Tuesday, August 25, 2015

Four Letter Words in Investing

As the market turns down, I expect there will be a lot of four letter words being used.   Here are some of the common ones in investing, in order of desperation:

  • Can't - The price can't go down any further.
  • Want -  I want the price to reach what I paid before I sell.
  • Hope -  I hope the stock gets back to what I paid for it.
  • Pray -  I pray that the stock stops falling and returns to the price I paid.

  • It probably won't be long before these four letter words are being regularly used,

    For more on Ideas You Can Use, check back Tuesdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Monday, August 24, 2015

    What I Learned from the Last Crash

    The market volatility of the past three days has caused me to think back to the last major stock market crash in 08/09.  Here's what I learned from then:


  • The  new Fed chairman will make a mistake.   Back in 2006, Ben Bernanke claimed there was no subprime mortgage issue and did not address it.   He was a new Fed chairman at the time.  Janet Yellen has been chairwoman for less than a year.

  • It will get worse before it gets worse.   Monday's volatility will be repeated many times. Monday's lows will get taken out.

  • The market will take a while to bottom, up to several months.   During that time, being in the market will be extremely painful.

  • The market will recover and reach new highs, as it has from every other bear market.

  • My plan for now is to keep our current investments and add funds with every 10% decline in the market indices, with a target of being fully invested around a 50% decline.  While good in theory, I expect the plan will be difficult to execute as our current stock investment values are reduced by 50%.

    For more on Strategies and Plans, check back every Monday  for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Sunday, August 23, 2015

    The Party Feels Like It's Over

    This is the third longest bull market in U.S. history, and all bull markets must end.

    There's a tremendous amount of negativity on the current bull market.


  • Bull markets rarely last over six years. 
  • China's economy is slowing significantly.
  • Emerging market currencies are in a crisis.
  • The Fed is raising interest rates.
  • Commodities and precious metals are in a bear market;
  • Oil is at a 6 1/2 year low.
  • 31% of S&P 500 stocks are in a bear market.
  • 39% of S&P 500 stocks are in a correction.
  • The 2.8% decline during the first three days of 2015 was the worst start since 2008.

  • The only positive I found was that 2015 is the third year of a presidential term.  Since WWII, the market has not experienced a loss during the third year.   However, it has closed flat during two of those third years: 1947 and 2011.

    The negatives far outweigh the positives.  Unfortunately.

    So it is very likely the market will continue to fall this week.   The only question is, "How far?"

    For more on New Beginnings, check back Sundays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Saturday, August 22, 2015

    It's Probably Going to Get Really Ugly

    The 1017 point drop in the Dow this week has wreaked havoc on my investment portfolio.  Unfortunately, I believe the indices will continue to fall next week.  At this point,China and the Fed have lost their economic credibility with the market.  Hence, I expect the selling will continue.

    One factor that may contribute to a steeper decline is the high level of existing margin debt.  As stock prices fall, accounts with margin debt may receive margin calls that require further selling of stock. I have also read that the emerging market currency crisis may be another factor causing a stock market decline, just like in 1998.

    Right now, I'm anticipating at least a 20% drop in the market indices.   During that time, I will be trickling in a small amount funds into commission free broad market ETFs.  In addition, I will make some small purchases of specific stocks to build our retirement dividend portfolio.    For now, I don't expect to put more than 20% of our cash position back into the market.

    For more on  Reflections and Musings, check back Saturdays  for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Wednesday, August 12, 2015

    Managing Our Investment Risk

    With the recent volatility of the U.S. stock market, I decide to revisit how we are managing our retirement investment risk.

    My simple qualitative measure is whether i would be relatively free from worry in the event of a major market downturn.  In 2007, I gave an unequivocal yes as the answer.  However, during the 08/09 bear market, I was far from worry free.   I had too much invested in my company stock and not enough cash reserves in our accessible funds.

    My answer today is a qualified yes.  Yes,  mainly because we've significantly increased our cash reserves, which we didn't do in 2007. Qualified due to my continued exposure company stock, even though I've greatly reduced the amount and reinvested the proceeds in a diversified stock portfolio.   Unfortunately, some of my company stock will need to be sold in the next two years, no matter what the price.   Hence, the possibility of higher worry during a near term bear market.

    So from a risk perspective, we're better than in 2007 but not as good as I hope we will be in 2018. If we are lucky, the current bull market may last for three more years.:-)

    For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015  Achievement Catalyst, LLC

    Saturday, August 08, 2015

    Market Pain Is Increasing

    The market volatility and decline is starting to worry me.      At first, I believed the market was similar to 2012, i.e. lots of volatility but still finishing higher.    However, I'm starting to believe 2015 is going to be more like 2008, i.e. lots of volatility and a big downward spike.  The main difference from 2008 is that market indices are still near the all time highs highs.

    One argument against a significant decline is that almost everyone expects one to happen.  In fact, many of the pundits turned negative on the market over the last couple weeks.  Often, high negative sentiment is a good contrarian indicator that a market correction time frame is not near.  And the sentiment seems very negative at this time.

    At this point, I'm still in a wait and see mode.  I'm ready for a downturn and trying to prepare myself to buy should there be a 20% or greater drop.   Hopefully, if there is a significant drop, I will have the discipline to put some funds into the market.

    For more on Reflections and Musings, check back Saturdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Friday, July 31, 2015

    Early Retirement Miscalculations

    In 2007, I took early retirement at the age of 49.   Before making the decision, I worked with my financial advisor to determine if we had sufficient funds to retire.   The analysis was positive and I retired early after 27 years of service with my company.

    With almost eight years of retirement behind me, I have the benefit of experience in reviewing the analysis that was done in 2007.   Here are some of the miscalculations that I made in 2007.

  • Growth of company stock.    We used the historical 7% average annual growth that my company stock had experience during my time with the company.   Unfortunately, the actual stock growth did not match the historical growth rates.  From the 2007 high, the stock has only grown about 3% in total, much less than the projected 60% expected growth.

  • A significant recession occurring immediately.  For the Monte Carlo retirement analysis, we had over a 90% chance of not running out of money.   The 10% chance were most likely due to a significant market drop during the early years of retirement.   Lucky me, the 08/09 bear market started a few months after I retired.

  • Planning to live until 90.    Our retirement analysis assumed life spans until 90, which seemed reasonable at the time.   Recently, I've been thinking that living to 100 or longer may be a better plan.   After all, running out of money at 90 is a major issue since going back to work is not likely solution.  

  • With these revised considerations, I've decided to delay taking Social Security until the latest possible date, when I'm 70. Also, I've been asked to consider an executive director position which would have me returning to work as CEO of a non-profit for a few years. Both of these actions should help extend the life of our retirement savings.

    For more on Reaping the Rewards, check back on Fridays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Tuesday, July 14, 2015

    Interesting Reads

    Just a few interesting reads:

    The $339,200 college debt example hurts more than it helps  After reading this article, I won't be giving my vote to this candidate for President.   If I don't agree with his personal financial choices, I'm sure I will disagree with his government financial choices.

    Premier of Greece, Alexis Tsipras, Accepts Creditors' Austerity Deal  A great lesson in how not to negotiate.  Not only are the terms worse than what was on the table in January 2015, but the situation has worsened due to the delay.

    Marc Faber: Recession is coming this year  For the last couple years, the best investment strategy has  been to ignore his predictions.   He has been saying the same thing since at least 2012.   Someday, he will be right, but it may not be for a while.

    For more on Ideas You Can Use, check back  Tuesdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2013 Achievement Catalyst, LLC

    Sunday, June 28, 2015

    Looking for Extreme Market Pain

    I am convinced the Greek debt crisis will create an investing opportunity.   However, whenever I've had this mindset in the past, I started investing right away and quit before the bottom because the pain was too great.   Case in point:   The May 2013 Taper Tantrum.    I started buying right away, and kept buying into the decline.  However, it took over a month for the pullback to complete.  By the bottom, I was feeling enough market pain to stop buying.

    When the decline starts this time, I plan to only buy those stocks I was considering last week, but haven't purchased yet.  These stocks are dividend paying stocks and part of my strategy to create a steady source of retirement income.   After these purchases, I will wait until the stock market pain is very high (at least a 10% decline) and then start making the additional purchases.

    For more on  New Beginnings, check back Sundays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Saturday, June 27, 2015

    A Greek Induced Correction?

    It appears a Greek default is the most likely outcome next week.

    The current bull market is getting a bit tired, but it keeps going up.   Perhaps the impending Greek default will be the event that causes the market to have its first correction since 2011.

    Or will buyers on the dip prevent the correction from happening?  Hard to say.

    My plan is to make partial purchases of my buy list during the initial drop, and wait before making additional purchases.

    For more on Reflections and Musings, check back Saturdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC