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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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Comments

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)

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ripresa
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