^And ironically enough reducing the 401k limit would actually be a progressive tax reform.  And now Democrats are proposing higher 401k limits.  Strange times.

 

If I were the Democrats I would demand that any additional tax revenue collected by reducing the 401k limit be directly applied to increased social security payments for poorer retirees.

^ don't see that happening either. Dems don't care about that, what Dems want is to increase the social security threshold to apply to high earners too. That is a higher priority to them than distributing it to the poor.

 

 

^To be fair, it's a high priority to the Dems because they view it as the best way to make SS solvent for the long term.  And they're completely right in my view.  If the wealthy are going to get these giant tax cuts every time a Republican is President the least they can do is pay a little bit more is SS tax to keep our elderly from eating cat food to survive.

That's why the Right might have a real lock on middle agers currently but loses a lot of them as they become Seniors.

That's why the Right might have a real lock on middle agers currently but loses a lot of them as they become Seniors.

 

I'm not so sure about that.  Every other commercial on Fox News or Rush Limbaugh is for a reverse mortgage, adult diapers or a walk-in bathtub.  Or maybe just that's their ENTIRE demo....

What I don't like about 401k/IRA and other tax-advantaged accounts (health, school) is that they encourage investing that borders on the speculative.  Traditional pension funds were usually forced by law to keep roughly 50% in government or high-grade corporate bonds.  The rest was a mix of real estate and blue chip stocks. 

 

Plus, many employer 401k's charge scandalous fees.  Even if you switch everything over to low-fee Vanguard index funds, the 401k can still charge a higher fee than you will get in an independent IRA for the same investment. 

 

 

 

 

 

^If they just put a $25k limit on combined 401k/IRA contributions that'd be fine with me.  I'd just skip the 401k since our provider charges a 0.25% fee.

What I don't like about 401k/IRA and other tax-advantaged accounts (health, school) is that they encourage investing that borders on the speculative.  Traditional pension funds were usually forced by law to keep roughly 50% in government or high-grade corporate bonds.  The rest was a mix of real estate and blue chip stocks. 

 

 

 

 

 

ALL EQUITIES, bro! Don't you want growth?

What I don't like about 401k/IRA and other tax-advantaged accounts (health, school) is that they encourage investing that borders on the speculative.  Traditional pension funds were usually forced by law to keep roughly 50% in government or high-grade corporate bonds.  The rest was a mix of real estate and blue chip stocks. 

 

Plus, many employer 401k's charge scandalous fees.  Even if you switch everything over to low-fee Vanguard index funds, the 401k can still charge a higher fee than you will get in an independent IRA for the same investment. 

 

There is nothing speculative about buying stocks and holding them until retirement age. Speculation would be betting on short-term market increases and decreases, and that's not the same thing at all as growth investing, which is betting on long-term, 8-12% / year REAL growth over a long period of time. Furthermore, you can put your 401(k) money in any investment you want, and the tax benefits are the same - 401(k)s do not incentivize stock investments over any other type of investment, only prospective returns do that. Financial illiteracy among the public is a problem with 401(k)s vs. pensions, sure. And wage stagnation is a problem as well, but I don't see any problem with how 401(k)s are set up in the internal revenue code.

 

You are correct about the scandalous fees, and anyone who works for a company with a bad 401(k) plan should complain about it until those places are put out of business. They are robbers who benefit off of the public's aforementioned financial illiteracy.

What I don't like about 401k/IRA and other tax-advantaged accounts (health, school) is that they encourage investing that borders on the speculative.  Traditional pension funds were usually forced by law to keep roughly 50% in government or high-grade corporate bonds.  The rest was a mix of real estate and blue chip stocks. 

 

Plus, many employer 401k's charge scandalous fees.  Even if you switch everything over to low-fee Vanguard index funds, the 401k can still charge a higher fee than you will get in an independent IRA for the same investment. 

 

 

 

Jake - What about defined benefit pension funds? Where do you think that money comes from? It is invested in many of the same equities that your 401k is invested in.

No pension fund is 100% stocks, nor should they be.  But many people have 401k/IRAs that are not just 100% stocks but 100% growth stocks. 

 

We are about 10 years into an unprecedented period of low interest rates.  That partly explains why the stock market keeps ticking higher. 

There is nothing speculative about buying stocks and holding them until retirement age. Speculation would be betting on short-term market increases and decreases, and that's not the same thing at all as growth investing, which is betting on long-term, 8-12% / year REAL growth over a long period of time.

 

The little old ladies who squirreled away stock certificates when their husband died and 40 years later were worth $18 million were just lucky. 

 

 

 

many people have 401k/IRAs that are not just 100% stocks but 100% growth stocks.

 

It depends on the person's age, but I don't view 100% stocks (diversified index funds, not individual stocks or penny stocks or anything) to be problematic, at least for people in their 30s and even early 40s. Once they hit their later 40s and 50s it might be time to add in some bonds to smooth out the ride and protect against bad timing. But for young people 100% equity just makes sense once you take emotion out of it.

 

Pension funds need to invest in a certain amount of less volatile investments because they have constant cash-flow needs so they also need to smooth out their ride. Otherwise, they should also invest in stocks as much as possible.

 

The stock market always goes up over time, technology always advances and the economy always grows over time. It's not even 'risky' when you look at the long run. You are only trying to avoid bad timing. Societal collapses notwithstanding.

That's true in today's investing environment. But sustained low interest rates over the past 15-20 years are what forced that. People in their 20s and 30s used to be able to diversify which made publicly traded companies less sociopathic and less full of futurist BS.

The stock market always goes up over time, technology always advances and the economy always grows over time. It's not even 'risky' when you look at the long run. You are only trying to avoid bad timing. Societal collapses notwithstanding.

 

Well even the worst bonds have beaten Japan's stock market since it peaked back in 1989:

http://www.macrotrends.net/2593/nikkei-225-index-historical-chart-data

 

 

That's true in today's investing environment. But sustained low interest rates over the past 15-20 years are what forced that. People in their 20s and 30s used to be able to diversify which made publicly traded companies less sociopathic and less full of futurist BS.

 

People with moderate incomes who live in Ohio can diversify with real estate.  Like actual physical rental properties, not REIT's.  What is scary though is how much medical bills can devour more in a month than a paid-off rental house can generate in rent.  This month (October 2017) I had $1,500 in medical bills and collected $650 in rent. 

But Jake, rental real estate is more risky than investing in stock market index funds especially if you are a newbie.

Interesting (and kind of scary) factoid about the Japanese stock market. I guess the whole "gray dawn" aging of society thing could be bringing us to uncharted territory. Still I would argue that Japan's economy will eventually surpass 1989, but if the boom-and-bust cycles are lasting entire lifetimes, that's a huge problem. Though, I'm not sure that pension funds with some allocation to bonds would offer much protection - if you are Japan, you're pretty much screwed.

I'm not claiming to be any expert on the Japanese economy but I would bet that a lot of foreign investment (including a bunch from the United States) fueled its meteoric rise in the 1980s.  In the 90s their stocks corrected down to the actual value of the companies, not future growth that anticipated a continuation of trend lines. 

 

Japan's population is declining and its refusal to welcome immigrants is hurting its potential (seemingly no tech companies have come out of Japan whereas medicine, science, and tech in the United States are largely comprised of Indian and Asian immigrants) and starving its mature domestic companies of their domestic market.  Meanwhile, open doors to the United States means our overall population continues to tack upwards even as the native population has relatively few offspring. 

 

For our stock market to decline and stay down for 20 years we would need immigration to stop and for foreign investment to dry up.  Unlikely, but it's also inconceivable that the bull market will continue at its current steady pace for the next 20. 

 

That's true in today's investing environment. But sustained low interest rates over the past 15-20 years are what forced that. People in their 20s and 30s used to be able to diversify which made publicly traded companies less sociopathic and less full of futurist BS.

 

People with moderate incomes who live in Ohio can diversify with real estate.  Like actual physical rental properties, not REIT's.  What is scary though is how much medical bills can devour more in a month than a paid-off rental house can generate in rent.  This month (October 2017) I had $1,500 in medical bills and collected $650 in rent. 

 

A mention in the UO Cleveland business development thread got me interested in a company called Fund That Flip. They provide relatively short-term bridge loans to developers to finance rebuild-and-resell deals, i.e. "house flipping". Then they sell to investors notes in $5,000 multiples backed by the loan. They promise interest up to 10%.  It's an appealing idea. The only problem is to participate you have to be a qualified investor, which leaves out the little guy. 

What I don't like about 401k/IRA and other tax-advantaged accounts (health, school) is that they encourage investing that borders on the speculative.  Traditional pension funds were usually forced by law to keep roughly 50% in government or high-grade corporate bonds.  The rest was a mix of real estate and blue chip stocks. 

 

I can buy 100% bonds in my 401k, IRA, and HSA.  Heck, I can leave it in a "money market" account where it earns nothing.  I can buy 100% REITs in at least my IRA.  I can by 100% international stocks in all of them.  I can buy 100% international bonds in all of them.  I can buy a few mixed funds as well.  I can buy target date funds in my IRA and 401k, which shift asset allocation the closer to the "retirement date" we get.

 

The only incentive people have for going 100% equities is to try and maximize their earnings over the long term.  If that's how they choose to invest, that's up to them.  But there are plenty of other options available.

A titan in the personal finance blogosphere, JD Roth, bought back his original site Get Rich Slowly and is now in the process of transferring it back to his ownership.

 

 

http://www.getrichslowly.org/blog/

 

 

I wasn't really reading about personal finance (or just blogs in general) when JD started his site, but I've heard from others that he's almost the godfather of personal finance blogs as he started a web journal in 1997 and then Get Rich Slowly in 2004, detailing his journey going from deep in consumer debt to financial independence.  Most recently, he's been writing over at Money Boss - http://moneyboss.com/.

 

 

Just as an FYI if any of you followed Get Rich Slowly or JD in the last 15+ years.

A titan in the personal finance blogosphere, JD Roth, bought back his original site Get Rich Slowly and is now in the process of transferring it back to his ownership.

 

http://www.getrichslowly.org/blog/

 

 

I wasn't really reading about personal finance (or just blogs in general) when JD started his site, but I've heard from others that he's almost the godfather of personal finance blogs as he started a web journal in 1997 and then Get Rich Slowly in 2004, detailing his journey going from deep in consumer debt to financial independence.  Most recently, he's been writing over at Money Boss - http://moneyboss.com/.

 

Just as an FYI if any of you followed Get Rich Slowly or JD in the last 15+ years.

 

Yay!  I used to love reading stuff on his/her site.  It really went down the toilet after it was bought, so I'm glad to hear it's coming back in its original format.

He's also said he's doing a website redesign.  It sounds like it hasn't been touched since 2004 (the design).

 

http://www.choosefi.com/045-jd-roth-get-rich-slowly/

 

^Here's a podcast from a couple weeks ago featuring JD.

That site is new to me.  I discovered the Mr. Money Mustache blog awhile ago, maybe in 2011, but I pretty much knew everything he talked about already so I didn't keep up with it.  Then I got back on it about a year ago and saw that it has a forum.  It has the exact same color scheme as UrbanOhio.  There are some really, really smart people on that forum and it is well-moderated.  Virtually zero trolling.  It is dominated by people earning in the range of $75-200k.  So it's a lot easier for people with household incomes north of $150k to squirrel away large sums than it is for someone on the south side of that range.  They have thread titles like "race from $1 million to $2 million".  There are also threads like "trying to save $10,000".  So there is a range of ages and incomes.  Also, a fair number of people from Canada, England, and Australia post on there so it's interesting to see what is different in those places. 

 

I didn't like this post:

http://www.getrichslowly.org/blog/2017/10/19/side-hustles/

 

I'm a bit tired of the phrase "side-hustle".  Just go get a second job.  Temp second shift, work in a restaurant on the weekends, etc.  Don't do something that requires expensive equipment (i.e. photography), nice clothes (working in too nice of a restaurant), or requires a nicer car than the one you already own.  And do not drive for Uber or Lyft! 

 

For the last 2 years I have had the goal of living entirely off of income from a second job and rent collection and then banking my entire paycheck from my day job but haven't been able to do it.  I bring in about $2,200 on the side in a good month but that budget is blown almost every month by weddings or family events I can't get out of.  I have my day job salary direct deposited into a savings account at a different bank than the one I use for checking, so it's intentionally a bit of an ordeal to go get the money out. 

 

 

 

I've attended 2 weddings in the past 10 years.

^ You are not an immortal like Jmeck, who has likely sired hundreds, if not thousands of progeny, and their ensuing family. That's a lot of chafing dishes.

 

I didn't like this post:

http://www.getrichslowly.org/blog/2017/10/19/side-hustles/

 

I'm a bit tired of the phrase "side-hustle".  Just go get a second job.  Temp second shift, work in a restaurant on the weekends, etc.  Don't do something that requires expensive equipment (i.e. photography), nice clothes (working in too nice of a restaurant), or requires a nicer car than the one you already own.  And do not drive for Uber or Lyft! 

 

I think the spirit of a "side hustle" is that it's not thought of as a "job."  It's something you have more of an interest in or a hobby you've been wanting to explore/monetize.  I guess you could be a "consultant" in whatever field you want to work in - is that a 2nd job or a side hustle?  Who cares.  I think it's more - can you bring in additional income and enjoy the manner in which you bring in that income (ideally more than your primary job).

I much prefer multiple income streams over side hustles.

https://ournextlife.com/2017/10/23/reveal/

 

The authors at Our Next Life revealed their true identities a few weeks ago.

https://finance.yahoo.com/news/wall-street-set-positive-start-123854655.html

 

Stock Markets open 2018 at record highs....again.

Yesterday was a good day. Among all my stocks, index funds and crypto coins, I earned more in one day than I did in an entire year in the early 1990s (I was in my mid-20s then).

Yesterday was a good day. Among all my stocks, index funds and crypto coins, I earned more in one day than I did in an entire year in the early 1990s (I was in my mid-20s then).

 

MAGA

^ also no plane crashes yesterday.  #MAGA

I said this in one of the political threads, but I actually think we're a bit overdue for a correction and it wouldn't actually be the worst thing in the world at this point.  In 2009, we were well below the historical mean S&P 500 P/E and mean reversion meant some aggressive growth.  Now we're a good bit above it and mean reversion would mean a little bit of a correction, or at least a lull.

 

I've actually got more parked in cash than I have in a long time now (two of my holdings got bought out when Panera and Whole Foods were acquired, and I haven't reinvested it simply because everything looks ridiculously high).  I keep trickling money in just on dogged dollar-cost-averaging principles, but I haven't made any big buys in a long time now.

 

Short version: Times are good enough that I'm receptive to the argument that times are too good.

I am expecting a correction soon but I have not changed my overall allocation since my time horizon is relatively long.  Although, we do keep a bit in cash and some corporate bonds as part of our normal allocation anyway.

If you like P/E ratios as a predictor (they aren't great at it, but some people track them), Schiller's CAPE ratio is here - http://www.multpl.com/shiller-pe/

 

The only time in history it's been higher than its current level was 1999 - leading up to the dot com crash.

 

Of course, CAPE is a 10-year look back, so you're still getting the overpriced 2008 P/E in there.  It may drop down in the coming year - I only know the basics of CAPE so I'm speculating a bit on that.

Yesterday was a good day. Among all my stocks, index funds and crypto coins, I earned more in one day than I did in an entire year in the early 1990s (I was in my mid-20s then).

 

MAGA

 

It will help me buy my new condo in Kitchener, Ontario next year. MCGA

I said this in one of the political threads, but I actually think we're a bit overdue for a correction and it wouldn't actually be the worst thing in the world at this point.  In 2009, we were well below the historical mean S&P 500 P/E and mean reversion meant some aggressive growth.  Now we're a good bit above it and mean reversion would mean a little bit of a correction, or at least a lull.

 

I've actually got more parked in cash than I have in a long time now (two of my holdings got bought out when Panera and Whole Foods were acquired, and I haven't reinvested it simply because everything looks ridiculously high).  I keep trickling money in just on dogged dollar-cost-averaging principles, but I haven't made any big buys in a long time now.

 

Short version: Times are good enough that I'm receptive to the argument that times are too good.

 

I've been buying dips and corrections in otherwise high-valued stocks like Amazon and Sherwin Williams. I'm probably not going to stay in Amazon because I think it's oversold, but then again most of the finance media was reporting that AMZN was oversold last summer at $900. Now it's selling for $1,200. It corrected last week so I doubled my position and was rewarded yesterday and today by another jump. I'm not staying, though. I'm long in Sherwin Williams, however. I expect SW to come out of the Valspar acquisition a much stronger company with more pricing power. SW is a fundamentally strong, well-run company.

Sherwin-Williams was recommended by the Motley Fool on June 20, 2014 at $196.66/share.  I didn't buy any.  I should have done a lot more homework.  I was just like, "paint, seriously, where the heck is there any profit to be made in paint?  And maintaining retail stores just to sell paint?"

 

Turns out there is profit to be made in paint.  Opened today at $414.61.

 

Coulda shoulda woulda.

People don't buy paint or painting supplies on the internet. The margin on it is also sky high. Plus, people paint their rooms way more often than they did even a few years gao.

After seeing Trump's statement just now in response to Bannon, it may be a good idea to invest in popcorn futures.  Sorry, I just had to do it.

 

;D ;D

Like the dumb leading the damned. Or is it vice versa.

 

So when are Amazon and Google splitting 7-1? It seems like $1000 is that sweet spot.

Netflix split 7-1 in 2015 after getting to right around $700, getting the share price back down to around $100.  (And that one, I *was* around for.  Some of my earliest purchases of NFLX have cost bases of less than $12/share.)  I'm not sure I'd look to see split news from AMZN or GOOG/GOOGL (it's much less relevant for any stock that doesn't pay a dividend, but that obviously didn't stop NFLX), but if they did, I wouldn't be surprised to see 10-1.

Good point; I misremembered that. Apple was also in the early 700s when it split.

2018 so far:

 

DOW: up .82% to 24,922.68

 

NASDAQ: up 2.35% to 7,065.53

 

S&P 500: up 1.5% to 2,713.83

All of these ordinary people chatting up the stock market is the sign of bad things to come. 

 

It is relatively easy to buy low.  It's pretty tough to sell high. 

 

 

I have a lot of friends caught up in the Bitcoin craze. Nothing you can do to convince them there are no fundamentals behind the rise.

jmeck: It is pretty tough to sell at the peak.  The one time I've done that (other than in acquisitions, which tend to involve getting bought out at a premium) was more luck than anything else.  Selling high is considerably easier.  Buy what you know when it's low.  Hold for long enough.

 

I know you have rental properties as your own form of investing.  I've looked at getting into that.  It scares me a lot more than the stock market.  Leveraged, illiquid assets.  (Granted, the leverage is also part of the temptation, at least in terms of potential ROE.)  Carrying costs--interest, property taxes, maintenance, insurance.  Far more potential legal risks.  But of course, if that's what you know, and you have a way of finding decent deals, then you're doing the same thing I try to: buy what you know when it's low.

^ Stock market is efficient. You can find a lot of inefficiencies in real estate investing where paying a premium for someone else's pile of coal may actually yield a few diamonds.