Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[scho63]

This market feels like it's begging for some good news or reason to shoot higher.

[Rain Man]

Originally Posted by Hog's Gone Fishin

This doesn't answer your question but I just want to throw in that the best thing a person can do ,and the earlier the better is to invest in real estate. Single family homes,duplexes, or even a small apartment complex. They'll provide income forever. When your at an age you don't want them , just sell them and finance them yourself. Then you continue to get a monthly check for 15-30 years more. Hassle free.

I have a little different model than you, because I only have one apartment. But I have a pretty expensive home just because I live in the Denver market, and I've recently been learning that a pretty expensive home is a really nice hedge against inflation. I've had the house for 25+ years and had never really thought about it because inflation has been low that whole time. But while my other investments have been taking a beating this year, Zillow has been cranking my home value up by a hefty amount every month.

I'd initially had the thought that I might sell my home in retirement and move someplace cheaper to convert some home equity into something that produces income. But now I've decided that I'm best off staying put as long as I can generate enough income in other ways. Home equity is a great anchor against both inflation and other investment risks.

[Rain Man]

Originally Posted by Buehler445

There are some people here approaching retirement age, and maybe some here considering early retirement.

For those that are, how does this inflation affect your decision making.

I know some people that have retired in the last year or so. Some of them early. I'm not in position to pry into their personal business, so I thought I'd bring it up here.

If I was looking at retirement, especially fixed income retirement, I'd be shitting my pants. No chance I'd give up a paying gig, especially if it was a well paying gig in times like these. At least until it shakes out.

I remember my grandpa (who had plenty saved/invested he was good to go) like absolutely freaking out when he went into the rest home because he was worried about running out of money because he can't make anymore. Resonated a lot. I've also done some taxes of people trying to live on social security and I have no clue how they do it.

If I was considering retirement, I'd be terrified.

Am I missing something here?

Inflation is a bad deal and a negative stock market year is a bad deal, and both of them in combination really stinks.

I announced earlier this year that I was cutting to part-time with a plan to retire fully in probably 2 or 3 years. At the time, the market was rolling and I was in really good shape to do that. Pretty much the day I made the announcement, the market started falling and inflation started spiking, and I've now lost five years of retirement funding based on my financial model. (The odds are that we'll still okay, but the current situation has things getting dicey for me in my 90s.)

More specific to your question, I've built some assumptions into my financial model that drive a lot. I used a long-term average of 3.29 percent for inflation, which if I remember right was the 40-year average when I built the model. I also assumed a conservative-but-invested 3.5 percent return on non-IRA savings as my short and intermediate term funding, and a 5.5 percent return on my IRAs, which I'm hoping to avoid tapping for another 20+ years so I'll be a little more aggressive there.

My financial model is really sensitive to those three numbers. Minor changes in any of those things changes my projected financial solvency date up or back by years. So from that standpoint it's kind of scary to think about retirement at all. Those things are pretty much outside my control, and they can either ruin me or make me rich.

I think, though, that I'm comfortable with the assumptions in the long term. The 3.29 inflation is an average, so some years will be higher than that. And I think the 3.5 percent and 5.5 percent estimates on returns are conservative enough that they'll be reasonable to hit as a long-term average. And I'll never be able to eliminate the risks of those things outside my control, so at some point I either stomach the risk or I work until I die, and I don't want to work until I die.

The only thing that stinks about the current situation is that I read an article a while back that talked about how important the first couple of years are after retirement. If your money gets drawn down faster those first couple of years due to a bad market, it makes a big difference on your long-term finances. You have less money to grow long-term. But I guess on a positive note, it's happening early enough that I can keep working part-time a little longer while I still have momentum in my career.

The bottom line for me is that I'll assume that the high inflation is just a walk on the high side of the average and will level back out. It's just occurring at a bad time.

[ChiliConCarnage]

Originally Posted by Buehler445

If I was considering retirement, I'd be terrified.

Am I missing something here?

I don't think so. I posted several months ago I felt bad for retirees and wasn't sure what they were doing. The performance for total market bond funds like BND/AGG is brutal now

NAV Total Return as of May 02, 2022
YTD: -9.95%

Bonds have sucked for a decade, at best you treaded water with inflation. That's hard to have a big chunk of your portfolio produce nothing. Now with inflation up so high, your real yields are terribly negative. There's really nowhere safe to hide anymore.

I think about this because I would like to at least semi-retire early. Covid, inflation, the war. Rainmain's post does a great job summarizing that you have to make assumptions you don't know what will happen and have no control. The last couple of years have definitely highlighted that fact.

[scho63]

I'm really hoping that the Fed raises rates .5% and the market is satisfied then takes off higher.

I hope it's not a .75% and the market is spooked and bonds spike a lot higher since the Fed would be saying they ****ed up and are now trying to play catch up.

[scho63]

Originally Posted by scho63

This market feels like it's begging for some good news or reason to shoot higher.

KABOOM!!!

Facebook (Meta) Options hit big today.

Felt this coming. Put my money where my mouth was.

[scho63]

This has been a very good day!!!

[DaFace]

Originally Posted by scho63

I'm really hoping that the Fed raises rates .5% and the market is satisfied then takes off higher.

I hope it's not a .75% and the market is spooked and bonds spike a lot higher since the Fed would be saying they ****ed up and are now trying to play catch up.

So far, you appear to be correct.

[TwistedChief]

Originally Posted by DaFace

So far, you appear to be correct.

Fed was dovish. The market has spent the last 6 months pricing rate increases sooner and sooner and then when it could no longer do that in proceeded to price them larger and larger. The Fed essentially took 75bp hikes off the table which is as dovish as they've been since last fall. That's the good news for equities as the Fed is less likely to prematurely choke off the recovery.

The bad news may be that inflation all else equal will be set to run higher and longer end yields could potentially shift higher as a result (the next week is a gauntlet of events that might push that way). Typically higher long end yields are bad for sectors like tech.

That's all I've got.

[Hog's Gone Fishin]

Originally Posted by scho63

KABOOM!!!

Facebook (Meta) Options hit big today.

Felt this coming. Put my money where my mouth was.

Originally Posted by scho63

This has been a very good day!!!

I love seeing stuff like this! That's awesome!

[IowaHawkeyeChief]

Originally Posted by TwistedChief

Fed was dovish. The market has spent the last 6 months pricing rate increases sooner and sooner and then when it could no longer do that in proceeded to price them larger and larger. The Fed essentially took 75bp hikes off the table which is as dovish as they've been since last fall. That's the good news for equities as the Fed is less likely to prematurely choke off the recovery.

The bad news may be that inflation all else equal will be set to run higher and longer end yields could potentially shift higher as a result (the next week is a gauntlet of events that might push that way). Typically higher long end yields are bad for sectors like tech.

That's all I've got.

They got really nervous with the negative GDP number... I think they decided it is better to have inflation with any positive GDP for the next quarter compared to having stagflation. In my opinion, neither option is very palatable. It will be an interesting 6 months with tons of uncertainty. Many folks have never seen 5% mortgage let alone 7%+ of the 10 year and up shift higher.

[Rain Man]

Originally Posted by scho63

This has been a very good day!!!

That's enough profit for you and me to fly to a game this fall with hotel and tickets and everything.

[Hog's Gone Fishin]

Originally Posted by Rain Man

That's enough profit for you and me to fly to a game this fall with hotel and tickets and everything.

And scho63 will have the hookers lined up!

[Rain Man]

Originally Posted by Hog's Gone Fishin

And scho63 will have the hookers lined up!

I hope he lets me help pick.

[ChiliConCarnage]

Originally Posted by scho63

This has been a very good day!!!

Looks like the drinks are on, scho! That's got to be exciting