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Scott,
I just read your article regarding the perfect SH-T storm which may be blowing our way. I have been spending the last several days watching some of my stock portfolio profits dissolve and, while that is no fun to do, I am going to deal with it by looking at this as a buying opportunity and not as a disaster. I am staying engaged. The market always comes back…eventually. And if, this time, it will not, how would you suggest we protect our assets? Removing your nest egg from the market and literally putting it into a nest (ie; your mattress or a money market fund)), is an act of fear.
I am continuously stunned by the way the market over reacts. It is a mirror of the way the american public fearfully over reacts to world events. It is a herd mentality. I take stock of the potential for world catastrophe, but our lives and fortunes are so completely intertwined that, short of retiring to a mountain top and growing a long beard, there is little I can do to avoid being overtaken. I am staying engaged and hopeful….and OUT of the herd.
Rule #1: The market can go a lot higher than anyone can imagine…
Rule #2: The market can go a lot lower than anyone can imagine …
An investor in the S&P 500 from 1929 through 1949 “if” he was brave to hold on would received an inflation adjusted return of 4.54%. From its peak in 1929, a long-term investor would have had to endure an 86% decline in the value of his portfolio to its low in July, 1932.
An investor in 1968 had to wait until 1983, fourteen years to just break-even after inflation. If they waited until 1987, twenty years, their annual return was 4.19% after inflation.
These are just two examples…
In 1978, would you have told me that “The market always comes back…eventually?”
And yes! It is different this time – We have NEVER before faced the kind of geo-political ‘challenges’ that we presently face.
Scott Oliver – Founder
WeLoveCostaRica.comPS. Just as a matter of interest, please tell me what economic “lights” there are at the end of the tunnel as far as you can see…
You see a tunnel. I do not. The world has seen dangerous times before and today is no worse than 20 years ago when we had a hair trigger on thousands of nuclear weapons pointed everywhere. If you want a light at the end of your tunnel, here is one; a veritable ocean of money we baby boomers currently have invested and will be using for all kinds of services when some of it is retired from the market. Where is all of that invested money going to go right now? Real estate?
One can play endless games of cherry picking blocks of time to illustrate the horrors of a secular bear market or to show the marvels of compounded interest. Those are POSSIBILITIES . I am more interested in PROBABILITIES and it is much more likely that the market will pay off over a 5 year period than not. I have some money in my U.S. home, some in Costa Rica property and most in the stock market. You were once a broker. Where is the biggest part of your wealth right now? I am curious to know just how seriously you are taking your beliefs about current events. Has your caution sent your money some place special?There is more to be gloomy about today than ever before. We hear about a vibrant economy, but what are the realities. The dollar is devalued to encourage foreign trade. What do we even have to sell them at a discount when manufacturing has gone overseas? Along with the jobs! The dollar can’t even advance against the Colon.
We’re shoving money down a rathole in a war that has no end in sight. This means our kids will be left the burden of picking up the tab. Never mind that historically a recession always follows a war, when it does end.
Real estate taxes are increasing like never before. I just read our county executive has said our county property taxes will go up by 20% plus this next year. Great news, huh? I wish I could get raises in that realm.
Then we get to the real estate market. Equity dropping by 10% or more and that appears just for starters. And still homes are not affordable for new buyers. Lenders will tighten their policies, requiring larger down payments. More money taken is out of investments to be redirected into home purchases.
Now, down to the harsh reality. Baby Boomers will be retiring in record numbers shortly. Where do you think they will be getting the funds to keep their lifestyle going? They will of course be dipping into retirement funds, mostly from stock related investments. What effect do you think that will have on the market? It has to have a negative effect. More money out, less money in, because these youngsters are not investing at the same rate as their parents did.
I don’t think in light of what we see happening in our own lives, and see and read in the news, anything truly positive can been said. Scott, I believe, is only commenting on what he sees and reads as well. A positive outlook is nice to have, but it should not prevent you from using logic and common sense.
Pain and pleasure rule the vagaries of the stock market. Most of that is worked out in “Fear.” Fear of losing, or fear of missing out on the big boom. Panic is the result of “Fear” not optimism. That is what we are seeing play out in the market right now. Many people don’t have the cold calculating nerve or the professional wisdom to invest. When I lost mine, along with my money, I got out.
Things may recover, they usually do. The question you have to ask, as Scott pointed out, is, will there be enough time before I retire?Buy and hold is not in my opinion the most effective way to invest although that is the advice you will get from your broker at Merrill Lynch. Although market timing is not an exact science (what is?) when markets shift exploring other opportunities can make sense. Such as shifting to a MM account that is paying 5%, I have done very well following Bob Brinker’s advice since 1988. The buy and hold model as Scott has pointed out is not a “no brain-er” and why would I leave my money in a market that was declining?
As Warren Buffet advised “be fearful when others are greedy, and be greedy when others are fearful”
As far as Boomers withdrawing all their money from the market, I think that much of that money will stay IN the market. Most people don;t have enough to retire into conservative investment instruments. They will need to stay engaged in stocks.
Will the market stay positive for enough time for me? Who knows? Nobody can say exactly when the market correction will happen nor how long it will last. The only thing we know for sure is that without risk and engagement, your money will shrivel. 5% earnings in conservative instruments, after inflation, leaves less than 2%. Congratulations on having accumulated at least a couple million dollars. Anything less than that would not be sufficient for a 1.5% withdrawal retirement rate .Edited on Jul 28, 2007 06:45
Edited on Jul 28, 2007 06:49
Scott (me) is commenting with a little experience behind him having worked on Wall Street for over ten years plus 12 years investing offshore. All told I have helped my clients invest about US$900 million over the past 20 years in mutual funds, offshore hedge funds and have trade S&P futures and currency futures.
The best thing I ever did was to start trading S&P futures, the second best thing I ever did was to stop trading S&P futures.
Scott Oliver – Founder
WeLoveCostaRica.comPS. No! I do not help manage money for US citizens.
By your own estimation then, that still leaves trading S&P futures as the best thing you ever did. Do you still keep a hand in it?
Thanks for creating and maintaining this message board and web site.My retirement to Costa Rica is directly tied in with the market. When I think of one, I automatically think of the other. I find valuable information and opinions here about both themes and so I visit this site quite often.
Lotus, I was just listening to Bob Brinker not 10 minutes ago. He likes the treasuries even though the yields have come down. It is all about quality. Critical mass is what he enjoys seeing achieved. When you have enough capital to pay your way in retirement.
I didn’t catch the entire program, but he seems concerned about the future as well. the subprime lending market has done a tremendous amount of damage and we are not even through it yet.
Nobody has a crystal ball and no “Expert” has all the answers. It just flies in the face of rational thinking that the situation today is as good as it was in years past.
I wish everyone well in their investing strategies. None of us want to see a 1929 scenario develop.Come on Scott – you write this frightening stuff and everybody is listening and then EF Hutton (LOL) doesn’t speak any practial antidote to the situation?? What – you got everybody holding their breath and you say nothing. Come on – what, buy Gold and Platinum. How about the Chinese currency or is it the Euro?? Everybody is listening.
What say you Sir Scott?
I do not buy into the old paradigm of fear in relation to retirement….I won’t have millions that’s for sure! What I have is a house in CR paid in full and all that money I have and continue to pay into social security. I live large now..lol! And really enjoy life in the moment, 2 months vacation a year, golf 2-3 days a week, ski, surf etc…and yes I do charity work and my part in keeping the planet and oceans clean…and I’m 43. Before you scoff at me I do work hard, but smart and wont slave away hoping to reach 65 and then draw down on my “millions”. Live now while I’m young and healthy and then live a very simple life in my “old age” that’s my plan. Also we live in a 700square foot home and drive a 94 Toyota, just living in the moment( not just for the moment!) I love life!! That’s just my plan…Simple living…high thinking.
I specialize in “managed money,” most of my clients are invested in managed, multi-currency hedged accounts – not just the Euro although it has done well… I provide my NON-US clients access to about 900 different offshore hedge funds..
Out of those funds, exactly NONE of them will do business with US citizens so I am sad to say that for the most part, what I would recommend would be irrelevant. This is unfortunate since the vast majority of our VIP Members are from America.
Scott Oliver – Founder
WeLoveCostaRica.comLotus, I like your plan! I think you may have figured out how to have your cake and eat it too. Simplicity is something I would love to achieve too. That is the hardest part of living in the US. We are bombarded by consumer driven advertising and feel we need all the toys to be truly happy, when the real issue is to become happy with ourselves first.
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