  RMDs and might be forced to take larger withdrawals than you want. I plan to draw no more than 4% this year and might even drop it  to 3% depending on how the year develops.  I maintain a long term forecast of withdrawals year by year based on a given average return. At this time I'm still okay through age 95. At the start of 2008 it was age 100.

Good luck,

Tony

 

Hi Tony,

I agree. Using a hypothetical scenario considering taxes, 1967 - 1981 was probably worse than the '29 Crash. Taxes favor higher risk per tax loss harvesting, and capital gains and dividend tax rates, as well as need to be considered in rebalancing. Selling growth in retirement helps, but I'm sure not every scenario. Some annuities might help as well.

Chin