The Lunacy of Sage Advice in Unprecedented Times -*- So Much for the Village Elders

[Being]

Yeah, how dare people who are skilled at something take advantage of those skills. It's blasphemous.

Loki, it wouldn't be an issue if they were generating new wealth. The problem is the current trend of siphoning existing wealth away from those who can least afford to lose it. It's especially distasteful when the losers have presumably followed all the rules.

[Loki]

Loki, it wouldn't be an issue if they were generating new wealth. The problem is the current trend of siphoning existing wealth away from those who can least afford to lose it. It's especially distasteful when the losers have presumably followed all the rules.

Do tell how they siphon off existing wealth.

[EyeKhan]

Do you have a 401k yet?

[Being]

Do tell how they siphon off existing wealth.

How about you start a retirement account and get back to me with the results in twenty years. In the past we've discussed your assumtion of the continuation of the 8% average market gain. I showed you how 20 year lulls have existed. Well this current lull is not only extending beyond 20 years it is also losing people money.

[EyeKhan]

How about you start a retirement account and get back to me with the results in twenty years. In the past we've discussed your assumtion of the continuation of the 8% average market gain. I showed you how 20 year lulls have existed. Well this current lull is not only extending beyond 20 years it is also losing people money.

And the Sage Advice always said: Buy a house, as long as you're in a solid neighborhood the value will always at least hold but likely go up! Well, I just sold the house I owned for thirteen fucking years at 40k less than I paid for it and that's after putting 30k into hard upgrades. Mind you my city, state and region never had a bubble-run-up in housing prices. Just a crash.

The sages say: "Oy! That's never happened before. Wow, who woulda thunk it?" And that's the fucking point. Modern home ownership in the masses is only five or six decades old, and the "Ownership Society" concept even less. But every dick in the woods knew just what to do vis a vis home ownership. Well, I and everyone else in the country who had to sell a house in the last three years got royally fucked by that Sage Advice because guess what? They were wrong.

[Being]

And the Sage Advice always said: Buy a house, as long as you're in a solid neighborhood the value will always at least hold but likely go up! Well, I just sold the house I owned for thirteen fucking years at 40k less than I paid for it and that's after putting 30k into hard upgrades. Mind you my city, state and region never had a bubble-run-up in housing prices. Just a crash.

Yeah, that's a tough pill to swallow. And you didn't even mention the premium you were paying above the cost of renting instead of buying.

[EyeKhan]

Yeah, that's a tough pill to swallow. And you didn't even mention the premium you were paying above the cost of renting instead of buying.

Its extremely frustrating, let me tell you. Based on the Sage Advice, that was supposed to be at a minimum like putting money into a bank account so long as I took care of the house and the neighborhood didn't fall apart. I did, and it didn't. But because some jackasses in Las Vegas and LA (gigantic simplification, noted) spent a whole hell of a lot of money driving up property values to wholly unsupported levels, I lost my ass. Nobody could have predicted that and that's why when someone says "this is what you do" I'm not buying it. Anything can happen when your nut is at the mercy of the Market, especially insufficiently regulated markets.

[Loki]

And the Sage Advice always said: Buy a house, as long as you're in a solid neighborhood the value will always at least hold but likely go up! Well, I just sold the house I owned for thirteen fucking years at 40k less than I paid for it and that's after putting 30k into hard upgrades. Mind you my city, state and region never had a bubble-run-up in housing prices. Just a crash.

The sages say: "Oy! That's never happened before. Wow, who woulda thunk it?" And that's the fucking point. Modern home ownership in the masses is only five or six decades old, and the "Ownership Society" concept even less. But every dick in the woods knew just what to do vis a vis home ownership. Well, I and everyone else in the country who had to sell a house in the last three years got royally fucked by that Sage Advice because guess what? They were wrong.

If you want certainty, go to a communist country. Risk is inherent in a non-command economy.

[EyeKhan]

If you want certainty, go to a communist country. Risk is inherent in a non-command economy.

Yeah, ok. Remember the Soviet Union?

[Loki]

Yeah, ok. Remember the Soviet Union?

Yeah, for seven decades, everyone had a job and no one lost their savings.

[Being]

... Risk is inherent in a non-command economy.

Remember that when you watch your retirement funds dwindle away 30 years from now. Try not to complain too loudly lest someone brings up your post history.

[Wraith]

The sages say: "Oy! That's never happened before. Wow, who woulda thunk it?" And that's the fucking point. Modern home ownership in the masses is only five or six decades old, and the "Ownership Society" concept even less. But every dick in the woods knew just what to do vis a vis home ownership. Well, I and everyone else in the country who had to sell a house in the last three years got royally fucked by that Sage Advice because guess what? They were wrong.

I remember things differently. Everybody who paid attention was saying there was a housing bubble and that it would burst sooner or later for years before it actually did. Many people ignored their warnings. I remember someone (not you, I'm pretty sure) taking shots at me because I said there was a housing bubble and that it was going to pop. "A lot of people say that, but it hasn't happened yet so it won't!" The problem wasn't that the information wasn't there or that the underlying rules that guide these things were wrong, it's that everyone was ignoring the information and underlying rules.

I'm sorry you took a loss on your home sale. It sucks, the timing is bad luck, and there was some risk anyways though maybe you got hit harder than most, but it doesn't invalidate everything people know about economics.

Does this mean you're retired now?

[EyeKhan]

I remember things differently. Everybody who paid attention was saying there was a housing bubble and that it would burst sooner or later for years before it actually did. Many people ignored their warnings. I remember someone (not you, I'm pretty sure) taking shots at me because I said there was a housing bubble and that it was going to pop. "A lot of people say that, but it hasn't happened yet so it won't!" The problem wasn't that the information wasn't there or that the underlying rules that guide these things were wrong, it's that everyone was ignoring the information and underlying rules.

The bath I took was a result of the bubble, and probably of the collapse of GM and Chrysler, but it had nothing at all to do with me participating in the bubble or of over inflated house prices in my region. I followed all the rules to the letter. The rules, which were wrong, never allowed for what happened. Which is my point.

I'm sorry you took a loss on your home sale. It sucks, the timing is bad luck, and there was some risk anyways though maybe you got hit harder than most, but it doesn't invalidate everything people know about economics.

Does this mean you're retired now?

The timing could not have been worse. I bought my new house pre-crash and sold my old post. Know about economics? Are you serious? The subject is as much about human behavior in the context of culture as anything else. It sure as he'll isn't a hard science you can ever know anything enduring about. Which again is somewhat my point.

Also, no, I'm nowhere near retirement. This is just an exercise in frustration and recognition that all the advisors out there with their rules of thumb are at least in part far too confident in their knowledge.

[Wraith]

The bath I took was a result of the bubble, and probably of the collapse of GM and Chrysler, but it had nothing at all to do with me participating in the bubble or of over inflated house prices in my region. I followed all the rules to the letter. The rules, which were wrong, never allowed for what happened. Which is my point.

The 'rules', such as they are, did though. Bubbles don't only impact people who buy into the bubble. It sucks, yes, but it doesn't really invalidate anything.

BTW, I've never heard that "buy as big a house as you can" financial guidance. What I've always heard is more along the lines of "Never buy a house as an investment, they're terrible for that. Buy one to live in it."

[GGT]

This is just an exercise in frustration and recognition that all the advisors out there with their rules of thumb are at least in part far too confident in their knowledge.

Or our unabiding faith in authority and experts.

Tear says it's the same old economy as ever, with wool over our eyes. I saw a stat the other day, that 63% of our GDP is run through just six financial institutions. No, it didn't used to always be this way. And it's never been this bad to have a fricking savings account or CD with returns of 1-2%. What a joke.

The biggest bubble that ties all other bubbles into this massive floating illusion is the explosion in credit and debt. Consumers, businesses, municipalities, states, federal....international and sovereign debt. Trillions and trillions of unfunded 'liabilities'.

Yes, it's frustrating to have done all the right things, saved hard and invested, not loaded up on debt (hell, I haven't used my credit card for about a year now...) But financial "hygienics" won't help the 70 year old whose retirement got busted up, and their time is running out. Golden Years, huh? Not traveling the world, volunteering, or spoiling grandkids, but being a Walmart greeter, or as choobie says---fipping burgers. yay

[wiggin]

Wiggin, the problem is that complexity allows unforseen manipulations that undermine conventional wisdom and strip regulation of the power required to balance fairness with faith in the markets.

Please. That's not an argument against a complex system, it's just an argument for prudent policy and careful investment.

#1, the analogy is invalid. #2, the most basic fundamental of investing, as the common person experiences it, is that its essentially gambling.

*shrugs* Not precisely; investing certainly has an element of risk (as is any 'hoard' of wealth, regardless of where you put it), but it isn't gambling in that any worthwhile investment means you own a chunk of something real - the gamble is generally in the asset allocation and the timing of asset redemption. Anyways, no one has argued that there is anything 'sure' about investing, it's obviously a risky endeavor (even cash is risky in that it's fiat currency, and precious metals or other commodities have bubble/etc. risks as well). We just argue that the basics of wise investing and risk management aren't fundamentally different today than they were a hundred years ago - some people just ignore the wisdom of time.

The complexity is aggravated by the constantly changing conditions. A hundred years ago people relied on sticking money in their mattresses and the compassion of their children. Sixty years ago it was the defined pention programs. Twenty years ago it was the 401k. Now what do we have? Bankrupt pension programs because program managers were allowed to gamble - and lose - them in the stock market while shorting contributions based on unrealistic projections of returns. So the solution to that fuck up was to have individuals gamble their own money in the stock market, and of course lose. Hey, I know, lets put social security in the stock market, maybe the third time's the charm.

The 'progression' you're positing is meaningless - they have to do with changing demographics, not changing principles of economics and investing. People don't 'of course' lose in the stock market, and I challenge you to show me how that's true.

Maybe people shouldn't have to rely on gambling in a too-complex-to-understand and likely loaded system to provide for their health and welfare when they can't work anymore. This model of retirement care is fundamentally a fucked up joke. Its more about allowing savvy investors to harvest money from the rest of the population.

There's some risk in any retirement scheme, whether it's a defined benefit or a defined contribution. There's no certainty in life; you think the governments can cope with longevity and market risk any more than an individual? The only issue is that a government will fall back on debt to deal with risk, when an individual doesn't really have the option. Obviously, this is an incentive for better risk management on the part of the individual saver than a government or corporation would ever have - it's their retirement that's on the line.

How about you start a retirement account and get back to me with the results in twenty years. In the past we've discussed your assumtion of the continuation of the 8% average market gain. I showed you how 20 year lulls have existed. Well this current lull is not only extending beyond 20 years it is also losing people money.

You're quoting one black swan event as proof of some fundamental change in long-term best practices? It's always possible to cherry-pick results to argue 'things are different this time'.

And the Sage Advice always said: Buy a house, as long as you're in a solid neighborhood the value will always at least hold but likely go up! Well, I just sold the house I owned for thirteen fucking years at 40k less than I paid for it and that's after putting 30k into hard upgrades. Mind you my city, state and region never had a bubble-run-up in housing prices. Just a crash.

Total lie. No one has argued that buying a house is for everyone - that's an aberration of the real estate bubble. They're not a great investment - highly illiquid, subject to very high taxes (on the principal value and not a realized gain, either!), etc. Sure, in some circumstances they can give high yields, but the market is awfully tough to predict. You also happened to catch the very worst time to sell a house.

Yeah, that's a tough pill to swallow. And you didn't even mention the premium you were paying above the cost of renting instead of buying.

*shrugs* It's no secret that in some markets renting is far cheaper than buying.

Oh, by the way, putting money aside for 15 years in a low risk fund got me a return that wasn't even on a par with if I'd put the money under my mattress.

Cherry-picked data.

As for paying down your principle, why? Our mortgage is at 4.75%. Over 30 years, my retirement investments will yield much higher than that. With those kinds of mortgage rates, paying down early is as silly as paying off student loans early. You're citing dogma from a time when people had much higher interest rates on their mortgages.

This is obviously a tough decision - principle paid down on a debt is sometimes a good idea compared to investing in something illiquid, as it gives you some leeway on future loan payments. This is really only true for limited paydown of the principle, though.

PS another good rule of thumb: keep enough money for 3 months of frugal living in a liquid source. You can pay wicked penalties from removing money from retirement accounts, so you need a rainy day fund.

Agreed, but I'd say at least 6 months is necessary. We've got 8 months worth of cash plus plenty of principle we can pull out of a Roth IRA penalty-free if need be. It's all about risk management - the cash is paltry compared to retirement savings after a few years, but gives a very hefty margin of safety so you don't need to liquidate assets in a down market.

The bath I took was a result of the bubble, and probably of the collapse of GM and Chrysler, but it had nothing at all to do with me participating in the bubble or of over inflated house prices in my region. I followed all the rules to the letter. The rules, which were wrong, never allowed for what happened. Which is my point.

Your interpretation of the rules is what's wrong, either that or someone stupid was advising you. You're bandying about arguments that are functionally no different than the worst of the house flipping advisers back in the boom and claiming it's fundamental rules of investing.

[Hazir]

Do tell how they siphon off existing wealth.

Ok, now you really have hit the rock bottom of lazy answers.

Oh, by the way, putting money aside for 15 years in a low risk fund got me a return that wasn't even on a par with if I'd put the money under my mattress.

[Loki]

Ok, now you really have hit the rock bottom of lazy answers.

Considering that Being makes absurd claims in every thread he posts in, I find that it makes no sense in trying to come up with reasonable counter-arguments until he actually makes it clear what his point is.

[Being]

Considering that Being makes absurd claims in every thread he posts in, I find that it makes no sense in trying to come up with reasonable counter-arguments until he actually makes it clear what his point is.

I have made my point perfectly clear. You simply deny reality and continue promoting the notion that history is the ultimate guide to economic stability. All the while ignoring recent history.