Markets still falling like whoa

[Cheeseweasel 26438]

2 minutes ago, Wally Fairway said:

I'd like an unlimited line-of-credit loan with virtually 0% interest and an infinite maturity

BRRRRRRRRRRRRRRRRRTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT

 

Done

[Blotto 23478]

3 hours ago, Wally Fairway said:

not a bad 2 years - first hit the $1 trillion market cap on August 2, 2018

https://www.cnbc.com/2018/08/02/apple-hits-1-trillion-in-market-value.html

5 years ago (Fiscal year ending in Sept of 2015) Apple had revenues of $233 billion and Net Income of $53.4 billion

Their most recent complete FY was 2019 and they turned in revenue of $260 billion and Net Income of $55.3 billion

Trailing 12 month  revenue figures including Covid period show revenue of $273 billion and Net Income of $58.4 billion. 

TINA phenomena with low interest rates has been very good for AAPL.  Total revenue growth in 5 years was 17%, net income growth was 9%. AAPL stock on the other hand is up over 400% from where it was 10/1/15. Yeah, AAPL was  undervalued 5 years ago, but their "growth" has been fairly mediocre when viewed in context of the stock price. 

 

[ChiTownDoc 21119]

7 minutes ago, Blotto said:

5 years ago (Fiscal year ending in Sept of 2015) Apple had revenues of $233 billion and Net Income of $53.4 billion

Their most recent complete FY was 2019 and they turned in revenue of $260 billion and Net Income of $55.3 billion

Trailing 12 month  revenue figures including Covid period show revenue of $273 billion and Net Income of $58.4 billion. 

TINA phenomena with low interest rates has been very good for AAPL.  Total revenue growth in 5 years was 17%, net income growth was 9%. AAPL stock on the other hand is up over 400% from where it was 10/1/15. Yeah, AAPL was  undervalued 5 years ago, but their "growth" has been fairly mediocre when viewed in context of the stock price. 

 

Shall I point you over to TSLA?  Multiple expansion bro, we has it.  

[Blotto 23478]

1 minute ago, ChiTownDoc said:

Shall I point you over to TSLA?  Multiple expansion bro, we has it.  

oh I'm well aware, was just pointing out that AAPL really isnt growing for shit. Its a fairly stagnant company all things considered, admittedly one that generates a fuckton of cash. That multiple will come into play at sometime. it always does......eventually.

[ChiTownDoc 21119]

17 minutes ago, Blotto said:

oh I'm well aware, was just pointing out that AAPL really isnt growing for shit. Its a fairly stagnant company all things considered, admittedly one that generates a fuckton of cash. That multiple will come into play at sometime. it always does......eventually.

Yep.  Agreeing with you that a shit load of this makes no sense.  When does the euphoria run out?  BRRRRRTTTT alone is not causing all this.  

[Cheeseweasel 26438]

2 minutes ago, ChiTownDoc said:

When does the euphoria run out?

Like Blotto said. TINA.

When another option becomes better. Right now, there is no place to put money.

[ChiTownDoc 21119]

3 minutes ago, Cheeseweasel said:

Like Blotto said. TINA.

When another option becomes better. Right now, there is no place to put money.

I don’t think it’s TINA.  Experienced investors have alternatives.  They may not be great but they’re there.  A lot of what we are seeing seems to be amateur gamblers who are STONKS to the moon - and they’ve been right...‘for now’ as we all say.

[Cheeseweasel 26438]

I don't think amateur gamblers have enough in the markets to move the dial. I think you have a bunch of sheep following the crowd.

[ChiTownDoc 21119]

3 minutes ago, Cheeseweasel said:

I don't think amateur gamblers have enough in the markets to move the dial. I think you have a bunch of sheep following the crowd.

Oddly enough I think those amateur clowns kept things humming w options etc then the ‘in the know’ crowd said fuck it and fell in line...behind the sheep.  And away we go!

[Cheeseweasel 26438]

1 minute ago, ChiTownDoc said:

Oddly enough I think those amateur clowns kept things humming w options etc

A buddy of mine's 20 something kid has started "investing" in leveraged options and is bragging about his 50% returns. I'm sure he'll be going quiet soon...

[ChiTownDoc 21119]

7 minutes ago, Cheeseweasel said:

A buddy of mine's 20 something kid has started "investing" in leveraged options and is bragging about his 50% returns. I'm sure he'll be going quiet soon...

Keep us updated.  Love these.  

[Wally Fairway 5536]

45 minutes ago, Blotto said:

oh I'm well aware, was just pointing out that AAPL really isnt growing for shit. Its a fairly stagnant company all things considered, admittedly one that generates a fuckton of cash. That multiple will come into play at sometime. it always does......eventually.

I think a big part of it is all the money that is plowed into index funds - things like $SPY, which because it is market weighted new money gets overly allocated to the largest companies. The S&P 500 actually consists of 505 companies; but the 5 largest are over 20% of the fund. So for every $1,000 into a S&P 500 fund, just over $200 goes into those 5 stocks, it is a consistent push to buy more stock. And don't forget the Fed is now buying into SPY, to support markets; these things just keep inflating the balloon. 
But it is hard to bet against it, because there is no telling how much more the balloon can inflate....maybe a lot, I'm sure I can lose all of my speculative puts before it deflates. However, I do still have some mid to long-term (9-18 months) puts that are hedges against my core investments, usually buying puts at a 10% loss strike price to hedge against a correction that feels inevitable. 

[Blotto 23478]

Don't discount the rise of ETFs and 401K plans offering indexed solutions. If they are market weighted funds, for every $1 billion they take in, 20+% gets allocated to AAPL, MSFT, AMZN, FB and GOOG. The more money that flows into these funds, the more they have to buy. Its like a financial self-perpetuating engine.....until it unwinds. SPY has a super low expense ratio and is outperforming a lot of other "managed" investment options. 

[T’Boo Ted Marshall 2730]

So my best friend growing up... his dad had survived the Holocaust as a child.  Obviously that changed him forever.  Saved like crazy.  Would buy a new Camry every 5 years.  That was his splurge.  Houses in our neighborhood cost 80-100k.  You get the point...his dad passed around 50.  Left Micheal 15-20M.  He invested  on his own and dropped to 4M ish after dot com crash.  He put every cent into Apple and has not touched it since.  He lives like a totally normal dude but he is loaded to the gills.  So there’s someone out there who lucked out at least.  

Houses were $80-100k and his Dad had $15-20m? Doc are you telling tall tales again?

[ChiTownDoc 21119]

19 minutes ago, T’Boo Ted Marshall said:

Houses were $80-100k and his Dad had $15-20m? Doc are you telling tall tales again?

#holocaustsurvivor 

Lol.  The truth my man.  

[Trey3216 15338]

2 hours ago, Blotto said:

Don't discount the rise of ETFs and 401K plans offering indexed solutions. If they are market weighted funds, for every $1 billion they take in, 20+% gets allocated to AAPL, MSFT, AMZN, FB and GOOG. The more money that flows into these funds, the more they have to buy. Its like a financial self-perpetuating engine.....until it unwinds. SPY has a super low expense ratio and is outperforming a lot of other "managed" investment options. 

Not to mention that there are now more ETF’s and mutual funds out there than actually listed stocks.  

[Fudge Nuggets 19170]

asdfasdfasd

Edited August 19, 2020 by Fudge Nuggets

[Fudge Nuggets 19170]

Edited August 19, 2020 by Fudge Nuggets

[Mighty fine 169]

The pause and site redirect when clicking the link originally posted made the picture all the more funnier.

[hornbri 1384]

4 hours ago, Blotto said:

oh I'm well aware, was just pointing out that AAPL really isnt growing for shit. Its a fairly stagnant company all things considered, admittedly one that generates a fuckton of cash. That multiple will come into play at sometime. it always does......eventually.

Part of it is just figuring out what that P/E multiple should be for tech stocks. You could argue Apple was undervalued for a long time comparatively and is just now even with the closest compares. 

As of today the P/E multiples look like:

Facebook - 32

Google - 34

Apple - 35

Microsoft - 36

Netflix - 82

Tesla - 972

 

[BradInATX 9208]

3 hours ago, Blotto said:

Don't discount the rise of ETFs and 401K plans offering indexed solutions. If they are market weighted funds, for every $1 billion they take in, 20+% gets allocated to AAPL, MSFT, AMZN, FB and GOOG. The more money that flows into these funds, the more they have to buy. Its like a financial self-perpetuating engine.....until it unwinds. SPY has a super low expense ratio and is outperforming a lot of other "managed" investment options. 

100% SPY crew checking in.

[Trey3216 15338]

23 minutes ago, hornbri said:

Part of it is just figuring out what that P/E multiple should be for tech stocks. You could argue Apple was undervalued for a long time comparatively and is just now even with the closest compares. 

As of today the P/E multiples look like:

Facebook - 32

Google - 34

Apple - 35

Microsoft - 36

Netflix - 82

Tesla - 972

 

Back out cash and AAPL/MSFT are closer to 30 

[Blotto 23478]

34 minutes ago, hornbri said:

Part of it is just figuring out what that P/E multiple should be for tech stocks. You could argue Apple was undervalued for a long time comparatively and is just now even with the closest compares. 

As of today the P/E multiples look like:

Facebook - 32

Google - 34

Apple - 35

Microsoft - 36

Netflix - 82

Tesla - 972

 

In my original comment, I acknowledged that Apple was undervalued relative to its peers 5 years ago. But from 2011-2015 AAPL was still experiencing real growth (doubled revenue and profits). In the last 5 years, Apple has grown revenue 17% and profit 9%.Since Jobs croaked they have been milking the same damn product line . They have probably the most captive, sticky customer base on the planet and yet their revenue and earnings growth is anemic.  Every other company you listed  grew revenue and profits at least 100% over the same period, some significantly higher than 100%. Its not clear to me Apple deserves the same multiple as its peers. And to be honest, I don't think they are capable of  engineering their way to future growth. Their best shot is putting that cash pile to work and making the right acquisition(s). 

Edited August 20, 2020 by Blotto

[washparkhorn 9939]

https://www.usatoday.com/story/money/2020/08/20/dollar-weakening-sparks-worries-stay-worlds-reserve-currency/3396627001/

https://www.newyorkfed.org/markets/secondary-market-corporate-credit-facility/secondary-market-corporate-credit-facility-broad-market-index

First link - the threat to the dollar's reserve currency status explained USA Today style.

Second link - what the fed is buying. The Fed's list of corporate bonds and the weighting of companies purchased (if you sort by index weight, VW is the leading company in the Fed's purchases).

Good luck. Know your limits. 

[bernorange 8357]

Thanks Dirty Harry Washparkhorn.

[Cheeseweasel 26438]

11 hours ago, Blotto said:

yet their revenue and earnings growth is anemic. 

They haven't had a "new" product in a while. I hope their R&D has something big planned or they are planning on using that cash to purchase the Fed printer.

[Fudge Nuggets 19170]

2 hours ago, washparkhorn said:

https://www.usatoday.com/story/money/2020/08/20/dollar-weakening-sparks-worries-stay-worlds-reserve-currency/3396627001/

https://www.newyorkfed.org/markets/secondary-market-corporate-credit-facility/secondary-market-corporate-credit-facility-broad-market-index

First link - the threat to the dollar's reserve currency status explained USA Today style.

Second link - what the fed is buying. The Fed's list of corporate bonds and the weighting of companies purchased (if you sort by index weight, VW is the leading company in the Fed's purchases).

Good luck. Know your limits. 

Our 11 aircraft carrier strike groups say we aren't losing reserve currency status any time soon.

[Anastasis 23446]

1 minute ago, Fudge Nuggets said:

Our 11 aircraft carrier strike groups say we aren't losing reserve currency status any time soon.

 

 

Don't CR me bro cause I can pull a similar picture for each administration over the last few decades. 

[ZB'Tejas 593]

#holocaustsurvivor 
Lol.  The truth my man.  

He must have owned some decent businesses then. Normal working stiffs don’t just accumulate 15M in their lifetime.


Sent from my iPhone using Tapatalk

[Cheeseweasel 26438]

1 minute ago, ZB'Tejas said:

Normal working stiffs don’t just accumulate 15M in their lifetime.

[Wally Fairway 5536]

38 minutes ago, Fudge Nuggets said:

Our 11 aircraft carrier strike groups say we aren't losing reserve currency status any time soon.

11 carrier strike groups sounds quite impressive, until you look at their location and status

USS NImitz - North Arabian Sea
USS Dwight D Eisenhower - Norfolk
USS Carl Vinson - Bremerton - Drydock
USS Teddy Roosevelt - San Diego
USS Abraham Lincoln - San Diego
USS George Washington - Norfolk - Drydock
USS John C Stennis - Norfolk
USS Harry S Truman - Norfolk 
USS Ronald Reagan - South China Sea
USS George HW Bush - Norfolk - Drydock
USS Gerald Ford - Norfolk - post commissioning trials continuing

So currently there are 2 carrier group actively deployed, I'm not saying we don't have a forward presence but this is where the US main carriers are currently located
This does not include the LHA operations

Nothing too secret here, you can find it on many websites including http://www.gonavy.jp/CVLocation.html
 

[Fudge Nuggets 19170]

Too bad carrier groups can't move around and stuff.  Defense Department should look into that as an improvement opportunity.

[Wally Fairway 5536]

11 minutes ago, Fudge Nuggets said:

Too bad carrier groups can't move around and stuff.  Defense Department should look into that as an improvement opportunity.

Can and do are separate things - I've watched the CV and LHA/D locations for a while (I'm wired wrong and think that it somehow tracks global "hotspots" which for some reason intrests me) 
They don't move much at all, and the ones in drydock aren't moving for quite a while.
On the other hand the sub fleet is hardly in port, and it's whereabouts are not commonly known....and that is a pretty big hammer

[ChiTownDoc 21119]

52 minutes ago, ZB'Tejas said:

He must have owned some decent businesses then. Normal working stiffs don’t just accumulate 15M in their lifetime.


Sent from my iPhone using Tapatalk

Bought land in west Moore back in 80’s and it appreciated quite a bit.  That and family practice doctors in 70’s and 80’s making 1M was far from crazy.  He spent almost zero.  

[ZB'Tejas 593]

So where are we these days? S&P back at highs and Bull Marketing back on yet the majority of my stocks are no where near the highs from the beginning part of the year. What areas are you putting your money?

Sideline still waiting?

I've got positions in $BA $LUV $XOM $BIGC and $OKE where I'm looking to buy more if it keep going down.

Holding on to $WORK, $ZM, $ZI, $NKLA, $BYND $DIS and $MAR

Any new big long term bets you guys are buying?

[ChiTownDoc 21119]

2 minutes ago, ZB'Tejas said:

So where are we these days? S&P back at highs and Bull Marketing back on yet the majority of my stocks are no where near the highs from the beginning part of the year. What areas are you putting your money?

Sideline still waiting?

I've got positions in $BA $LUV $XOM $BIGC and $OKE where I'm looking to buy more if it keep going down.

Holding on to $WORK, $ZM, $ZI, $NKLA, $BYND $DIS and $MAR

Any new big long term bets you guys are buying?

I have CVX, OKE, XOM and if they drop I’ll buy more.  Energy has not seen a pop yet.  I think once vaccine hits those will have a good run up.  Nice dividend while we wait. 
 

[Cheeseweasel 26438]

Looking at a few stocks that have been hammered due to covid: $TJX $DIS $KR 

Hard to pull out of $AAPL, wish I had more.

Looking at the International Market Index Funds. They've been down 10 years 

[Cheeseweasel 26438]

FWIW, most of my money is in FLGLX and FLKAX with a decent amount in several bond funds, but I'm about 5 years from retirement

[ChiTownDoc 21119]

6 minutes ago, Cheeseweasel said:

Looking at a few stocks that have been hammered due to covid: $TJX $DIS $KR 

Hard to pull out of $AAPL, wish I had more.

Looking at the International Market Index Funds. They've been down 10 years 

Intl and small caps are tempting because they’re due.  JPM CIO office is big fan of Intl Market Index Funds right now.  Take that with all the salt.  

[ZB'Tejas 593]

8 minutes ago, ChiTownDoc said:

I have CVX, OKE, XOM and if they drop I’ll buy more.  Energy has not seen a pop yet.  I think once vaccine hits those will have a good run up.  Nice dividend while we wait. 
 

Isn't that the truth... I look at the potential upside and the dividends I've got over the last 6 -7 months and i'm not sure why I don't have all my extra cash in these.

[Cheeseweasel 26438]

1 minute ago, ZB'Tejas said:

Isn't that the truth... I look at the potential upside and the dividends I've got over the last 6 -7 months and i'm not sure why I don't have all my extra cash in these.

Mainly because XOM seems like a train wreck. If I dive back in, I'll consider a Energy Index

[Cheeseweasel 26438]

4 minutes ago, ChiTownDoc said:

Intl and small caps are tempting because they’re due.

This is the kind of thinking that always gets me in trouble. 

It can't fall any farther, can it?!?!?!

Narrator: Oh, but it did fall farther.

 

[Superhero 8822]

On 8/19/2020 at 10:15 AM, ChiTownDoc said:

So my best friend growing up... his dad had survived the Holocaust as a child.  Obviously that changed him forever.  Saved like crazy.  Would buy a new Camry every 5 years.  That was his splurge.  Houses in our neighborhood cost 80-100k.  You get the point...his dad passed around 50.  Left Micheal 15-20M.  He invested  on his own and dropped to 4M ish after dot com crash.  He put every cent into Apple and has not touched it since.  He lives like a totally normal dude but he is loaded to the gills.  So there’s someone out there who lucked out at least.  

Hopefully he opened up his account every once in a while to look at it. The US government can seize accounts if they have been inactive for a period of time.

https://www.npr.org/2020/02/13/805760508/when-your-abandoned-estate-is-possessed-by-a-state-thats-escheat

Spoiler

AUDIE CORNISH, HOST:

When state governments need cash, they could raise taxes, but that's such a tough sell that more and more states are doing something else to get the money. Audrey Quinn with NPR's Planet Money podcast reports on the practice known as escheat - E-S-C-H-E-A-T.

AUDREY QUINN, BYLINE: Walter Schramm found out about escheat the hard way. Back in the late '90s, Walter ran an online store and was getting totally whomped by a young company, Amazon. He was so impressed with his competition, he invested. He opened a brokerage account and bought a few thousand dollars in the Amazon stock. If you can't beat 'em (ph)...

WALTER SCHRAMM: Join 'em (ph). Exactly.

QUINN: And then, at least as far as the brokerage account was concerned, Walter did nothing.

SCHRAMM: If you believe in a company, you need to buy the stock and let it sit for 20 years. I mean, that's the philosophy of Warren Buffett. Go out and have a walk. Enjoy nature. Talk to your family. Don't worry about the stock market.

QUINN: Cue almost 20 years later. It's 2015. Walter goes to sell the stock. He logs into his account, and...

SCHRAMM: I saw nothing. The account was empty.

QUINN: Walter's stock - which, by 2015, would've been worth about 100 grand - had been escheated by the state of Delaware in 2008. Escheat is when a state government takes possession of unclaimed property and holds it until the rightful owner comes forward. It could be a paycheck you never cashed, a forgotten bank account or, in Walter's case, a stock account he hadn't logged into in over three years. The account Walter believed was growing his nest egg had been closed back when his investment in Amazon was worth only about $8,000. That's what was left for Walter to get back.

JENNIFER BORDEN: I work on cases like that all the time.

QUINN: Jennifer Borden runs an escheat law firm in Boston. She says all across the country, states are getting more aggressive in how they identify property as unclaimed. Some states are shortening the time period in which accounts can be deemed inactive - like in Walter's case, three years. Some have gotten rid of notification requirements for giving people a heads-up their account's about to close.

BORDEN: States are able to use the cash or the assets until such time as the owner comes forward, so it's almost like the state has a little loan they can give themselves of other people's money.

QUINN: Unclaimed property is the fifth largest source of funding for California. It's the third largest source for Delaware, about 12% of the state budget. That's where they liquidated Walter Schramm's Amazon shares. So we talked to the person in charge of escheat in Delaware, Brenda Mayrack. She says states take hold of potentially forgotten money because otherwise, it would just go to the corporations. Escheat at least sends it to a public fund.

QUINN: Why the three years, or why five years? It just - it seems pretty arbitrary.

BRENDA MAYRACK: It needs to be short enough so that companies aren't actually losing track of people and basically taking a windfall of that property or benefiting from their property over time, so it's trying to strike a balance.

QUINN: States used to publish newspaper listings with the names of people whose property they escheated. Now states have websites instead. If you look up the words lost money and the name of any state where you've lived, you can search for yourself on your state's unclaimed property Web site, see if the state has any money owed to you and file a claim. Meanwhile, Walter Schramm's now making his investments through a brokerage firm in Europe, where they don't escheat accounts. For NPR News, I'm Audrey Quinn.

 

[ChiTownDoc 21119]

Just now, Superhero said:

Hopefully he opened up his account every once in a while to look at it. The US government can seize accounts if they have been inactive for a period of time.

https://www.npr.org/2020/02/13/805760508/when-your-abandoned-estate-is-possessed-by-a-state-thats-escheat

  Reveal hidden contents

AUDIE CORNISH, HOST:

When state governments need cash, they could raise taxes, but that's such a tough sell that more and more states are doing something else to get the money. Audrey Quinn with NPR's Planet Money podcast reports on the practice known as escheat - E-S-C-H-E-A-T.

AUDREY QUINN, BYLINE: Walter Schramm found out about escheat the hard way. Back in the late '90s, Walter ran an online store and was getting totally whomped by a young company, Amazon. He was so impressed with his competition, he invested. He opened a brokerage account and bought a few thousand dollars in the Amazon stock. If you can't beat 'em (ph)...

WALTER SCHRAMM: Join 'em (ph). Exactly.

QUINN: And then, at least as far as the brokerage account was concerned, Walter did nothing.

SCHRAMM: If you believe in a company, you need to buy the stock and let it sit for 20 years. I mean, that's the philosophy of Warren Buffett. Go out and have a walk. Enjoy nature. Talk to your family. Don't worry about the stock market.

QUINN: Cue almost 20 years later. It's 2015. Walter goes to sell the stock. He logs into his account, and...

SCHRAMM: I saw nothing. The account was empty.

QUINN: Walter's stock - which, by 2015, would've been worth about 100 grand - had been escheated by the state of Delaware in 2008. Escheat is when a state government takes possession of unclaimed property and holds it until the rightful owner comes forward. It could be a paycheck you never cashed, a forgotten bank account or, in Walter's case, a stock account he hadn't logged into in over three years. The account Walter believed was growing his nest egg had been closed back when his investment in Amazon was worth only about $8,000. That's what was left for Walter to get back.

JENNIFER BORDEN: I work on cases like that all the time.

QUINN: Jennifer Borden runs an escheat law firm in Boston. She says all across the country, states are getting more aggressive in how they identify property as unclaimed. Some states are shortening the time period in which accounts can be deemed inactive - like in Walter's case, three years. Some have gotten rid of notification requirements for giving people a heads-up their account's about to close.

BORDEN: States are able to use the cash or the assets until such time as the owner comes forward, so it's almost like the state has a little loan they can give themselves of other people's money.

QUINN: Unclaimed property is the fifth largest source of funding for California. It's the third largest source for Delaware, about 12% of the state budget. That's where they liquidated Walter Schramm's Amazon shares. So we talked to the person in charge of escheat in Delaware, Brenda Mayrack. She says states take hold of potentially forgotten money because otherwise, it would just go to the corporations. Escheat at least sends it to a public fund.

QUINN: Why the three years, or why five years? It just - it seems pretty arbitrary.

BRENDA MAYRACK: It needs to be short enough so that companies aren't actually losing track of people and basically taking a windfall of that property or benefiting from their property over time, so it's trying to strike a balance.

QUINN: States used to publish newspaper listings with the names of people whose property they escheated. Now states have websites instead. If you look up the words lost money and the name of any state where you've lived, you can search for yourself on your state's unclaimed property Web site, see if the state has any money owed to you and file a claim. Meanwhile, Walter Schramm's now making his investments through a brokerage firm in Europe, where they don't escheat accounts. For NPR News, I'm Audrey Quinn.

 

Yes.  Very rarely.  It’s like he’s literally scared of what it’s become.  Pretty sure he has a kid now.  And I know for a fact he won’t say anything to him for a few decades.  We all think his wife doesn’t even know.  He managed a footlocker for a while.  Can’t make this shit up.  He went to OU so he’s obviously not the sharpest tool in the shed.  

[Superhero 8822]

The new savings target for a modest retirement: $8 million?

Quote

You might want to hold off on that Winnebago.

The 4% Rule has long been used as a guideline for retirees in determining how much they should be able to withdraw from their retirement account while still maintaining a balance that will allow for the same income stream to flow through their golden years.

But here’s a stark reality check from the man behind the popular Financial Samurai blog:

‘The 4% Rule as a safe withdrawal rate in retirement is dead.’

He explained to MarketWatch on Monday that the outdated rule was established back in 1998 by a group of professors at a time when the 10-year bond yield averaged 5%.

“Therefore, of course you could withdraw 4% without any fear of running out of money when you could earn 1% more risk-free,” the Financial Samurai said.

But now that interest rates are hitting rock bottom, retirement savers face a challenging future — one that perhaps, at least according to this blogger, should be shaped by a new rule.

“You can use the 0.5% Rule as a safe withdrawal rate guide once you’ve reached retirement or financial independence,” he said, drawing more than a few virtual spit-takes from readers.

The Financial Samurai laid it all out in this table:

“Or you can use the 0.5% Rule as a stretch net worth target,” he added, operating under the goal of leaving the nest egg untapped. “To find out how much net worth you need to declare financial independence, multiply your desired annual expenses by 200. If you want to live off $40,000, then your stretch net worth goal is to accumulate $8 million.”

The Financial Samurai also took a deep dive into the numbers in a recent blog post.

“Although the 0.5% Rule may sound extreme, it is based on financial reality today,” he explained, amid a growing number of critiques in his comments section. “2020+ is a very different time than 1998. Inflation is much lower and risk asset returns will likely be structurally lower for a while as well. Further, you’ve got to account for a potential bear market after such tremendous growth.”

He went on to apply the unsettling rule to his own situation, in which he’s aiming to generate $300,000 a year in passive income. Good luck with that.

“As two unemployed parents, amassing a $30 million to $40 million net worth appears next to mission impossible,” the Financial Samurai wrote. “However, at least the 0.5% Rule has provided a new net worth target to shoot for. Now we’ve got to figure out whether it’s worth both of us trying to find day jobs again and not seeing our kids all day for the sake of more wealth.”

For more on the topic, check out the full blog post along with all the moans and groans in the comments section, where one reader pretty much summed it all up by saying, “No one could ever retire at the 0.5% Rule. So why read your web page anymore. We just work till we die.”

The blogger’s response: “That might be the point. To pay for the massive stimulus, the Fed and the a central government want more Americans to work longer in order to pay more taxes.”

My original goal was $4M. At our current savings rate (maxing out our 401Ks), we'll likely be at $6M. Guess I'll putting in an extra $80K/year into retirement. 😒

[Incredulity 11631]

So if I pull off the Nakatomi robbery(who said we were terrorists) I can't sit on a beach and earn twenty percent?

[DaysOff 7938]

That's the dumbest shit I've read in awhile. 8M in the bank to live on 40k a year.

[Cheeseweasel 26438]

2 minutes ago, DaysOff said:

That's the dumbest shit I've read in awhile. 8M in the bank to live on 40k a year.

Yeah, I think the advisor must be skimming off the top a little.

[UT_OB1 2210]

8 minutes ago, DaysOff said:

That's the dumbest shit I've read in awhile. 8M in the bank to live on 40k a year.

Yeah, my goal isn't to set my kids up for life when I die.  If I can great, but I'll have helped them plenty on the way.  If my choice is work until I'm 75 so they have a nest egg or retire at 55 with 8 mil in the bank, pulling 200k a year out (I'm being generous here, I think I'll be able to live off less quite enjoyably by then) with the possibilty of them covering the funeral cost if I make it to 105, well..I'm retiring.  Bury me i the back yard and buy a bunch of budlight for the guests.

[B00M 6409]

4 hours ago, Cheeseweasel said:

FWIW, most of my money is in FLGLX and FLKAX... 

Is there a joke here I'm missing? Are these real funds?