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The terrifying market

Well, I guess people aren't retiring this year or the next. The Baby Boomers are so screwed. But then again, so are the rest of us young middle class folks. My 401k continues to be battered, though it's not losing as much money as the market is, but that's not saying much. When I ask people how their 401k is doing, their response is: "I just don't look at it". Yep, that's what they teach you to do. Unless you're retiring, but I guess you won't for a while.

From the nytimes today, economix:
"Forget about Dow 10,000. Keep your eye on S.&P. 967.

At 11:15 this morning, the Standard & Poor 500-stock index was trading around 1,048. That left it 46 percent below its inflation-adjusted high, which it hit in the summer of 2000. If shares keep falling and the index hits 967, it will be a remarkable 50 percent below its peak. That has happened only two other times since 1929 — during the Great Depression and during the 1970s.

It is easy to overlook just how steep the decline in stocks has been in the last eight years. Stock prices and indexes tend to be described in nominal terms, rather than inflation-adjusted terms. (In nominal terms, the S.&P. 500 is down about 33 percent from its peak.) But it makes much more sense to adjust share prices for inflation, just as it makes sense to adjust the price of just about anything — food, houses, incomes — for inflation."

--

Oh.. and the much touted Vanguard 500 Index fund? I bought some in 2004, and it's the only thing I don't touch in my playbox.

In Oct 2004, I bought $2939.34 worth of it at a share price of 102.97
today in Oct 2008, it's back to 101.23, and I've a total of $3182.67.

Woo! So in another 4 years, I will have... $3350?

Seriously, I should've just put it in a CD. In fact... maybe I still should. If I can find a bank that won't collapse. Grrr.

Can someone let me know when we've hit the bottom so I can get rich from my 401k suddenly increasing in price?

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( 8 comments — Leave a comment )
medryn
Oct. 6th, 2008 05:11 pm (UTC)
I wouldn't feel so sorry for the Baby Boomers. On average they started investing in the stock market in 1980, when the S&P was at something like 114. So even with the recent losses, they've seen the market increase 8-fold during their working years. Do you think that the market will increase 8-fold during our generation's working years? I do not.

Furthermore, Baby Boomers for the most part purchased homes at low prices and haven't suffered the insane mortgage payments required of anyone who has purchased a first home in the last 10 years.

Most CDs are FDIC insured, so bank collapse shouldn't be a huge concern, unless you think that the FDIC itself is going to collapse. :-)
ripresa
Oct. 6th, 2008 06:57 pm (UTC)
Yeah, I guess the people who cashed out two years ago are lucky :)

Seriously, if you see anything returning 4% or %5 that doesn't look fishy, let me know. A bunch of my savings is moneymarket in UFCU, but I think it's like 2%ish.
medryn
Oct. 6th, 2008 07:11 pm (UTC)
http://www.fatwallet.com/forums/finance/783099/

Right now you can get 4% with no risk (assuming you believe in the FDIC). There are some weird accounts that give you 5%+ on your first 25k, but require you to jump through some annoying hoops.

http://www.fatwallet.com/forums/finance/682884/

You can take a look at CDs also. I don't have much of an intuition right now for whether interest rates are going to rise or fall in the near future.
ripresa
Oct. 6th, 2008 07:01 pm (UTC)
seriously though, another 700+ drop???

nekomouser
Oct. 6th, 2008 08:48 pm (UTC)
I say use it. I swooped int today and threw $1100 at my Roth to scoop up some large cap growth shares at a wonderfully low price. The market is full of good deals right now for when the rebounds inevitably occur.

At least oil is finally approaching where it should have been all along. That's a bigger short-term concern to me.
dnivie
Oct. 7th, 2008 06:28 am (UTC)
Recent craziness
It's way crazy lately, agreed. The OBX was down 9% at closing yesterday. The largest intraday-loss was even at 12%, which is just insane when you consider that it'd been falling over 30% *before* that.

We've fallen about as much as you guys. On the positive side, we grew a lot more than you did in the last few years, so we're not back to 2000, not even close. We are however back to autumn 2005.

I agree with Medryn, the boomers aren't in (the biggest) trouble, the people who have lost the most are those who started investing in the last 5 years. Even I am shielded to some degree by the fact that I've been investing for 10 years.

Granted, this setback has been severe, if I adjust for inflation, I'm pretty close to being back where I started, but I can live with that.

As for safe savings, modulum exchange-rates you can get 7% interest in any Norwegian bank, our banks are all state-guaranteed for any amount up to 2 million nok. (about $320K) I don't think I'd suggest it though, there's always a risk that the dollar rebounds, which would suck.
ripresa
Oct. 7th, 2008 03:28 pm (UTC)
Re: Recent craziness
7%? Seriously, the more you talk about Norway, the more I want to move there.. if people spoke English! :P

Your language is hard!!
What percentage of people speak English there?...
dnivie
Oct. 7th, 2008 08:01 pm (UTC)
Re: Recent craziness
Hi, it works both ways -- i get the joy of *paying* sligthly above 7% on my mortgage too.

So it's not such a great thing, on the balance, for those of us with more debt than cash. Which is most youngish people with a house/apartment offcourse.

It does help quite a bit that you get 28% of the interest you pay subtracted from your taxes. So *real* interest is actually reasonably low in Norway. I may pay 7.1%, but after the tax-advantage 5% is left of that, and half of that is inflation, so the *REAL* cost of money here is something like 2.5%/year.

It was half that a year ago, but you know how the credit market is currently.

The norwegian minister of finance does have a few card up her sleeves, I think it likely we'll wither the storm better than most. First, she's got cash. Cold hard cash. About 2 trillions worth of it, and a state-budget that is solidly in the black.

Second, our interest is highish. This makes it possible to *cut* interest to stimulate demand if that seems nessecary. This at the same time helps people better manage their loans.

Third, we've got a policy of counter-cycle. That is, in boom-times the state saves, spends significantly less money than it "could". When stuff goes down shit creek, and people start losing their jobs, like now, the state turns around and start spending.

The budget for 2009 came today; government-spendings are up 9%. Primarily infrastructure, education, research, environment and aid are up.

95% of the people between 10 and 80 speak english. it's compulsory from first grade in school. But that doesn't mean one isn't miserable as a foreigner not knowing norwegian -- people may KNOW english, but they still, offcourse, speak norwegian to eachothers normally.

Norwegian is simple though, it's a germanic language afterall, closely related to english and german. (and sligthly less closely to french and spanish)
( 8 comments — Leave a comment )

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