Thursday, July 17, 2008

The Sad State of the Economy

Earlier today I read this article from Slate that said that "Flat, is the new Up" in business circles. That is the perfect statement for how at this point people really just don't want to be losing money and don't really care about making money at this stage.

Much to the dismay of The Anarchist who is in the office next to me and every investing guru who says leave it in there I say they are stupid. Everything is going down. How do you keep from losing profit, sell at a decent price before it gets lower, then get back in at the bottom and ride it as it goes back up. All those people will say "Sure, that is right but its not that easy and people should leave alone b/c they don't know what they are doing". I can read, I can see my investments losing, I can change to something that will possibly win me less but is almost assuredly lose me less. And when things start to turn around I may not get in on the very lowest day ever of the market but who cares, as long as I buy back in lower than where I got out I make money. It is really not that hard of a concept. Don't play when the odds are against you and right now the odds are still stacked against the markets in general.

A couple of months from now (possibly) or even a couple of years from now (almost certainly) things will be better b/c companies are being more upfront with their accounting and seeking more liquidity and less debt (business practices everyone knows but many ignored in the recent bubble and run-up). I am basically doing with my finances what the business who say Flat is the new Up are saying, I'll take even for now b/c that beats the hell out of down.

I will even tell you what I am switching out of in general with percentages, I had:
  • 50% Stock
  • 15% Growth
  • 10% Bond Market
  • 10% Equity
  • 10% Traditional
  • 5% Real Estate
This is fairly aggressive and in line for investing for a 27yo as many places say but I'm tired of losing 1/4 of what goes in there on the first quarter so now my contributions will look like
  • 30% Traditional
  • 30% Bond Market
  • 10% Growth
  • 10% Equity
  • 10% Global
  • 5% Stock
  • 5% Real Estate
This is mainly based off of Bond returning 5.5% and Traditional returning between 4.5 and 6% with Stocks losing 13%, Growth losing 12%, Equity losing 13.6% and Global losing 14.5%. Typing this out makes me think that maybe I shouldn't even have 35% of my retirement in these "LOSERS" but that is the hedge.


The Library Guy said...

I blogged about what I'm doing as far as investing is concerned a few months ago, and I'm sticking to it.

I've only been building my portfolio for ten years. Prices are going down, which means you can buy more at the same price. So it's still full speed ahead for me.

Blaine said...

Have you read your fund prospectus recently? While you are well-diversified, my guess is that many of your funds are redundant, that is, many of the stocks held within your funds are also held in other funds. I'm going to assume that since you work in a library, you participate in a 403b? Are you in funds or sub-accounts within an Annuity?

You might be better off sticking with your current allocation and begin auto-rebalancing your funds on a quarterly (or monthly) basis if your plan allows it, that way you are ALWAYS selling high and buying low, therefore taking the guess work out of funds.