109R | “Bear” Perspective

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109r bear perspective
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Big ERN from Early Retirement Now joins the show to talk about the current market climate: How is it impacting investors, who could benefit, and what markers he uses to evaluate its actual condition?

We also share a voicemail from Abby, who provides a few more helpful hints for teaching abroad.

Topics from the show:

  • Brad maxed out his HSA for 2019, and talks about how he’s prioritizing fitness.
  • Easy choices, hard life. Hard choices, easy life.
  • Preview of who will be at the coming CampFI that Brad plans to attend.
  • Review of Monday’s episode about teaching abroad, and the wide variety of opportunities available.
  • A voicemail from Abby H., who is currently teaching in China and has experience in several other countries as well.
  • Abby tried teaching in Kuwait, but found that despite a high salary the cost of living was also extremely high.
  • Suggestions from Abby:
    • Don’t just look for jobs in the Middle East, or other “high salary” locations.
    • Try negotiating your salary/benefits offer.
    • Look for options that don’t require purchasing a car.
  • How did Rob and Scott, from Monday’s episode, replace fear with flexibility in each of their lives?
  • Big ERN joins the show to talk about the current market situation:
    • What is “sequence of returns” risk, and why does it matter?
    • Under the assumption that the great recession or the dot-com bust will not repeat, Big ERN thinks it’s too early to worry about the current market climate.
    • The 4% rule should be considered a rule of thumb. Market conditions should always be considered and flexibility is key.
    • If someone’s portfolio decreased this year, should they work a few more years to rebuild it, or count on the market recovering?
    • If someone is still many years away from retirement, they shouldn’t worry too much about the market, and might actually be benefit from low stock prices.
    • If you have a 50% or higher savings rate, you are going succeed financially, regardless of this drop in the market.
    • The U.S. economy is still strong, so the value of the market isn’t necessarily going down – the price is just down.
    • If someone has a sum of money ready to invest, should they invest it all at once, or employ “dollar-cost averaging”?
    • Who should be concerned about the market and what should they be looking for?
    • Look at the fundamentals of the U.S. economy to evaluate the conditions of the market.
    • Big ERN just retired. His family is just settling in to a new house in Washington.

 

 

Links:

TeachAway

Early Retirement Now

Market Timing and Risk Management, Part 1 – Macroeconomics

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11 thoughts on “109R | “Bear” Perspective”

  1. I don’t think stocks are on sale yet. Are they cheaper than then a couple of months ago, yes. It’s like the local jewelry store that marks up a bracelet from $100 to $200 and then offers you a 40% sale!!! At $120 it’s still expensive, like our current market, in my opinion.

    I found this resources to be super helpful in understanding valuations and expected returns going forward: https://www.crestmontresearch.com/ur-highlights/

  2. Really good to hear from Big Ern–all things I knew but great to hear it from an expert. Bond yield curve 10 yr earning less than 2 yr, PMI index (business confidence), Unemployment claims up then worry. Look against averages.

  3. One caution on maxing out your 401k “early”: if you have paychecks with no 401k contributions, you will have no company match for those paychecks, and are missing out on free money! Happened to me once for a couple of December paychecks; no fun.

  4. I have been an international teacher for 8 years in 3 different countries. In your podcast you made it sound like the norm saIary was $70-90k. This is definitely not the case. I would say the norm is lower than the salary you would make in the states. Not paying taxes, free housing, and living in a country with a low cost of living are where you can save more money in the states.
    I appreciate the wealth of information that you have provided my on my FI, but don’t misinform teachers into leaving their jobs for false expectations.

    • Hey Eric, we appreciate the feedback, in 109 the actual episode I think we painted the broad strokes you are referring to. I agree we don’t want to leave false impressions. in 109R we were talking specifically about Scott’s package not making claims about every job. Thanks for listening

  5. Hi and thank you for yet another great episode with a favourite participant (loved the sequence of return risk episode #35). Am I understanding this bullet point correclty? “The 4% rule isn’t as untouchable as people think. With a small market downturn, it’s possible that some people will need to draw as much as 5%.” What is meant by that, that you “need” to draw 5%? Or is it a typo and should be “3% in market downturn”?

    • typo – thanks will correct. what ERN tried to convey was that if your investments are still at a high enough level after this latest correction, you can be more confident in a 4% withdrawal going forward,but that all plans should have some flexibility built in

  6. Everyone here is always just talking about 1 way of just investing in index funds of stocks and bonds.
    I got to thinking about this episodes worry about a stock market decline and got me to thinking about someone like Jason Fieber (Mr Free at 33 blog).
    Have you guys ever interviewed someone about DGI – Dividend Growth Investing? So long as the stocks they choose keep churning out dividends that keep growing year after year. You don’t have to care about the value of the portfolio. Over time, the price will take care of itself as it consistently churns out a growing dividend. And if you are living off the dividends, you don’t care about price, and you will consistently get a raise from your growing dividends.

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