Investment Allocation

[Boatswain2PA]

On 6/17/2020 at 9:47 AM, GetMeOuttaThisMess said:

All this being said, when you own your home, have no debt, and have chosen to live on a fixed income, it's hard to convince ones' self that you can beat what you already have if you can travel on your own to some of these other desired locations.  Best to be thankful for what you have (though I can still dream).

On 6/17/2020 at 9:47 AM, GetMeOuttaThisMess said:

 I suspect that it will become a buyer's market in some of these areas, though I'm not seeing significant pricing changes in Maui condos for example, at least not as of yet.  

These are times I am very thankful that we own everything we have, and live in an area where everyone still believes in property rights.

There are enough people with enormous amounts of money so that these vacation properties like that will never become cheap. 

It will be the smaller starter home that will be foreclosed on due to the terrible loan-deferral of the PPP.

[Boatswain2PA]

On 6/17/2020 at 12:18 PM, Cideous said:

It was a full year later before the bottom fell out....and we are only 3 months into Covid.  

And government intervention severely exacerbated the impacts of Covid in the economy, and therefore the housing market, and then the Paycheck Protection Act delayed but worsened the impact.

[Boatswain2PA]

On 6/17/2020 at 10:53 PM, cinntsp said:

The market's current success in no way reflects the state of the country and is being propped up solely by the trillions being dumped into the national economy by the government, so I think your thoughts are totally valid. 

Not solely.  Trump, love him or hate him, has done some necessary things that gave our economic production a huge boost.  Cutting regulations is a huge boost, as is fighting back against Chinas intellectual theft.

[Boatswain2PA]

On 6/18/2020 at 5:11 AM, ShakaHoo said:

With USA tax rates very low compared to the rest of the world, why not pay taxes up front for future tax free gains?  

Good thinking.  Will also depend on your level of taxable income later.  You have to subtract todays tax from your projected taxes in the future to see which would be better.  

You also have to make under the incone limits for a ROTH, or do a backdoor if you dont.

[Cideous]

11 hours ago, Boatswain2PA said:

Good thinking.  Will also depend on your level of taxable income later.  You have to subtract todays tax from your projected taxes in the future to see which would be better.  

You also have to make under the incone limits for a ROTH, or do a backdoor if you dont.

Large cashe's of CASH buried in the back yard.......   

[Boatswain2PA]

3 hours ago, Cideous said:

Large cashe's of CASH buried in the back yard

No growth potential there.  Worse yet, if/when inflation takes off those dollars will be devalued.

[JoeM]

21 hours ago, Boatswain2PA said:

These are times I am very thankful that we own everything we have, and live in an area where everyone still believes in property rights.

There are enough people with enormous amounts of money so that these vacation properties like that will never become cheap. 

It will be the smaller starter home that will be foreclosed on due to the terrible loan-deferral of the PPP.

Can you elaborate on how the deferral of home loans through the PPP will increase foreclosures and how the economic impact of COVID will be increased due to the PPP? I understand how it will be delayed. Thanks!

[Boatswain2PA]

1 hour ago, JoeM said:

Can you elaborate on how the deferral of home loans through the PPP will increase foreclosures and how the economic impact of COVID will be increased due to the PPP? I understand how it will be delayed. Thanks!

Because many people are financially stupid.  

Many people only pay what they have to, kicking debt down the road every chance they can.  Glaring examples are congress, and people who no longer like their three year old car that they are upside down on, but trade it in anyway, and just roll the debt into new car payment.  "But its the same payment!" they will say, not realizing that they just signed a 7 year car note.

 

So with this, there will be many lower income folks who, because they didnt have to, will not have made their mortgage payment.  Come July they will have to, and they will have to start repaying rhe past 3 months that they skipped.

Some banks are stretching that 3 missed monthly payments over a year....but that will still uncrease the mortgage by 25%.  Many cant afford that.

Sime banks want the past 3 months paid in full in July.  Pretty sure that wont happen for anyone.

Make sense?

 

[JoeM]

6 hours ago, Boatswain2PA said:

Because many people are financially stupid.  

Many people only pay what they have to, kicking debt down the road every chance they can.  Glaring examples are congress, and people who no longer like their three year old car that they are upside down on, but trade it in anyway, and just roll the debt into new car payment.  "But its the same payment!" they will say, not realizing that they just signed a 7 year car note.

 

So with this, there will be many lower income folks who, because they didnt have to, will not have made their mortgage payment.  Come July they will have to, and they will have to start repaying rhe past 3 months that they skipped.

Some banks are stretching that 3 missed monthly payments over a year....but that will still uncrease the mortgage by 25%.  Many cant afford that.

Sime banks want the past 3 months paid in full in July.  Pretty sure that wont happen for anyone.

Make sense?

 

For sure. Thanks for the reply!

[mgriffiths]

11 hours ago, Boatswain2PA said:

Sime banks want the past 3 months paid in full in July.  Pretty sure that wont happen for anyone.

 

I actually looked into deferring my mortgage when I was concerned about my job.  When I learned this I was flabbergasted.  Even more it was like pulling teeth to get the mortgage company to actually provide an answer to, "What happens if I defer my payments?"  It was obvious they wanted me to just think the three months would be added on to the end of my mortgage term.  The only reasonable explanation is that the mortgage company wants me to default resulting in foreclosure.  If I can't afford my mortgage payment for three months, how in the world will I have the full 3 months saved up for when the deferment ends?!?!?!

Thankfully my job was safe with only a 10% salary cut (almost feel grateful to my employer until I actually stop and think about it...but am grateful I wasn't terminated) which we easily absorbed.

[GetMeOuttaThisMess]

Cid, I owe you a margarita.  Market down yesterday and yet I saw that my bonds were up $0.01.  BTW, what a pain in the arse getting my Roth IRA/retirement funds out of the feds from my short stint with the VA.  Have to take the wife tomorrow to get forms notarized saying she knows that I'm getting a disbursement.  No such need with other non-fed accounts.

 

Edited June 25, 2020 by GetMeOuttaThisMess

[Cideous]

1 hour ago, GetMeOuttaThisMess said:

Cid, I owe you a margarita.  Market down yesterday and yet I saw that my bonds were up $0.01.  BTW, what a pain in the arse getting my Roth IRA/retirement funds out of the feds from my short stint with the VA.  Have to take the wife tomorrow to get forms notarized saying she knows that I'm getting a disbursement.  No such need with other non-fed accounts.

 

 

Awesome!

Yeah the market dropped a good bit and I made $500 thanks to my bonds going up even though the stocks ate it.  Like I said before, it's not really about trying to make money for us right now as much as it is about keeping what I have.  Still, now up 6% for the year  

[Boatswain2PA]

21 hours ago, GetMeOuttaThisMess said:

Cid, I owe you a margarita.  Market down yesterday and yet I saw that my bonds were up $0.01.  BTW, what a pain in the arse getting my Roth IRA/retirement funds out of the feds from my short stint with the VA.  Have to take the wife tomorrow to get forms notarized saying she knows that I'm getting a disbursement.  No such need with other non-fed accounts.

And the S&P was up 1% yesterday.  Day to day swings are not worth tracking.  You should look to your event horizon to see what your risk acceptance is.

I had to do the same thing (notarized acknowledgement from wife) for one of my private accounts.  I don't understand why...

 

On 6/25/2020 at 4:46 AM, JoeM said:

For sure. Thanks for the reply!

From:https://www.cnbc.com/2020/06/26/coronavirus-mortgage-bailouts-suddenly-swell-as-homeowners-struggle.html

"By loan type, 6.9% of all Fannie Mae and Freddie Mac-backed mortgages and 12.5% of all FHA/VA loans are currently in forbearance plans. Another 9.6% of loans in private label securities or banks’ portfolios are also in forbearance."

This is indicative of why I am suggesting it will be mostly mid-lower priced houses that will have a glut of foreclosures soon.  Those who qualify for the traditional FM/FM mortgages almost always put a significant chunk down payment, have lower interest rates, have better debt-to-income ratios, and sometime even do 15 (or even 10 or 5) year loans.  This means they can refinance if needed if they get into trouble like this.

Whereas with FHA/VA loans there are traditionally low- to zero- down payments, so no equity at purchase so reduced ability to refinance.  Financing is also more expensive with more points up front (unless disabled and getting VA loan), so refinancing is again less likely.  Furthermore they generally have worse debt-to-income ratios, and are almost always 30 year loans.

So 12.5% of FHA/VA loans are in forebearance plans.  Depending on what these forebearance plans are (which as MGriffiths has alluded to, can be very difficult for customers to figure out), I expect to start seeing a rise in lower-end foreclosure homes for sale in 3-6 months.  When will the worse of it/best pricing come?  I don't know, too many variables including what the forebearance plans are, how many first time homebuyers will jump in the market, and how many investors are sitting on cash (I think a lot).

[Cideous]

^^^ That's the big debate right now.  Will or won't housing prices drop ala 2009/10.  They certainly have not yet, but we are only 3 months into this thing.  Even with the forbearance relief, if people don't have jobs they are going to lose that house eventually.  I think the big economy hit is going to be next spring when forbearance stops and unemployment runs out and we are in the middle of the 2nd wave with no vaccine yet, but who knows.  Retirees on SS will be just fine and they are simply not moving.  If nothing else, it might be a great time to buy a car!

[Boatswain2PA]

23 minutes ago, Cideous said:

^^^ That's the big debate right now.  Will or won't housing prices drop ala 2009/10.  They certainly have not yet, but we are only 3 months into this thing.  Even with the forbearance relief, if people don't have jobs they are going to lose that house eventually.  I think the big economy hit is going to be next spring when forbearance stops and unemployment runs out and we are in the middle of the 2nd wave with no vaccine yet, but who knows.  Retirees on SS will be just fine and they are simply not moving.  If nothing else, it might be a great time to buy a car!

Much more intricate than this.

In my opinion average housing prices won't drop until/unless we see a housing crash on the coasts.  The average cost of a single home in San Francisco is $900,000.  I have purchased five houses, an 80 acre parcel of land to build dream house, and built a huge barn with less than that amount.  I see no change in the government intrusion that allows the rich to keep getting richer, so I don't see a big drop in the coastal home values.

Where I do see a big drop is the price of small starter homes where people who are scraping by will lose their homes.  

Government mandated forebearance stops in July, as does the ridiculous additional $600 in unemployment.  This MAY drive down the unemployment rate and get our businesses back to work, but we'll see.

Retirees on SS will be fine, as will us military retirees,etc....until we are not.  I do not expect to get my military retirement for the rest of my life.  I don't expect to get anything from SS.

Edited June 26, 2020 by Boatswain2PA

[ShakaHoo]

On 6/27/2018 at 9:13 AM, beattie228 said:

In order to time the market, you have to be right on two separate occasions: the time you decided to hop in as well as the time you decide to leave. As you might imagine, that is nearly impossible and almost every professional trader gets this wrong. Do what makes you feel comfortable, but logic says to dollar cost average by investing a certain amount every two weeks regardless of what the markets are doing. You have to set up an allocation percentage based on what makes you comfortable and stick with that allocation.

 

The market is volatile at all times. The nature of that beast is it goes up and down but overall, it historically goes up over the long run. Helps me to remind myself it's a long marathon and not a short sprint. Makes no difference if the Dow drops 250 points on some Wednesday in 2018 when I don't plan to use that money for decades. Jump on in, water's warm.

I have read numerous articles which would argue

1.  Front-Loading (Depositing a large sum of money into an investment account - all at once) versus Dollar Cost Averaging... That Front-Loading always wins out over time.  That being said, I dollar cost average anyways!

[mgriffiths]

8 hours ago, ShakaHoo said:

I have read numerous articles which would argue

1.  Front-Loading (Depositing a large sum of money into an investment account - all at once) versus Dollar Cost Averaging... That Front-Loading always wins out over time.  That being said, I dollar cost average anyways!

Front loading wins because you are in the market longer.  But dollar cost averaging wins over the long term because generally we don't have chunks of money sitting around to make the decision between front-loading vs. dollar cost averaging.

[MaggieMay3]

Wow, thanks to everyone for all of the useful information! 
I’m a final year med student and will start working in hospital in 6-7 months. 
Throughout medical school, I have relied on my parents for finance, used payday loans, and due to this, haven’t had to budget enormously. I was getting just about enough monthly and it was sufficient. But I am aware that once you start working, things get different.
For my first month, my parents will assist me with finance but once I get my first payslip, they will slowly stop supporting me (as expected).
So I was just wondering whether anyone has tips and advice regarding planning and budgeting to do as a first-time earner that would be beneficial and healthy in terms of finance and for the future as well.

Edited August 10, 2020 by MaggieMay3