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Are you changing your behavior in response to current events? - Page 3

post #61 of 432
9/26/08 at 2:45pm

Re: Are you changing your behavior in response to current events?

Support Idaho! Buy more taters!
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post #62 of 432
9/26/08 at 6:18pm

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by DaveF
Yes and no. When you buy Kodak, Xerox, Bausch and Lomb, or a newer East-coast grocery Wegmans, the profits are local...to me. These are all based in Rochester, so my local economy benefits from profits sent back to the mother ship.

Similarly, national chains that are headquartered in your area that I buy from benefit you. This might be a Honda plant, or Starbucks, or even Walmart if you live in Arkansa.

But that only works well if there is a balance, just like any case of import vs. export. And the problem is less on the manufacturing side as it is on the retail side. Product demand remains the same regardless of big box retailers or multiple small mom and pops. But the sheer efficiency of large retailers to move product to customers requires less employees overall.

And yes, Wal-Marts do create a lot of jobs when they are opened. It's what happens around the Wal-mart in the following months and years that I'm talking about. And that's why you then have people lining up for Wal-mart jobs.
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post #63 of 432
9/26/08 at 6:39pm

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by DaveF
Absolutely. Asset allocation is also important. But have the "rules" dramatically changed for long-term investing since last year?

That's my point. While it's easy to pick on the poor indices, like S&P500, how have the market-timers, the technical selectors, the graph-watchers done? Certainly no better on the whole, and probably a bit worse due to their higher transaction costs.
I see your point now.

My point was that the "long-term investing is the way" mantra has basically been a lie for the past 10+ years. You would have done better funneling your money into an ING Direct savings account than being in the market, overall.

And, I wonder if this will continue into the foreseeable future.
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post #64 of 432
9/27/08 at 10:54am
Thread Starter 

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by Todd Hochard
I see your point now.

My point was that the "long-term investing is the way" mantra has basically been a lie for the past 10+ years. You would have done better funneling your money into an ING Direct savings account than being in the market, overall.

And, I wonder if this will continue into the foreseeable future.
I agree. It's painful. My first IRA in grad school marks tracks the dot-com bubble, and you can see the S&P500 rise and fall in my share prices. I've bought high and sold low. My 401k from the past 6 years at work has been mediocre to abysmal, and made worse by increased fees by the 401k management. I have great sympathy for those retiring in the next few years. My hope is that my 30-year investment horizon means I'm buying cheap now and will make up the returns in the long run.

'cause the past ten years have been bad.

And now, due to this sub-prime, credit crisis business, I can't get a decent savings or CD rate for my short- and mid-term savings! And ironically, banks want nothing but deposits right now, but they provide no incentive to do so, beyond FDIC.

I also wish I'd bought Apple back in '95 like I told myself too. I'd have an $800k nest egg now, if I had.
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post #65 of 432
9/27/08 at 12:00pm

Re: Are you changing your behavior in response to current events?

Quote:
I also wish I'd bought Apple back in '95 like I told myself too. I'd have an $800k nest egg now, if I had.

Assuming, of course, you held it all this time and didn't sell.

One of the contrarian rules of investing is that you should let your winners ride and cut your losses. Most people do the opposite -- they sell their winners too soon and hold on to losers, hoping they will come back to at least break even.
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post #66 of 432
9/27/08 at 12:14pm

Re: Are you changing your behavior in response to current events?

Quote:
I can't get a decent savings or CD rate for my short- and mid-term savings!

Well there's always blackmail.

Up until last week my two lowest-interest savings were at bank X and Y. I went into Bank X and said I wanted to take out all my money and close my account. They asked why. I told them I was going to open a 13 month CD for 5% APY at WaMu. After much hemming and hawing they offered to MATCH WaMu's rate. So then I went over to Bank Y. They tried to match it but management said they wouldn't match WaMu due to "present circumstances". So I ended up opening an account at the new bank in town, JP Morgan Chase. Funny how the sign out front says "Washington Mutual".

When you politely ask for your money, banks start to negotiate. Don't be put off by the "published" interest rates.

People here at the HTF always talk about "price matching" on the purchase of DVDs, but don't realize that other institutions will price match even though it's never stated in writing.
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post #67 of 432
9/28/08 at 9:17am

Re: Are you changing your behavior in response to current events?

I would offer the standard advice - don't start even thinking of investments until you've paid off your debts. E.g. there's zero point in investing 10k at 5% if you're paying off 10k at 7% at the same time. Better to pay off the debt faster and *then* start saving.

And the other boring advice - if you can't afford to lose it, don't speculate with it. If your invested money cannot run the risk of losing value in gross or inflation-adjusted terms, then basic interest-bearing savings with a guaranteed rate of return are a saner course of action. Unless, that is, you're absolutely 200% certain that your stock market dabbling is immune from loss. And if you know of such a scheme, please let me know, because I've never found one.

My policy, for what it's worth is to place 12% of my gross income in pension funds, save 10% of what's left in a tax-free savings account, and enjoy the rest. Oh yes - and have no debts. If you can't afford it and it ain't available on an interest free loan, then do what earlier generations did - save up for it.
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post #68 of 432
9/28/08 at 9:35am

Re: Are you changing your behavior in response to current events?

Generally good advice, Andrew.

Quote:
E.g. there's zero point in investing 10k at 5% if you're paying off 10k at 7% at the same time. Better to pay off the debt faster and *then* start saving.

Here in the States, that's not so cut-and-dry. There are tax benefits that come with some debt (mortage & HELOC for example). Depending on your tax bracket, you may actually come out ahead investing money at a lower interest rate while continuing to carry debt at a higher rate.
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post #69 of 432
9/28/08 at 9:50am

Re: Are you changing your behavior in response to current events?

Quote:
There are tax benefits that come with some debt (mortage & HELOC for example). Depending on your tax bracket, you may actually come out ahead investing money at a lower interest rate while continuing to carry debt at a higher rate.
We used to have a similar thing in the UK, but our Chancellor (i.e. finance minister) put a stop to it. The scheme only benefitted the middle classes, so that wouldn't do, would it?

Thankfully the UK hasn't quite reached the financial position the USA has (yet ...) though your problems have been the lead story in our more serious newspapers for weeks. We are particularly dumbfounded at the scale of the problem in the housing market.
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post #70 of 432
9/28/08 at 10:16am

Re: Are you changing your behavior in response to current events?

The UK economy will tank as soon as free-spending Francois Caron returns home.

Isn't Fortis now under attack? Looks like even the Dutch are having issues with the economy.
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post #71 of 432
9/28/08 at 11:05am

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by Bryan X
There are tax benefits that come with some debt (mortage & HELOC for example). Depending on your tax bracket, you may actually come out ahead investing money at a lower interest rate while continuing to carry debt at a higher rate.

Bryan;

I must respectfully disagree. The US government has created "incentive" for many people to carry mortgage debt, but that doesn't necessarily make it a wise choice. If you have no home mortgage interest to deduct, your tax liability will almost certainly increase, however, not nearly enough to offset the ridiculous mortgage interest you would no longer be paying. Further, the alternative minimum tax is making the whole thing moot for an increasing number of higher-income Americans.

As for HELOC's, the vast majority of individuals who take out these loans [ostensibly to consolidate debt, and turn their consumer debt into tax deductions] end up running their credit cards right back up to where they were before the HELOC. This borrowers mentality is [IMHO] a big part of why we are in our current situation as a country.

As long as you owe others money, they excercise some level of control over you. If you have no debt, you don't worry [as much] about gas prices, the overall economy, or job loss. Debt is a necessary evil in today's society, but it should be used as a last resort, and then with great caution.

John
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post #72 of 432
9/28/08 at 1:03pm

Re: Are you changing your behavior in response to current events?

Quote:
Isn't Fortis now under attack? Looks like even the Dutch are having issues with the economy.
Practically the whole world is in a financial mess. In part this is because of the old adage that when America sneezes, the world catches a cold. It's also because we've been copying what you guys have been doing. However, I don't think any european country has done it to the same extent. E.g. I don't know of any other country where there are the mass of abandoned houses we see in media reports about the USA.

I feel really sorry for ordinary folks caught up in this. But how the fat cats who made their billions of dollars in bonuses out of creating this misery can sleep at night is beyond me.
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post #73 of 432
9/28/08 at 1:06pm
Thread Starter 

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by Dennis Nicholls
When you politely ask for your money, banks start to negotiate. Don't be put off by the "published" interest rates.

People here at the HTF always talk about "price matching" on the purchase of DVDs, but don't realize that other institutions will price match even though it's never stated in writing.
Even the best interest rates are only a few tenths of a percent higher than I get at my credit union. I could be more aggressive in opening secondary accounts at other banks for savings. But I'm busy / lazy and pursuing new accounts for a few dollars a year isn't worth the time.

And price-shopping at banks with the threat of leaving is not so trivial as price-matching a DVD at BestBuy. It's a good bit of work, in changing direct deposit, mortgage payments, closing out CDs over the next 12 months, and all the other details of a new bank account.
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post #74 of 432
9/28/08 at 3:09pm

Re: Are you changing your behavior in response to current events?

Dave,
I just keep a small checking account at BofA and use it for automatic funds transfers etc.

All other money is savings accounts at 4 or 5 other banks.

That way I can move stuff around as I see fit without the bother of changing things tied to my checking account.

My other accounts had gotten down to the 3%-3.5% range so going to 5% was a big deal. At the amount I have in each account that's $1,500-$2,000 a year more money.
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post #75 of 432
9/28/08 at 3:56pm

Re: Are you changing your behavior in response to current events?

Quote:
I must respectfully disagree. The US government has created "incentive" for many people to carry mortgage debt, but that doesn't necessarily make it a wise choice.

Woah there, John. I never said it was "wise" to carry debt. I was simply noting that depending on factors (including interest rates and tax brackets) that one can come out ahead monetarily even if the interest rate on the debt is modestly higher than the return on investments.

Quote:
...however, not nearly enough to offset the ridiculous mortgage interest you would no longer be paying.

Certainly rates will rise at some point in the future, but currently and for quite some years, fixed mortgage rates are anything but ridiculous. Historically, they are extrememly low.

Quote:
Further, the alternative minimum tax is making the whole thing moot for an increasing number of higher-income Americans.

That certainly is a monster that needs to be addressed. But that doesn't change what I said-- one must take into account one's tax situation.

Quote:
As for HELOC's, the vast majority of individuals who take out these loans [ostensibly to consolidate debt, and turn their consumer debt into tax deductions] end up running their credit cards right back up to where they were before the HELOC. This borrowers mentality is [IMHO] a big part of why we are in our current situation as a country.

As long as you owe others money, they excercise some level of control over you. If you have no debt, you don't worry [as much] about gas prices, the overall economy, or job loss. Debt is a necessary evil in today's society, but it should be used as a last resort, and then with great caution.

I completely agree, John. Again, if you read my post I wasn't advocating debt. I was simply noting that if one is strictly looking at dollars and cents, one can come out ahead with debt interest rates modestly higher than investment rates.
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post #76 of 432
9/28/08 at 5:48pm

Re: Are you changing your behavior in response to current events?

Fortis is now "partially nationalized" whatever that means. Is that like being partially pregnant?

European Bank Fortis Partially Nationalized - TIME

The good news: our old friend Cees Alons is now a partial owner of a really big bank.
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post #77 of 432
9/28/08 at 7:40pm

Re: Are you changing your behavior in response to current events?

One thing I did when I had some extra bills left over from building my house was borrow against my 401K. I think that this is a good option for both investing and paying off debt at the same time. The 401k is taken out of my paycheck before taxes. Then my company matches 100% of my first 5% contribution. That is a 100% gain right away! Then when I borrowed against it, I am getting all the interest that I pay in, not a credit company. It is for 5 years, not a rotating charge. If I can't have faith in my own credit for an investment, who can I trust?
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post #78 of 432
9/29/08 at 1:45am

Re: Are you changing your behavior in response to current events?

Quote:
Fortis is now "partially nationalized" whatever that means. Is that like being partially pregnant?



Not quite - basically, the government in effect becomes a major shareholder and like any major shareholder, then has leverage over what the company can do. This used to be a common thing in Europe, with a lot of key companies (particularly those concerned with the infrastructure) being solely or partly nationalised, but over the last couple of decades, denationalisation has been the name of the game as we've moved from planned to free market economies.
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post #79 of 432
9/29/08 at 1:50am

Re: Are you changing your behavior in response to current events?

Am I the only person to have this frivolous thought?

All this financial crisis is over virtual assets. It's not that physical assets have gone missing or are in short supply. The property in question still exists, industry is still producing goods, people are still available to work in industry. So if all the problem is virtual, why not just simply decide to ignore everything and start all over again?

Of course it's not quite as simple as that, but in essence, this financial crisis is psychological, not physical. So why can't everyone stop panicking and simply reboot the system?
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post #80 of 432
9/29/08 at 4:07am

Re: Are you changing your behavior in response to current events?

That was actually my reasoning in post 5, but I know it will never happen.
Quote:
While they are buying out bad debits on wall street, I think they should expand the program and have a national debit forgiveness day! Say as of 9/24/08 ANY debit that ANYONE owes is erased!! That would free up trillions of dollars that people would spend and boost the overall economy. Instead of everyone hurting to bail out a few, a few would hurt to bail out everyone.
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post #81 of 432
9/29/08 at 5:08am

Re: Are you changing your behavior in response to current events?

Quote:
But how the fat cats who made their billions of dollars in bonuses out of creating this misery can sleep at night is beyond me.

The amount of compensation Wall Street paid out over the last few years is mind boggling. According to one report, the top five investment banks (Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman, and Bear Stearns) paid $66 Billion to 185,000 employees over the last five years. That comes to 350k per employee. Last year alone, Goldman's average bonus was over 600k per employee. And while this average applies to everyone from the chairman to the lowest mailroom employee, it was incredibly skewed toward the top. I know a senior VP at Goldman who is in a very important position (i.e., a position I would certainly describe as far more than "average" at Goldman), and his bonus was nowhere near 600k. So that tells me the people at the top were raking in tens of millions.

And the sad (or criminal) part of it is that it now appears as though most of that money was paid out under false pretenses, due to assets being marked up way beyond their real value.
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post #82 of 432
9/29/08 at 5:46am

Re: Are you changing your behavior in response to current events?

Quote:
All this financial crisis is over virtual assets... why not just simply decide to ignore everything and start all over again?

HAHA! I love that. I have often thought that. Where do all these billions of invented dollars go; into whose pockets are they disappearing? Not mine! The treasury is printing money like mad, from what I understand, actually pumping dollars into the economy (not virtual, but actual pieces of paper)... But, where's that paper going? How come I have not seen any of it?

I once stamped a dollar bill with a rubber stamp, then spent it. A year or so later I got it back in change, same bill. So, they are out there, those dollars. But... I don't see them. Physically, where are those dollars?

Given this, it only makes sense to IGNORE this madness. It's media hype, that only might affect the super rich.

Bail ME out, and I promise to help the economy myself with the money you free up by paying my mortgage for me. Otherwise, don't bother me with this hype. And don't punish me for someone else's bad deeds.

MC
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post #83 of 432
9/29/08 at 6:26am

Re: Are you changing your behavior in response to current events?

Quote:
All this financial crisis is over virtual assets... why not just simply decide to ignore everything and start all over again?


To a certain degree this is correct; the bailout is attempting to take the "virtual" assets (debt) off of the books of the biggest financial institutions so that there are still financial institutions existing to do the country's banking. What isn't being said, however, is that in order to avoid a repeat of the current mess, future lending is going to have to be much more restricted. No more 0% down mortgages, no more option ARMs, etc. Which means fewer buyers out there, which means home prices not increasing as much as in the past. (Which is probably a good thing in some ways.)
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post #84 of 432
9/29/08 at 6:59am

Re: Are you changing your behavior in response to current events?

From what I am seeing anywhere from 60% to 90% of Americans think that this bailout is a bad idea. Now the vast majority of these people, including me, probably do not have the data or ability to fully understand the situation and make a good conclusion. But there are many people who can. I would think that all major colleges, state governments, news and other media sources as well as major corporations both here and in foreign countries have economic experts. Why is the "only" solution being worked on by a handful of people? Why are we not hearing from any other experts? Do they think this solution is a good one?
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post #85 of 432
9/29/08 at 9:06am

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by drobbins
Why is the "only" solution being worked on by a handful of people? Why are we not hearing from any other experts?

We're hearing from plenty of people. There are experts and bloggers and pundits everywhere you turn. It's just that there are only a handful of people who actually have any power to do anything.

And the further problem with "expertise" is that this isn't just a technical problem. Both understanding it and attempting to solve it involve taking positions (whether overtly or not) on a host of controversial issues that can't really be discussed here.

M.
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post #86 of 432
9/29/08 at 9:27am

Re: Are you changing your behavior in response to current events?

In extremal overly simplified terms I guess that I am looking for a

Problem + 700billion = Solution

I know that there are different ways of writing that equation, depending on those controversial issues. I just want to know that the math is correct irregardless of ideological points of view. This should be able to be answered by many other "experts".
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post #87 of 432
9/29/08 at 9:33am

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by drobbins
Problem + 700billion = Solution
I'm pretty certain most experts, of any persusasion, would be unwilling to back that equation. In fact, I'd be dubious about anyone who would. The $700 billion "plan", in its various forms, is designed to get us past a current crisis and prevent imminent panic. It is not a long-term fix; it will not restore the economy, fix the banking system, improve the housing market or tame inflation; and it certainly won't improve anyone's quality of life (except to the extent that a lot of people in the financial industry will still have jobs).

M.
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post #88 of 432
9/29/08 at 9:47am

Re: Are you changing your behavior in response to current events?

I dunno. What I see is that the imbeciles who got us into this mess in the first place are the same being relied on to get us out of it. People out there saw this coming, but they remain marginalized by the establishment. We should be seeking out these people, putting them to work on this problem. We should be building statues for them. Yet, despite spectacular failures in this and other areas, the field of "experts" remains bizarrely unchanged. The same establishment talking heads are still out there vapidly excreting all kinds of inanities. You would think people with a record of chronic wrongness would lose some credibility but noprrrrr.

--
H
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post #89 of 432
9/29/08 at 10:10am

Re: Are you changing your behavior in response to current events?

Quote:
Originally Posted by Holadem
the imbeciles who got us into this mess
Never underestimate the intelligence of the financial wizards who created this mess. It takes a lot of brain power to create fuck-ups of this magnitude. Wisdom, no, but that's a different issue.

M.
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post #90 of 432
9/29/08 at 10:44am

Re: Are you changing your behavior in response to current events?

Problem + 700 billion = Postpone total collapse until the perps, responsible for the fraud, close out their postions and escape on the yachts that Joe Public bought.
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