The Money Mustache Community
Around the Internet => Continue the Blog Conversation => Topic started by: RWD on June 21, 2017, 10:09:51 AM
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Now even MMM is warning about a coming recession... While I think he views it in an appropriate way (there's always one coming) I'm worried about the post causing panic/overreactions. Also, I essentially stopped taking it seriously when he referenced Zero Hedge... I thought MMM was supposed to be optimistic...?
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Fashion necklines are up and hemlines are down: MMM is just calling it like it is.
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Realists always find Zero Hedge. I scan it daily ;)
There are some indicators we are getting close to a recession. But these indicators can only tell the past, not predict the future. The world really is different now. Crazy low interest rates, CB's buying everything in sight & willing to buy more...
- Can't compare total debt, because low interest rates
- Can't compare Shiller PE's, because low interest rates / reach for yield / dividends
- can't compare home prices because low interest rates
- Can't compare employment info because changing (lowering) participation rate.
etc etc
Also we've not had a 'boom'. We've had a long slow careful conservative growth. Which is what big companies want (predictability).
Personally I need one more good bust & recovery, so I'm hoping for a nice 20-60% market 'correction'.
Keep calm and Mustachian on ;)
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Regardless if we use ETFs aren’t we better consistently adding money instead of trying to time the market?
Sent from my iPad using Tapatalk
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Now even MMM is warning about a coming recession... While I think he views it in an appropriate way (there's always one coming) I'm worried about the post causing panic/overreactions. Also, I essentially stopped taking it seriously when he referenced Zero Hedge... I thought MMM was supposed to be optimistic...?
First read the article again. It is optimistic yet realistic. A recession for most of us is an opportunity. Nothing to worry about. It is more of a warning for falling into the trap a lot of others might in thinking that things are going to be different this time and the market will go up forever. He isn't saying it will be here this year or even in 4. It is just that it will happen and we have many of the right elements in play currently. I fully expect a recession in the near future. But I'm yawning about it. About the only thing I think I might do differently is look into whether paying off my mortgage will be better given the slowing growth in the stock market.
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Ha. He didn't really say much of anything other than there's one coming (duh, of course there is at some point) and it'll be four years sooner than his last prediction (duh, it was four years ago). Just a reminder to keep up good behavior.
edit: And I'd also point out that he seems to be well aware that he wasn't reeeally saying anything new, so this wasn't to be critical or anything.
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Now even MMM is warning about a coming recession... While I think he views it in an appropriate way (there's always one coming) I'm worried about the post causing panic/overreactions. Also, I essentially stopped taking it seriously when he referenced Zero Hedge... I thought MMM was supposed to be optimistic...?
First read the article again. It is optimistic yet realistic. A recession for most of us is an opportunity. Nothing to worry about. It is more of a warning for falling into the trap a lot of others might in thinking that things are going to be different this time and the market will go up forever. He isn't saying it will be here this year or even in 4. It is just that it will happen and we have many of the right elements in play currently. I fully expect a recession in the near future. But I'm yawning about it. About the only thing I think I might do differently is look into whether paying off my mortgage will be better given the slowing growth in the stock market.
That was the way I interpreted the blog post. I think his advice is fine. I'm more worried about how some people might react to it. And the loss of credibility from linking to Zero Hedge.
Zero Hedge is for people that think that society is going to collapse and you should stock up on guns and ammo. From Wikipedia:
Zero Hedge's content has been classified as conspiratorial, anti-establishment, and economically pessimistic, and has been criticized for presenting extreme and sometimes pro-Russian views.
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Before the tech crash I felt it coming and pleaded with my (now ex) husband to back out of his margined holdings. Fortunately he lightened up some, so when the crash came we weren't totally wiped out.
Before the housing crash I didn't see how things could continue the way they were and thought about selling my house and renting, but that was too much trouble so I didn't.
Now I don't have those same feelings, that things are getting badly out of whack. I'm thinking it will be a while before the next crash. Not that I'm any kind of expert, of course. But I don't see anything rising as crazily as they did then.
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A crash isn't the only option for an economic recession. Prolonged stagnation is an option too, one that would likely effect people aiming for FIRE worse than a crash.
Never heard of Zero Hedge. Looks like your typical kooky, conspiracy theory site. Can't say I'll be going back for any of their brilliant advice.
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If you're fully FIRE'D, recessions are a fine time to rebalance from bonds into cheap stocks. Your dividends will probably take a hit, unfortunately.
If you are still working, and can maintain your job, you may also come ahead. Inflationary pressures tend to ease up, so your dollar stretches farther.
Recessions are hell on the unemployed and businesses.
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I found this line interesting as I've always considered this to be true of many forum members here:
"If you’re a sagely 27 years old right now, you may have never experienced a recession in your adult life – all you have ever seen is the good times. You’re in for an interesting surprise.
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Yup....I'm 30 and graduated in 09, right after the bottom fell out. We all graduated from college and went right to Honda automotive collections at $8/hour.
Wooo!
My Wife graduated in 2011 and complained about how tough the job market was. Man, half of us thought the world was going to freakin' end in 09....
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I just posted about this in the real estate section, but maybe this is a good place too.
As MMM notes, recessions are a great time to buy cheap rental properties. How should we prepare for this though? I go into more details on the different strategies I can think of in my other post, but high level:
Should I start putting my money in more bonds and money market funds to save for a down payment in the event of a recession in the next couple of years, or keep buying index funds with the risk of selling at rock bottom of a recession to gather a down payment on a steal-deal property? The reason I'm even considering the latter is because I risk losing out if I'm in conservative investments and the recession ends up being several years out.
This will be my first recession in my adult life, and therefore my first time changing my investment strategy.
For the area and property type I'm targeting, I'm allocating about $100k in downpayment+closing costs.
What are your strategies for buying real estate in a downturn?
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I really appreciated how MMM was both realistic and optimistic, as well as dished out a few subtle warnings about going into a recession as a consumer sucka. For me it was a good facepunch to redouble my efforts to save and get prepared to thrive in the next recession, whenever that happens.
As far as the link to Zero Hedge, he only referenced their article on consumer debt, he didn't endorse the whole website or the loads of conspiracy crap behind it. Just because the majority of ZH articles are fear-mongering conspiracy theories, doesn't mean they are wrong about the danger of consumer debt. You can never change someone's mind by opposing everything they say, even if most of what they say is bat-shit-crazy, you need to acknowledge when they ARE right, agree with them and go from there.
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
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I was reading a 538 response to a Wall Street Journal OpEd once (their op-ed page is near Zero Hedge level of crazy) and the person wrote "It was, without exaggeration, the dumbest thing I have ever read and I read Zero Hedge" haha.
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I just posted about this in the real estate section, but maybe this is a good place too.
As MMM notes, recessions are a great time to buy cheap rental properties. How should we prepare for this though? I go into more details on the different strategies I can think of in my other post, but high level:
Should I start putting my money in more bonds and money market funds to save for a down payment in the event of a recession in the next couple of years, or keep buying index funds with the risk of selling at rock bottom of a recession to gather a down payment on a steal-deal property? The reason I'm even considering the latter is because I risk losing out if I'm in conservative investments and the recession ends up being several years out.
This will be my first recession in my adult life, and therefore my first time changing my investment strategy.
For the area and property type I'm targeting, I'm allocating about $100k in downpayment+closing costs.
What are your strategies for buying real estate in a downturn?
I think the sensible advice would be to keep calm and carry on. You are unlikely to be able to time the market, including the property market.
Stay diversified and ride the ups and downs of the market.
If you intend to buy property, just be careful on the leverage. Maybe only buy if gross rental yields are above 6% or some hurdle rate that you can live with long term if you never get any capital appreciation. Maybe buy a few cheaper properties at different times to benefit from dollar cost averaging.
If you intend to buy shares, maybe keep a stash of cash as well, so that you don't need to sell at a bad time.
How will you know if property is cheap?
If it drops 20% does that make it cheap? I don't know.
Property prices have gone up 70% in Sydney in 5 years, whilst there has been only 10% increase in the consumer price index over the same period. Does that mean that property only becomes cheap if it drops 60%? Again, I don't know. I thought prices were already expensive 6 years ago.
We did buy 7 years ago, and on today's valuation the gross rental yield is only 2.9%. I would certainly not buy with this pathetic GROSS yield. (To be honest, the yield weren't even great when we purchased, but we had purchased it as a home at the time, so was not so yield focused).
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There are some indicators we are getting close to a recession. But these indicators can only tell the past, not predict the future. The world really is different now. Crazy low interest rates, CB's buying everything in sight & willing to buy more...
- Can't compare total debt, because low interest rates
- Can't compare Shiller PE's, because low interest rates / reach for yield / dividends
- can't compare home prices because low interest rates
- Can't compare employment info because changing (lowering) participation rate.
etc etc
Before the tech crash I felt it coming and pleaded with my (now ex) husband to back out of his margined holdings. Fortunately he lightened up some, so when the crash came we weren't totally wiped out.
Before the housing crash I didn't see how things could continue the way they were and thought about selling my house and renting, but that was too much trouble so I didn't.
Now I don't have those same feelings, that things are getting badly out of whack. I'm thinking it will be a while before the next crash. Not that I'm any kind of expert, of course. But I don't see anything rising as crazily as they did then.
Agreed. All indicators were that we were heading for a recession in late 2015/early2016. We even saw a nice market correction. However, ZIRP policies and a hefty Fed balance sheet remained in place from the Great Recession. I believe those policies remaining in place stopped what would have been a mild recession in it's tracks. Now we are in continued low, but stable growth phase with some very excellent recent corporate earnings along with very cheap oil and cheaper than ever renewable energy which will spur some economic growth in itself as it expands. I think we have a few more years of growth left, but I'm no expert and I wouldn't change my investment strategy either way :)
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I think the sensible advice would be to keep calm and carry on. You are unlikely to be able to time the market, including the property market.
Stay diversified and ride the ups and downs of the market.
If you intend to buy property, just be careful on the leverage. Maybe only buy if gross rental yields are above 6% or some hurdle rate that you can live with long term if you never get any capital appreciation. Maybe buy a few cheaper properties at different times to benefit from dollar cost averaging.
If you intend to buy shares, maybe keep a stash of cash as well, so that you don't need to sell at a bad time.
How will you know if property is cheap?
If it drops 20% does that make it cheap? I don't know.
Property prices have gone up 70% in Sydney in 5 years, whilst there has been only 10% increase in the consumer price index over the same period. Does that mean that property only becomes cheap if it drops 60%? Again, I don't know. I thought prices were already expensive 6 years ago.
We did buy 7 years ago, and on today's valuation the gross rental yield is only 2.9%. I would certainly not buy with this pathetic GROSS yield. (To be honest, the yield weren't even great when we purchased, but we had purchased it as a home at the time, so was not so yield focused).
This is what I needed to hear. I know better to try to time the market, but that's essentially the rabbit hole I started to go down in my head. Where I struggle is knowing when thinking ahead and planning start to turn into an attempt at market timing.
In terms of how to know whether an investment is a steal deal, I have calculators that make that relatively clear (for my goals and situation). We already own one rental property there and will have a pretty good sense of what we can expect, although there may certainly be more challenges given that we're talking in the context of a recession.
I think I'm going to keep doing what I'm doing investing-wise (dollar cost averaging), and keep my focus on bringing money in and preventing it from going right back out in the form of consumerism and inefficient tax planning.
One thing is for sure: I'm going to write my plan on paper, and stick to it no matter how psychologically challenging it will be at rock bottom.
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How will you know if property is cheap?
If it drops 20% does that make it cheap? I don't know.
One of the reasons we bought a house in 2008 was because prices had dropped 25% and I wanted to get in before they went back up... We sold that house for about a 20-25% loss in 2015. At one point (2011) Zillow said it was worth only half of what we paid. Timing the market is hard.
One thing is for sure: I'm going to write my plan on paper, and stick to it no matter how psychologically challenging it will be at rock bottom.
I also have our investment policy statement written down and intend to follow it regardless of what happens in the market. I reference it every time I manually buy shares in my brokerage account.
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
Huh, I think a lot of people on this forum have experienced the greatest recession since the Great Depression. That's an interesting statement. I'm also inclined to believe the readership here, and particularly the forum participants, are not likely to freak and sell out of hear. Some? Maybe. Most? No.
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
Huh, I think a lot of people on this forum have experienced the greatest recession since the Great Depression. That's an interesting statement. I'm also inclined to believe the readership here, and particularly the forum participants, are not likely to freak and sell out of hear. Some? Maybe. Most? No.
I disagree. I think that most people on this forum were (A) too young to experience the great recession (aka still in high school / college) or were so early in their investing that they did not truly feel the full weight of what happened (basically everyone under 35), or (B) weren't serious about investing 10 years ago (aka those who have been "enlightened" to high savings rates in the past 10 years). I'll bet this is the vast majority of members... Including myself at age 32. We will see what happens if another big recession happens, I do believe that most around here have the proper mentality to not jump off the roller coaster on the way down, but I also believe that it will be a lot bigger of a test for most of us than we would like to admit seeing our net worths chopped in half over the course of a year.
Edit: I am trying to find an age poll on the forum but can't seem to find one. If this forum's demographics are anything like the listeners of Radical Personal Finance (closest I have seen) we may be able to guess that close to 60% of the forum is under the age of 35:
https://radicalpersonalfinance.com/the-audience-demographics-of-radical-personal-finance-and-what-surprised-me-the-most/
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The wife and I have been searching for a house, but in the area we want, houses are flying off the market like hotcakes. People are buying houses without even looking at them sometimes. At one open house, we got there 15 minutes after it started and the realtor had already gotten two offers.
Anyway, it has been making things harder for us. We want to take our time and look and not overpay, but that seems to be the opposite of what everyone else wants to do. If this keeps up I can see a bubble bursting in the somewhat near future, or at the very least a bunch of buyer's remorse. After seeing this MMM post, I started thinking maybe we should just hold off for now (no hurry, renting at nice place). Mentioned this to the wife, she got really pissed.
Not sure if I should just bit the bullet and buy a house to make her happy or wait it out and deal with the fallout. She's not as FIRE-centric as me and each time I've brought up a new idea from MMM (or some other financial resource) it has mostly been met with anger or confusion, with her seeming to feel like I'm killing the fun or being a tightwad.
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
Huh, I think a lot of people on this forum have experienced the greatest recession since the Great Depression. That's an interesting statement. I'm also inclined to believe the readership here, and particularly the forum participants, are not likely to freak and sell out of hear. Some? Maybe. Most? No.
I disagree. I think that most people on this forum were (A) too young to experience the great recession (aka still in high school / college) or were so early in their investing that they did not truly feel the full weight of what happened (basically everyone under 35), or (B) weren't serious about investing 10 years ago (aka those who have been "enlightened" to high savings rates in the past 10 years). I'll bet this is the vast majority of members... Including myself at age 32. We will see what happens if another big recession happens, I do believe that most around here have the proper mentality to not jump off the roller coaster on the way down, but I also believe that it will be a lot bigger of a test for most of us than we would like to admit seeing our net worths chopped in half over the course of a year.
Edit: I am trying to find an age poll on the forum but can't seem to find one. If this forum's demographics are anything like the listeners of Radical Personal Finance (closest I have seen) we may be able to guess that close to 60% of the forum is under the age of 35:
https://radicalpersonalfinance.com/the-audience-demographics-of-radical-personal-finance-and-what-surprised-me-the-most/
+1....this was my response in another (hijacked) thread.
I'm still interested to see how the community fares in an inevitable bear market.
This will be interesting for sure, not just for this community but for all of the FIRE blogosphere. I had some money when the last downturn happened and it did not feel good....but I was nowhere near or even really thinking about FIRE, so was more job-income focused. I have quite a bit more now and probably could FIRE if a tightened up a bit, but still not perfectly sure how I will feel about a big downturn (bc those would be much bigger losses now - although my AA is also quite different now).
That said, I have prepared myself mentally for a 25% portfolio decline (which is really larger loss on equities due to bond/cash allocation). Of course I am also in the 3% SWR camp so my 25% decline will translate into a 4% SWR after the fact - kind of cheating I guess but I am good with it.
Not that I want to experience a big decline but I really do look forward to the blogosphere when that happens. It is so much easier to SAY you will be ok during a downturn when you are in a rising tide environment than actually living through a decline, especially for those that have never even been through any downturn with a meaningful asset level - translation....pretty much anyone who is under 30 has no f'in clue whatsoever bc they would have been still in school or on parents dime and anybody in the 30-40 group would likely have seen it, lived through it, but probably didn't have significant assets in the market so they probably don't know what the f*ck they are talking about either. Bc for both age groups it has been a rising tide since they either started or got to a point of having meaningful assets.
FWIW....I am just over the upper range and pretty convinced I still don't know what the f*ck I am talking about when it comes to how I feel if it happens again.
But as you said.....
Time will tell I guess...
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
Sounds like you disagree with the general advice here for investing and are now actively hoping that people fail so that you can say "I told you so". That's pretty shitty.
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
Huh, I think a lot of people on this forum have experienced the greatest recession since the Great Depression. That's an interesting statement. I'm also inclined to believe the readership here, and particularly the forum participants, are not likely to freak and sell out of hear. Some? Maybe. Most? No.
I disagree. I think that most people on this forum were (A) too young to experience the great recession (aka still in high school / college) or were so early in their investing that they did not truly feel the full weight of what happened (basically everyone under 35), or (B) weren't serious about investing 10 years ago (aka those who have been "enlightened" to high savings rates in the past 10 years). I'll bet this is the vast majority of members... Including myself at age 32. We will see what happens if another big recession happens, I do believe that most around here have the proper mentality to not jump off the roller coaster on the way down, but I also believe that it will be a lot bigger of a test for most of us than we would like to admit seeing our net worths chopped in half over the course of a year.
Edit: I am trying to find an age poll on the forum but can't seem to find one. If this forum's demographics are anything like the listeners of Radical Personal Finance (closest I have seen) we may be able to guess that close to 60% of the forum is under the age of 35:
https://radicalpersonalfinance.com/the-audience-demographics-of-radical-personal-finance-and-what-surprised-me-the-most/
I was investing at 21 in 2007. Lost my shirt and then some. Memory of it burned into my mind.
Now carrying nil leverage against shares, not going to make the same mistake again.
Quietly paying down realestate investment debt brick by brick too... interest rates are variable here, and they won't stay low forever.
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
Sounds like you disagree with the general advice here for investing and are now actively hoping that people fail so that you can say "I told you so". That's pretty shitty.
Hardly. The point is I believe most on this forum are well under 40 and have only experienced the most outrageously generous equities market in history. It concerns me to see so many touting their FIRE dates without regard to possible future events. Such things as children, marriage, job loss, RE market crashes, bear markets, ect all have an impact. I read posts from people here who have yet to experience any of those things but they have managed to acquire a sizable stash the last 8 years and think they can and will never work again. When you lose %30-40 of your net worth in 5 months the brain can do some crazy stuff.....been there done that.
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Is there an age poll? I don't think most people are "well under 40." Naturally a forum like this is going to attract a number of young people because nowadays the younger generations turn to the interwebs to help them find the answers to things they don't know. But, I think we have a good variety here. This is purely anecdotal based on the people I interact with mostly, but they are all over the map in terms of age as far as I know.
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And why are you so angry at youthful exuberance and optimism? I suspect you don't realize how insulting your comment sounds. If you didn't mean it to be insulting, please reread it and consider that "you can't wait" to see how people react to losing money, and saying we will "freak out and sell out of fear... that's a fact" - is obnoxious. If you did mean it to sound insulting... You don't know me or anyone else here.
I just FIRED at 42 yo. I had my babysitting money/birthday money in the market in 1987, I had a little more in the tech crash in the 90's, I had more in 2008. I have never freaked out and sold out of fear. If I choose to go back to work to make more money - that is no tragedy and I haven't lost anything.
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Hardly. The point is I believe most on this forum are well under 40 and have only experienced the most outrageously generous equities market in history. It concerns me to see so many touting their FIRE dates without regard to possible future events. Such things as children, marriage, job loss, RE market crashes, bear markets, ect all have an impact. I read posts from people here who have yet to experience any of those things but they have managed to acquire a sizable stash the last 8 years and think they can and will never work again. When you lose %30-40 of your net worth in 5 months the brain can do some crazy stuff.....been there done that.
There are more passive asset allocations that 100% stocks. Many portfolios have never seen a 30-40% loss of capital. If this is of concern for you, I suggest you investigate portfolios designed to hedge against such a risk. Forum contributor Tyler has an excellent site (https://portfoliocharts.com/calculators/) for passive portfolio comparisons. Or you can play an options game.
And why are you so angry at youthful exuberance and optimism? I suspect you don't realize how insulting your comment sounds. If you didn't mean it to be insulting, please reread it and consider that "you can't wait" to see how people react to losing money, and saying we will "freak out and sell out of fear... that's a fact" - is obnoxious.
Argumentative, maybe obnoxious, and probably fear-based; but not insulting. Since we like stoics around here. “Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.” ― Marcus Aurelius
Opinions are not insults, personal attacks, or offensive unless one decides to be insulted, attacked, or offended in disagreement.
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My biggest issues with the article was his use of the ZeroHedge graph on consumer debt and he said this: "Household debt levels have risen back to their pre-crash peak, and with an even worse composition: "
We've got a ways to go before we get that bad, debt wise.
Inflation and population growth don't seem to be accounted for in the graph that MMM decided to use. Inflation since 2007 is over 20% now, and population growth in the US on the order of 6-7%.
The ZH article says: "When measured as a percentage of GDP, total household borrowing today is 67% of nominal gross domestic product, compared with about 85% in 2008."
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None of us can really do anything about recessions coming. They will do what they do. However, it's one of the main reasons that you should save every possible penny you have. You never know when you are going to have to lean on your savings due to disaster. It could happen to anyone and the people who aren't prepared are going to get it the worst.
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For those that want interesting looks at how a FIRE community does during a downturn, check out some of the old threads on early-retirement.org forums.
On the site, there was a good mix of "stay the course!" And "the world is ending!" type threads there. They skew more conservative than MMM, but are the same type of logical thinkers that are on this site. I hear they lost many a member during the recession and some of the gung-ho younger types had to go back to work, nary to come back to post unless it was with their tales between their legs.
Sent from my iPhone using Tapatalk
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I think MMM is more worried about the Auto-loan and student loan debt bubble than is justified.
The problem with the 2008 crisis wasn’t the housing collapse. It was the extent to which the housing collapse endangered the banks, thereby endangering the entire financial system on which every business relies to manage cash flow. People really had no idea what these assets (i.e. mortgages, i.e. stews of mortgages) were worth, and some possible answers implied that very large banks should be bankrupt. The total of all auto and student loans is still less than $2,700 billion, not nearly enough to represent this kind of danger to our very large American banks. The recession is coming, but it won't be as bad as 2008.
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I think MMM is more worried about the Auto-loan and student loan debt bubble than is justified.
The problem with the 2008 crisis wasn’t the housing collapse. It was the extent to which the housing collapse endangered the banks, thereby endangering the entire financial system on which every business relies to manage cash flow. People really had no idea what these assets (i.e. mortgages, i.e. stews of mortgages) were worth, and some possible answers implied that very large banks should be bankrupt. The total of all auto and student loans is still less than $2,700 billion, not nearly enough to represent this kind of danger to our very large American banks. The recession is coming, but it won't be as bad as 2008.
I would also add that the student loan levels are somewhat of a red herring. While the overall level has increased significantly the average levels aren't that bad - sure there are some people out there with $150k of loans for a liberal arts degree but there are also plenty that only have $10-20k and then there are those that have been paying and are near the end with little balances. The average balance is about $33k.
Also, student loans have a stacking effect and should be or should have been expected to grow over the last 15 years exponentially when you look at increased emphasis/need on college educations, largest population (millenials) in history coming of college age, a 4-5 year expense period vs a 10-20 year repayment period - of course these will (and have) result in increasing student loans. All that said, student loans do seem to easy to get at such high levels and parent/student education on the subject is terrible - and unfortunately the ease of debt translates to nice buildings and good salaries/benefits in the higher ed system but the educational aspect hasn't actually improved. Higher ed is just a business like any other.
https://www.statista.com/statistics/183995/us-college-enrollment-and-projections-in-public-and-private-institutions/ (https://www.statista.com/statistics/183995/us-college-enrollment-and-projections-in-public-and-private-institutions/)
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Is there an age poll? I don't think most people are "well under 40." Naturally a forum like this is going to attract a number of young people because nowadays the younger generations turn to the interwebs to help them find the answers to things they don't know. But, I think we have a good variety here. This is purely anecdotal based on the people I interact with mostly, but they are all over the map in terms of age as far as I know.
I would bet it's 70% +/- 5% under 40 on this forum. Whether that qualifies as "well under 40" is up for argument. Could not find a poll specific to this forum, so someone would have to start one to be sure...
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The next recession won't happen until 2030.
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Is there an age poll?
I just started one here, which asks other great recession-related questions:
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-is-your-age-and-how-much-did-you-have-invested-in-2007/msg1599417/
Currently, 75% of the forum is under 40
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But you seem to think that just because people are under 40 they weren't affected by the 2008 recession. Even if you didn't have anything invested at that time, I'd say that coming of age in a time with so much financial uncertainty and fear has a great impact on people. The millennials saw the financial mistakes of their parents and, in many ways, metrics have shown that they're far more risk-averse (here (http://www.investopedia.com/articles/investing/070815/are-millennials-risk-averse-or-risk-takers.asp) and here (http://www.latimes.com/business/la-fi-the-millennial-factor-20161010-snap-story.html), to cite just two sources) and save money at higher rates than other generations, despite student loan debt. (Here (https://www.washingtonpost.com/news/get-there/wp/2015/03/31/good-news-millennials-are-savers-after-all/?utm_term=.d422269639fc), here (https://themoneygeek.com/2017/03/15/are-millennials-risk-averse-savers/), and here (https://www.forbes.com/sites/jonhartley/2015/04/02/millennials-a-generation-of-super-savers-in-the-economy/#d0b439140fa8).) Despite all the hand-wringing over avocado toast, most millennials are, by many metrics, better with their money than their parents are. The fact that they save at high rates and do so in ways different from their parents is, I would argue, a direct reaction to having grown up in the midst of the Great Recession. To brush that off as not affecting people because they weren't of a certain age is silly.
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But you seem to think that just because people are under 40 they weren't affected by the 2008 recession. Even if you didn't have anything invested at that time, I'd say that coming of age in a time with so much financial uncertainty and fear has a great impact on people. The millennials saw the financial mistakes of their parents and, in many ways, metrics have shown that they're far more risk-averse (here (http://www.investopedia.com/articles/investing/070815/are-millennials-risk-averse-or-risk-takers.asp) and here (http://www.latimes.com/business/la-fi-the-millennial-factor-20161010-snap-story.html), to cite just two sources) and save money at higher rates than other generations, despite student loan debt. (Here (https://www.washingtonpost.com/news/get-there/wp/2015/03/31/good-news-millennials-are-savers-after-all/?utm_term=.d422269639fc), here (https://themoneygeek.com/2017/03/15/are-millennials-risk-averse-savers/), and here (https://www.forbes.com/sites/jonhartley/2015/04/02/millennials-a-generation-of-super-savers-in-the-economy/#d0b439140fa8).) Despite all the hand-wringing over avocado toast, most millennials are, by many metrics, better with their money than their parents are. The fact that they save at high rates and do so in ways different from their parents is, I would argue, a direct reaction to having grown up in the midst of the Great Recession. To brush that off as not affecting people because they weren't of a certain age is silly.
This is a great point. I'm one of the unlucky Generation X who graduated college in 1999 and entered the job market just as the tech bubble burst. I didn't have a single $ in the market, but I saw graduates just a year or two ahead of me get laid off from their $90,000 consulting gigs and lived with stagnant wages and slim hiring prospects for years.
That was definitely a factor that drove me to be (relatively) frugal and read Your Money or Your Life in my 20s.
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Is there an age poll?
I just started one here, which asks other great recession-related questions:
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-is-your-age-and-how-much-did-you-have-invested-in-2007/msg1599417/
Currently, 80% of the forum is under 40
About 14% of the forum is what I would consider "well under 40" which is about what I was expecting.
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Is there an age poll?
I just started one here, which asks other great recession-related questions:
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-is-your-age-and-how-much-did-you-have-invested-in-2007/msg1599417/
Currently, 80% of the forum is under 40
About 14% of the forum is what I would consider "well under 40" which is about what I was expecting.
Keep in mind the percentages shown in the poll are out of the total votes (including the investment and house questions) so it isn't correct to read directly as age distribution. The number of users under age 33 is 40.2% according to the current poll results. Under 26 represents 11.8% of users.
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Oops you're right, thanks for pointing that out. Still a pretty good bell curve, all things considered.
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But you seem to think that just because people are under 40 they weren't affected by the 2008 recession. Even if you didn't have anything invested at that time, I'd say that coming of age in a time with so much financial uncertainty and fear has a great impact on people. The millennials saw the financial mistakes of their parents and, in many ways, metrics have shown that they're far more risk-averse (here (http://www.investopedia.com/articles/investing/070815/are-millennials-risk-averse-or-risk-takers.asp) and here (http://www.latimes.com/business/la-fi-the-millennial-factor-20161010-snap-story.html), to cite just two sources) and save money at higher rates than other generations, despite student loan debt. (Here (https://www.washingtonpost.com/news/get-there/wp/2015/03/31/good-news-millennials-are-savers-after-all/?utm_term=.d422269639fc), here (https://themoneygeek.com/2017/03/15/are-millennials-risk-averse-savers/), and here (https://www.forbes.com/sites/jonhartley/2015/04/02/millennials-a-generation-of-super-savers-in-the-economy/#d0b439140fa8).) Despite all the hand-wringing over avocado toast, most millennials are, by many metrics, better with their money than their parents are. The fact that they save at high rates and do so in ways different from their parents is, I would argue, a direct reaction to having grown up in the midst of the Great Recession. To brush that off as not affecting people because they weren't of a certain age is silly.
This is a great point. I'm one of the unlucky Generation X who graduated college in 1999 and entered the job market just as the tech bubble burst. I didn't have a single $ in the market, but I saw graduates just a year or two ahead of me get laid off from their $90,000 consulting gigs and lived with stagnant wages and slim hiring prospects for years.
That was definitely a factor that drove me to be (relatively) frugal and read Your Money or Your Life in my 20s.
I agree that millenials have been impacted by the downturn and that can (and has) made them more conservative - in fact it may be detrimental because of the fear of investing that millenials seem to have. But that is not the same as knowing how one will feel at a time when they have sizeable invested assets and the market starts tanking. I do think there is a possibility that due to the availability of information and historical context through blogs, simulations, etc being at your fingertips millenials should be better armed to combat irrational fears with the knowledge - this is something prior gens didn't have and should bode well.
Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
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Younger people didn't see the drop in investment value, but they were victims of the fragile labor market of 2008-2011.
Hard to build up experience when no one will hire you because you're inexperienced.
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
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I started in IT around 1995. Man those were some good years! 1995-2000 being a network engineer was like printing your own cash. So naturally, I financed everything, house, 2 motorcycles, 3 cars, even a dog. Since I had a 3 room house with just me and the dog, I rented two rooms out. What do you do with an extra $800/mo and you are heavy in debt? Flying lessons, or course! Savings? No, that's for old people. Worried? Nope, I'm a network engineer. By 2001, companies figured out that Y2K was all hype, even IT needed to show some ROI just like everyone else, and some assholes flew plane into buildings. The economy tanked and by late 2002, I found myself living in a financed Ford Ranger when not out being an OTR trucker. But I didn't lose any money in the market!
I spent the next few year rebuilding my career and digging out of the financial pit that I had dug for myself. I was firmly in the don't finance stuff camp by the time the 2007 recession rolled round, but was still not saving much due to paying off debt. But I had been able to keep myself afloat even with a layoff. So I didn't lose anything in the market again.
Now I find myself at a point where I really wish that I had been smarter. I am in the market, I understand that recessions/pull-backs/corrections happen. I say that when it happens again I will stay to course, ride it out, be better off after the recovery. But I am nervous and am curious about if I will really do that, worry free like my investment plan says I will.
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
To summarize....you agree that millenials spend a lot but its ok because they spend for different reasons provided they are justifiable by those doing the spending. Perfect, thanks.
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
Unless they are saving a good chunk of their income (20% or more), they are just as dumb as every other generation. Not more dumb and not less dumb. Equally as dumb.
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
To summarize....you agree that millenials spend a lot but its ok because they spend for different reasons provided they are justifiable by those doing the spending. Perfect, thanks.
Anecdote. I'm a late Gen X'er dating a younger millennial. Her & her group of friends have this obsession with going places over weekends. After spending a day driving (or worse flying) to the new locale we do exactly what we would have done if we stayed home... Visit the park, grab coffee or drinks, go out to eat, maybe visit a local landmark, then head home for work on Monday. The only difference is now she/they have a selfie of themselves being at [insert location here]. Personally, I just don't get it. If you're going to spend a bunch of money and time to travel somewhere, why not actually spend more time at the destination?
It's a good trend to watch for investing, millennials pay tons for travel or "experiences", but not so much for stuff. lol, Maybe this is why Buffet got back into airline stocks after he swore he wouldn't touch them ever again...
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
To summarize....you agree that millenials spend a lot but its ok because they spend for different reasons provided they are justifiable by those doing the spending. Perfect, thanks.
Anecdote. I'm a late Gen X'er dating a younger millennial. Her & her group of friends have this obsession with going places over weekends. After spending a day driving (or worse flying) to the new locale we do exactly what we would have done if we stayed home... Visit the park, grab coffee or drinks, go out to eat, maybe visit a local landmark, then head home for work on Monday. The only difference is now she/they have a selfie of themselves being at [insert location here]. Personally, I just don't get it. If you're going to spend a bunch of money and time to travel somewhere, why not actually spend more time at the destination?
It's a good trend to watch for investing, millennials pay tons for travel or "experiences", but not so much for stuff. lol, Maybe this is why Buffet got back into airline stocks after he swore he wouldn't touch them ever again...
I'm a millennial guilty of going to places on weekends and taking selfies while doing almost the same things I'd have done at home (plus a hike or skiing or whatever is popular there) for four plus years. But now that I have a family, I don't do it any more and I cherish those days when I did the 'going to places and taking selfies' thing. I didn't save as much as I could've but I also got these amazing memories in return. Now with two kids, I can't dream of doing those things. Given a chance to redo, I'd still do those things because the friendships and memories I built then got me through marriage and having kids and the reduced social interaction that comes with it. Some of the friends I made then were very helpful in growing my career. So, no regrets!
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Whenever I read articles like MMM's a slight part of me wonders what if they are wrong. Australia hasn't had a recession in over twenty-five years. It is possible that we are decades away from a recession. I do believe in the domino affect of these things but sometimes that first one doesn't fall.
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26 years actually.
We've come close to the tipping point on a number of occasions (2000, 2008, 2012, 2017).
Most economists define a recession as 2 quarters of negative growth... but most households wouldn't notice there's a recession until unemployment rises 4-5% points.
Having said that, for 4 years now real wages growth has been anaemic. For many people it has felt like a recession lately with cost of living going up and wages going back.
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The wife and I have been searching for a house, but in the area we want, houses are flying off the market like hotcakes. People are buying houses without even looking at them sometimes. At one open house, we got there 15 minutes after it started and the realtor had already gotten two offers.
Anyway, it has been making things harder for us. We want to take our time and look and not overpay, but that seems to be the opposite of what everyone else wants to do. If this keeps up I can see a bubble bursting in the somewhat near future, or at the very least a bunch of buyer's remorse. After seeing this MMM post, I started thinking maybe we should just hold off for now (no hurry, renting at nice place). Mentioned this to the wife, she got really pissed.
Not sure if I should just bit the bullet and buy a house to make her happy or wait it out and deal with the fallout. She's not as FIRE-centric as me and each time I've brought up a new idea from MMM (or some other financial resource) it has mostly been met with anger or confusion, with her seeming to feel like I'm killing the fun or being a tightwad.
There is nothing fun about the biggest purchase you make tanking in value. Been there and done that. I would be concerned with homes going crazy fast like that too.
I would suggest maybe putting it a better way... "Honey the housing market is getting a bit crazy and hyped up, I think it's false inflation and within the new few years prices will drop. When they do, we should purchase then and we will be able to afford a better location, more space and maybe even the master suite of our dreams " something like that. But it will take patience. That's what separates the "wish I would ofs" and the "yeah prices were so cheap!"
What I do remember from the last recession is cash is king. You can buy dirt cheap property and stocks with cash but you can't sell your property or stocks when everything has dropped.
Sent from my iPhone using Tapatalk
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I'm pretty amped for the next recession. I'm looking to buy property in the next two years but I'm willing to wait a little longer to get a great deal when everyone is selling. 2008 was rough, but we got through it so I'm not worried.
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The wife and I have been searching for a house, but in the area we want, houses are flying off the market like hotcakes. People are buying houses without even looking at them sometimes. At one open house, we got there 15 minutes after it started and the realtor had already gotten two offers.
Anyway, it has been making things harder for us. We want to take our time and look and not overpay, but that seems to be the opposite of what everyone else wants to do. If this keeps up I can see a bubble bursting in the somewhat near future, or at the very least a bunch of buyer's remorse. After seeing this MMM post, I started thinking maybe we should just hold off for now (no hurry, renting at nice place). Mentioned this to the wife, she got really pissed.
Not sure if I should just bit the bullet and buy a house to make her happy or wait it out and deal with the fallout. She's not as FIRE-centric as me and each time I've brought up a new idea from MMM (or some other financial resource) it has mostly been met with anger or confusion, with her seeming to feel like I'm killing the fun or being a tightwad.
First time buyer? I find that typically first timers stress too much about every little thing about a house and more experienced buyers look at the big picture. That's not to say you should waste money on something you will regret - it's a great strategy to wait until you get a smoking deal. But just be aware that if a house has good location, "bones," and layout, most problems that crop up will be minor compared to the home price. I'm talking specifically about expensive markets - if the home is $1 million, even a new roof, windows, flooring, etc. is only a small fraction of that price. So know what you are getting into but don't sweat the small stuff. When we were house shopping I always had to remind my wife that a particularly ugly carpet or countertop was really just an opportunity for us to bid against fewer buyers
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None of us can really do anything about recessions coming. They will do what they do. However, it's one of the main reasons that you should save every possible penny you have. You never know when you are going to have to lean on your savings due to disaster. It could happen to anyone and the people who aren't prepared are going to get it the worst.
But why save my money just to lose it in the stock market, when I can spend and enjoy it now?
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But you seem to think that just because people are under 40 they weren't affected by the 2008 recession. Even if you didn't have anything invested at that time, I'd say that coming of age in a time with so much financial uncertainty and fear has a great impact on people. The millennials saw the financial mistakes of their parents and, in many ways, metrics have shown that they're far more risk-averse (here (http://www.investopedia.com/articles/investing/070815/are-millennials-risk-averse-or-risk-takers.asp) and here (http://www.latimes.com/business/la-fi-the-millennial-factor-20161010-snap-story.html), to cite just two sources) and save money at higher rates than other generations, despite student loan debt. (Here (https://www.washingtonpost.com/news/get-there/wp/2015/03/31/good-news-millennials-are-savers-after-all/?utm_term=.d422269639fc), here (https://themoneygeek.com/2017/03/15/are-millennials-risk-averse-savers/), and here (https://www.forbes.com/sites/jonhartley/2015/04/02/millennials-a-generation-of-super-savers-in-the-economy/#d0b439140fa8).) Despite all the hand-wringing over avocado toast, most millennials are, by many metrics, better with their money than their parents are. The fact that they save at high rates and do so in ways different from their parents is, I would argue, a direct reaction to having grown up in the midst of the Great Recession. To brush that off as not affecting people because they weren't of a certain age is silly.
This is a great point. I'm one of the unlucky Generation X who graduated college in 1999 and entered the job market just as the tech bubble burst. I didn't have a single $ in the market, but I saw graduates just a year or two ahead of me get laid off from their $90,000 consulting gigs and lived with stagnant wages and slim hiring prospects for years.
That was definitely a factor that drove me to be (relatively) frugal and read Your Money or Your Life in my 20s.
Yeah, the 2008 crash is what got me interested in ERE.
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Anecdote. I'm a late Gen X'er dating a younger millennial. Her & her group of friends have this obsession with going places over weekends. After spending a day driving (or worse flying) to the new locale we do exactly what we would have done if we stayed home... Visit the park, grab coffee or drinks, go out to eat, maybe visit a local landmark, then head home for work on Monday. The only difference is now she/they have a selfie of themselves being at [insert location here]. Personally, I just don't get it. If you're going to spend a bunch of money and time to travel somewhere, why not actually spend more time at the destination?
It's a good trend to watch for investing, millennials pay tons for travel or "experiences", but not so much for stuff. lol, Maybe this is why Buffet got back into airline stocks after he swore he wouldn't touch them ever again...
... are you dating my wife by any chance?
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Unless they are saving a good chunk of their income (20% or more), they are just as dumb as every other generation. Not more dumb and not less dumb. Equally as dumb.
Frankly, I think avocado toast is less stupid than SUVs (which became popular before Millennials, or most of them at least, could drive--and certainly before they were the ones buying vehicles). At least avocado toast is healthy. I'm not going to justify it beyond that, because I agree that spending too much of your money is stupid no matter how you do it.
I just think the hand-wringing over the fact that Millennials spend differently from Xers and Boomers is silly and stupid. So what? Values have changed. Deal with it. It doesn't make them better or worse than other generations, just different, and it's a direct reaction to what they've seen growing up. People make too much of a big deal over it, and point to stupid Millennial spending as if a) it's the sole factor that will tank the economy one day and b) other generations don't spend their money just as stupidly. Yeah, get self-righteous. Go for it.
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Whenever I read articles like MMM's a slight part of me wonders what if they are wrong. Australia hasn't had a recession in over twenty-five years. It is possible that we are decades away from a recession. I do believe in the domino affect of these things but sometimes that first one doesn't fall.
The problem is that Australia is a very small economy (35 million people?) that benefits from selling natural resource products to much larger economies, like the US and China. When China has a "recession", they're still growing at 5.8%, so there's ample growth in demand for Australian products.
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(https://i.imgflip.com/1rjvhb.jpg)
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Unless they are saving a good chunk of their income (20% or more), they are just as dumb as every other generation. Not more dumb and not less dumb. Equally as dumb.
Frankly, I think avocado toast is less stupid than SUVs (which became popular before Millennials, or most of them at least, could drive--and certainly before they were the ones buying vehicles). At least avocado toast is healthy. I'm not going to justify it beyond that, because I agree that spending too much of your money is stupid no matter how you do it.
I just think the hand-wringing over the fact that Millennials spend differently from Xers and Boomers is silly and stupid. So what? Values have changed. Deal with it. It doesn't make them better or worse than other generations, just different, and it's a direct reaction to what they've seen growing up. People make too much of a big deal over it, and point to stupid Millennial spending as if a) it's the sole factor that will tank the economy one day and b) other generations don't spend their money just as stupidly. Yeah, get self-righteous. Go for it.
I would like to point out that Millennials have made a successful industry out of selling 3D pancake printers on Amazon and selling grilled cheese sandwiches over the internet. It confuses me because it's brilliant on the part of the entrepreneurs and idiotic on the part of the consumers.
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Unless they are saving a good chunk of their income (20% or more), they are just as dumb as every other generation. Not more dumb and not less dumb. Equally as dumb.
Frankly, I think avocado toast is less stupid than SUVs (which became popular before Millennials, or most of them at least, could drive--and certainly before they were the ones buying vehicles). At least avocado toast is healthy. I'm not going to justify it beyond that, because I agree that spending too much of your money is stupid no matter how you do it.
I just think the hand-wringing over the fact that Millennials spend differently from Xers and Boomers is silly and stupid. So what? Values have changed. Deal with it. It doesn't make them better or worse than other generations, just different, and it's a direct reaction to what they've seen growing up. People make too much of a big deal over it, and point to stupid Millennial spending as if a) it's the sole factor that will tank the economy one day and b) other generations don't spend their money just as stupidly. Yeah, get self-righteous. Go for it.
I would like to point out that Millennials have made a successful industry out of selling 3D pancake printers on Amazon and selling grilled cheese sandwiches over the internet. It confuses me because it's brilliant on the part of the entrepreneurs and idiotic on the part of the consumers.
I saw one of those sandwiches in a box last Friday at work. It was kinda neat that you could order them online. The coworker was given three month subscription dozen for a Father's Day presents.
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Unless they are saving a good chunk of their income (20% or more), they are just as dumb as every other generation. Not more dumb and not less dumb. Equally as dumb.
I just think the hand-wringing over the fact that Millennials spend differently from Xers and Boomers is silly and stupid. So what? Values have changed. Deal with it. It doesn't make them better or worse than other generations, just different....
I think this is exactly what I said...
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Part of why Millennials spend differently is that prices have changed: education is MUCH more expensive, and more necessary (yes, even graduate degrees). Health Care has deservedly earned a whole different thread. And housing is far more expensive relative to their meager incomes, which are lower at the same age in spending power terms.
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Part of why Millennials spend differently is that prices have changed: education is MUCH more expensive, and more necessary (yes, even graduate degrees). Health Care has deservedly earned a whole different thread. And housing is far more expensive relative to their meager incomes, which are lower at the same age in spending power terms.
All those things are not entirely true or in any event somewhat stereotyped. Education doesn't have to be more expensive (community college, living at home or w roommates, going to secondary schools) but it is more expensive if you live in luxury student housing and you go to an overpriced school with a BS degree that doesn't translate into a cost appropriate salary.
Homes are ONLY more expensive in gateway markets (SF, NYC, Boston, etc) but this applies to everyone that lives in these areas regardless of age - go to other markets (even just going to the suburbs of the aforementioned markets makes a huge difference) and homes are actually a bargain but the jobs may be less robust.
Healthcare applies to everyone, at least the millennials could stay on parents insurance until 26 so that helped.
I think the bigger issue is that millenials should be subcatoregized into urban vs. suburban/rural as I think most of the spendy stereotype issues that come up seem to be related more to urban dwelling residents. I know plenty of millennials, even of the younger range, that own houses and cars, have started families, and seem to be financial prudent but they all are in the suburbs - Those in the city not so much.
As usual, it comes down to choices more than anything else.
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All those things are not entirely true or in any event somewhat stereotyped. Education doesn't have to be more expensive (community college, living at home or w roommates, going to secondary schools) but it is more expensive if you live in luxury student housing and you go to an overpriced school with a BS degree that doesn't translate into a cost appropriate salary.
Homes are ONLY more expensive in gateway markets (SF, NYC, Boston, etc) but this applies to everyone that lives in these areas regardless of age - go to other markets (even just going to the suburbs of the aforementioned markets makes a huge difference) and homes are actually a bargain but the jobs may be less robust.
Healthcare applies to everyone, at least the millennials could stay on parents insurance until 26 so that helped.
I think the bigger issue is that millenials should be subcatoregized into urban vs. suburban/rural as I think most of the spendy stereotype issues that come up seem to be related more to urban dwelling residents. I know plenty of millennials, even of the younger range, that own houses and cars, have started families, and seem to be financial prudent but they all are in the suburbs - Those in the city not so much.
As usual, it comes down to choices more than anything else.
You're right! College can be so cheap if you do all those things that Boomers never had to do to afford college! ... ... Also, the fact that you can't pay for a year's worth of college based on a summer's worth of work (barring outliers, naturally, because they're outliers and not the average) means that the cost of college tuition has gone up far faster than the price of a person's labor. So, you're wrong.
Also, I know plenty of young Xers and early Millennials who are thrifty homeowners in an expensive city. What's your point, other than "I know what I'm talking about, without needing pesky data"? Plus, in my expensive city the suburbs are actually even more expensive than the city prices, and that's on top of ridiculous commutes. You either rent, fight it out with a million other people for the affordable houses, or live an hour+ away from work. Those are fantastic choices. And why do people continue to live here? Well, perhaps because this is where the jobs they want to work in are. You know, those fantastic tech jobs we're all told we have to get to survive.
You make a lot of assumptions and gloss over a lot of reality.
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Whenever I read articles like MMM's a slight part of me wonders what if they are wrong. Australia hasn't had a recession in over twenty-five years. It is possible that we are decades away from a recession. I do believe in the domino affect of these things but sometimes that first one doesn't fall.
The problem is that Australia is a very small economy (35 million people?) that benefits from selling natural resource products to much larger economies, like the US and China. When China has a "recession", they're still growing at 5.8%, so there's ample growth in demand for Australian products.
25 million. We are also in the top 15 (#13?) economies in the world, so we are hardly tiny.
We don't benefit much from the sale of natural resources*. Our companies set up "marketing hubs" in Singapore and transfer price the products there. Why pay 30% corporate tax in Australia when you can negotiate with the Singapore Government to pay 1-5%?
Our governments are too afraid to raise taxes and royalties because the mining lobby screams "sovereign risk" all the time. It's a hollow threat - it's not like the big mining companies can take the billion tonnes of iron ore to another country and start mining there, the mine will always be in Australia and will still be relatively cheap to dig out of the ground.
China is huge... everyone is wringing their hands at 6% growth in China... but 6% today in absolute terms is orders of magnitude higher than 8% of 10-15 years ago.
China will very soon be stuck with max growth of 2-3% like every other developed country... it won't be the end of the world because it'll still be massive in absolute terms.
* I have always found it funny that we ship a tonne of iron ore to Japan for $150, and Japan builds a car with that and sells it back to us for $15,000 and we think we're the smart ones.
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I do find it painful buying stocks at these prices :( - everything does look pretty toppy now.
MMM does have a point. Obviously I'm not going to be selling any equities I currently own, but I think this is an ideal time to be improving my cash position. I have almost zero cash and bonds at the moment, so it's time to deleverage a bit, put new money into lower risk investments, and build up an emergency fund. I might still buy small amounts of equities in my Pension that's going to be locked away for a couple of decades.
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I do find it painful buying stocks at these prices :( - everything does look pretty toppy now.
MMM does have a point. Obviously I'm not going to be selling any equities I currently own, but I think this is an ideal time to be improving my cash position. I have almost zero cash and bonds at the moment, so it's time to deleverage a bit, put new money into lower risk investments, and build up an emergency fund. I might still buy small amounts of equities in my Pension that's going to be locked away for a couple of decades.
If stocks go up another 10% or 20% over the next year or two will you continue with your current reasoning? What will make you switch back to buying stocks? And if it's a price drop of x% what if that never occurs?
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If stocks go up another 10% or 20% over the next year or two will you continue with your current reasoning? What will make you switch back to buying stocks? And if it's a price drop of x% what if that never occurs?
Good questions. It's entirely possible that the current run could continue for that long, and never drop below today's values. Once my cash position has improved (I wouldn't want to be over 3% cash), I'd slowly move back into investing in equities with new money, regardless of prices (through gritted teeth!).
Also, equities are not the only game in town... I have about 8% of my net worth in a P2B lending site, and I've consistently made nearly 15% PA on that since about 2010. Sadly that's currently taxable, but a tax-free ISA version is coming soon (hopefully). I plan on increasing my investments in that too when that happens (although that's effectively junk bonds, so just as risky as equities, really).
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I cant wait to visit this site again after a equities meltdown. Its going to be interesting to see who is left in the RE wagon after such a long bull market and I honestly don't think many people on this forum have experienced such an event.
Most of you will need to re-adjust your FIRE date several years since you will freak and sell out of fear....that's a fact
Sounds like you disagree with the general advice here for investing and are now actively hoping that people fail so that you can say "I told you so". That's pretty shitty.
Not necessarily -- the Dalbar study shows, year after year, how poor people are at making investment decisions. And while there may be some reason to suspect that folks on this site skew toward the more rational when it comes to investment decisions, I would guess it does not skew that far and in general people here (esp. with the explosion of followers here in the past few years) will be representative of the population as a whole when things go south.
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
To summarize....you agree that millenials spend a lot but its ok because they spend for different reasons provided they are justifiable by those doing the spending. Perfect, thanks.
Anecdote. I'm a late Gen X'er dating a younger millennial. Her & her group of friends have this obsession with going places over weekends. After spending a day driving (or worse flying) to the new locale we do exactly what we would have done if we stayed home... Visit the park, grab coffee or drinks, go out to eat, maybe visit a local landmark, then head home for work on Monday. The only difference is now she/they have a selfie of themselves being at [insert location here]. Personally, I just don't get it. If you're going to spend a bunch of money and time to travel somewhere, why not actually spend more time at the destination?
It's a good trend to watch for investing, millennials pay tons for travel or "experiences", but not so much for stuff. lol, Maybe this is why Buffet got back into airline stocks after he swore he wouldn't touch them ever again...
Also, "authenticity."
What the heck is this authenticity thing?
This drove me up a wall when someone said I should like the soggy fries at some local joint because it's authentic. Get out of here, they are crappy fries. Freshly made McDonald's fries are the best.
Even the Serious Eats guy says so: http://aht.seriouseats.com/archives/2010/05/the-burger-lab-how-to-make-perfect-mcdonalds-style-french-fries.html
There's plenty of crappy "authentic" food. Also, I am not going to eat in an "authentic" restaurant that's just a collection of code violations. I sure as fuck don't want to die in a fire for some "authentic" Cuban/Ethiopian/Martian food.
If I ever get famous, I am going to save all my shits, and sell them online as "authentic ADBG shits." I'm sure someone will buy them. It's authentic.
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
To summarize....you agree that millenials spend a lot but its ok because they spend for different reasons provided they are justifiable by those doing the spending. Perfect, thanks.
Anecdote. I'm a late Gen X'er dating a younger millennial. Her & her group of friends have this obsession with going places over weekends. After spending a day driving (or worse flying) to the new locale we do exactly what we would have done if we stayed home... Visit the park, grab coffee or drinks, go out to eat, maybe visit a local landmark, then head home for work on Monday. The only difference is now she/they have a selfie of themselves being at [insert location here]. Personally, I just don't get it. If you're going to spend a bunch of money and time to travel somewhere, why not actually spend more time at the destination?
It's a good trend to watch for investing, millennials pay tons for travel or "experiences", but not so much for stuff. lol, Maybe this is why Buffet got back into airline stocks after he swore he wouldn't touch them ever again...
I used to go on a road trip every holiday weekend, but cut way back when I realized I could save my pennies, FIRE, then travel at a sane pace. I do miss traveling, but I don't at all miss hurrying there, rushing to just see a small sliver of what I want to see, then hurrying back.
Assuming you're talking about the US, it may be related to wanting to travel, but living in a culture where taking any serious time off work is viewed as a lack of commitment.
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Also, "authenticity."
What the heck is this authenticity thing?
This drove me up a wall when someone said I should like the soggy fries at some local joint because it's authentic. Get out of here, they are crappy fries. Freshly made McDonald's fries are the best.
Even the Serious Eats guy says so: http://aht.seriouseats.com/archives/2010/05/the-burger-lab-how-to-make-perfect-mcdonalds-style-french-fries.html
There's plenty of crappy "authentic" food. Also, I am not going to eat in an "authentic" restaurant that's just a collection of code violations. I sure as fuck don't want to die in a fire for some "authentic" Cuban/Ethiopian/Martian food.
If I ever get famous, I am going to save all my shits, and sell them online as "authentic ADBG shits." I'm sure someone will buy them. It's authentic.
You got it right! Authentic means not eating at a chain even if the food is way better than the place you end up eating.
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Regarding the spending, millenials are not really better at saving than prior gens and that is pretty much spelled on in most of your links - they spend less on the big stuff (houses and cars) but more on rent, travel, eating out, entertainment (experiences) than prior gens. This could be bad....not saving much combined with no asset accumulation. At least the other gens end up with paid off houses at some point typically.
You're failing to take into account both a changing market (houses in areas with decent job markets are astronomical) and changing priorities. Not only are housing prices rather insane but many people see that they're not necessarily the grand investment they're touted to be and wonder, why bother? Frankly, that seems rather sensible. If the purchase price is incredibly high for an indeterminate ROI, why should we be wringing hands over that? Besides, who's to say that millennials won't start buying homes in larger numbers when they actually start families (many are still younger than the median age at which people have children these days) and pay off the student loans so that they can afford a down payment? Added to all of that, with the uncertainties in both the job market and the longevity in any particular job one may take, the flexibility of not being tied to any one location can be seen as a net positive. If you're not going to be tied to a job then being able to take your experience somewhere else is a great thing.
Last, one thing that I've noticed is not necessarily monetarily but ties into what many people deride. The classic brunch out example can be seen as people wasting money on a frivolous expense, or it can be seen as both networking and building community. I don't know of anyone in any age bracket who goes out to brunch once a week, or even once a month. Just because Millennials as a whole "go out to brunch" and order avocado toast doesn't mean that the entire generation is going out every week and ordering expensive items every time they go. It also seems to be a way to catch up with each other, not to dine out for the sake of blowing money. I see a lot of Xers and Boomers who don't have a big circle of friends because they're "too busy", or they were too busy when younger to keep up friendships. That leaves them in middle age and older suddenly at a loss, trying to rebuild relationships or start new ones. Tragic! I think many Millennials have realized that friends are at least as important as any other aspect of life and spend more capital (time, money) on keeping up with relationships than do older people. If all you've got are your friends, and you feel that you can depend on those around you rather than on the future or the markets or ROI or whatever, that's what you're going to invest in. And if you don't have an apartment big enough for entertaining a group of friends and don't want to spend a bunch of money on dinner, then brunch is a sensible maneuver.
Especially when you consider how much of job finding and everything else happens based on word of mouth and networking these days, it's actually quite smart. Hanging out with that friend-of-a-friend, even in a group context, could help you swing into a better paying position or score an apartment with a lower rent in a nicer area of town.
To summarize....you agree that millenials spend a lot but its ok because they spend for different reasons provided they are justifiable by those doing the spending. Perfect, thanks.
Anecdote. I'm a late Gen X'er dating a younger millennial. Her & her group of friends have this obsession with going places over weekends. After spending a day driving (or worse flying) to the new locale we do exactly what we would have done if we stayed home... Visit the park, grab coffee or drinks, go out to eat, maybe visit a local landmark, then head home for work on Monday. The only difference is now she/they have a selfie of themselves being at [insert location here]. Personally, I just don't get it. If you're going to spend a bunch of money and time to travel somewhere, why not actually spend more time at the destination?
It's a good trend to watch for investing, millennials pay tons for travel or "experiences", but not so much for stuff. lol, Maybe this is why Buffet got back into airline stocks after he swore he wouldn't touch them ever again...
I'm a millennial and I don't get it. In high school people would say "Let's go to the IHOP." Why? We are just going to sit there.
Of course I have been branded as "antisocial" for such views.
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Also, "authenticity."
What the heck is this authenticity thing?
This drove me up a wall when someone said I should like the soggy fries at some local joint because it's authentic. Get out of here, they are crappy fries. Freshly made McDonald's fries are the best.
Even the Serious Eats guy says so: http://aht.seriouseats.com/archives/2010/05/the-burger-lab-how-to-make-perfect-mcdonalds-style-french-fries.html
There's plenty of crappy "authentic" food. Also, I am not going to eat in an "authentic" restaurant that's just a collection of code violations. I sure as fuck don't want to die in a fire for some "authentic" Cuban/Ethiopian/Martian food.
If I ever get famous, I am going to save all my shits, and sell them online as "authentic ADBG shits." I'm sure someone will buy them. It's authentic.
You got it right! Authentic means not eating at a chain even if the food is way better than the place you end up eating.
I don't think authentic means better, necessarily, but I can see the appeal to at least try an authentic version of something. For example, I love all the Americanized Chinese food and TexMex around here. But it was really interesting to try authentic versions of those cuisines... usually, authentic just meant a bit healthier (less sugar, less tasty).
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I felt this last post from Mmm to be really poor and misguided
Yes its great If you have enough money that even a 50% :reduction won't make you nervous but even for people just reaching fi with their stashes will hate the thought of a big recession just as they are about to hit the eject button
For people with jobs a recession is a disaster especially if you are in a sector where it will directly be effected
Even if you put plans in place I can't see any good from hoping for a recession where many plans will be ruined for alot of people trying to reach fi
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Also, "authenticity."
What the heck is this authenticity thing?
This drove me up a wall when someone said I should like the soggy fries at some local joint because it's authentic. Get out of here, they are crappy fries. Freshly made McDonald's fries are the best.
Even the Serious Eats guy says so: http://aht.seriouseats.com/archives/2010/05/the-burger-lab-how-to-make-perfect-mcdonalds-style-french-fries.html
There's plenty of crappy "authentic" food. Also, I am not going to eat in an "authentic" restaurant that's just a collection of code violations. I sure as fuck don't want to die in a fire for some "authentic" Cuban/Ethiopian/Martian food.
If I ever get famous, I am going to save all my shits, and sell them online as "authentic ADBG shits." I'm sure someone will buy them. It's authentic.
You got it right! Authentic means not eating at a chain even if the food is way better than the place you end up eating.
I don't think authentic means better, necessarily, but I can see the appeal to at least try an authentic version of something. For example, I love all the Americanized Chinese food and TexMex around here. But it was really interesting to try authentic versions of those cuisines... usually, authentic just meant a bit healthier (less sugar, less tasty).
IMO it has nothing to do with the food itself, rather its they want to "feel" like they are "experiencing" something new & unique that others haven't. In the same way boomers "feel" good by having a Mcmansion (now maybe RV-mansions).
It doesn't matter whether or not it sucks to clean and maintain a 5000 sq ft home, or whether the food tastes bland and soggy. What matters is how having the thing or experience makes you "feel". These feelings are personal, but also social, so peer comparison is inevitable. Keeping up with the Jones's experiences is the real deal for millennials and social media is certainly at least partially culpable for this trend.
@dragoncar
I spent the weekend with my GF in another city with new selfies, if your wife was home this w/e we know they are not the same woman!
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I felt this last post from Mmm to be really poor and misguided
Yes its great If you have enough money that even a 50% :reduction won't make you nervous but even for people just reaching fi with their stashes will hate the thought of a big recession just as they are about to hit the eject button
For people with jobs a recession is a disaster especially if you are in a sector where it will directly be effected
Even if you put plans in place I can't see any good from hoping for a recession where many plans will be ruined for alot of people trying to reach fi
If your FI money won't withstand one recession, even a big one, then you need to rethink your FI plan. The point is to be able to weather ups AND downs in the market, not just retire when all is well and assume that will be the pattern that follows forever after.
I also don't see an upbeat, not doom-and-gloom reminder that, at some point, sometime in the future, there will be a recession as being a negative. That's something that we should keep in mind during the booms. I know that being in an unstable economy (or at least feeling like it) makes me, at least, more focused on saving up "just in case". It makes me want to reach true FI all the more, because then I will truly be free from worry about money and the economy.
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I felt this last post from Mmm to be really poor and misguided
Yes its great If you have enough money that even a 50% :reduction won't make you nervous but even for people just reaching fi with their stashes will hate the thought of a big recession just as they are about to hit the eject button
For people with jobs a recession is a disaster especially if you are in a sector where it will directly be effected
Even if you put plans in place I can't see any good from hoping for a recession where many plans will be ruined for alot of people trying to reach fi
If your FI money won't withstand one recession, even a big one, then you need to rethink your FI plan. The point is to be able to weather ups AND downs in the market, not just retire when all is well and assume that will be the pattern that follows forever after.
I also don't see an upbeat, not doom-and-gloom reminder that, at some point, sometime in the future, there will be a recession as being a negative. That's something that we should keep in mind during the booms. I know that being in an unstable economy (or at least feeling like it) makes me, at least, more focused on saving up "just in case". It makes me want to reach true FI all the more, because then I will truly be free from worry about money and the economy.
Hi
Even according to. Mmm.. Assume you use 4% rule and you get hit by a big recession or market drop when you just FIRE this puts you in alot of danger to recover
It's quite simple really.. Say you have 600k and we see a market drop of 300k straight after you retire then you would have to make some big adjustments to survive... I don't see how going back part time work as an answer as I'm sure most who want to fire actually don't want to go into that as they may aswell have jsut kept doing their normal job until there is. Enough cushion or flexibility to be able to withstand such a drop
Few of the many reasons I find the article poor to be honest
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I think the consensus around here is that the biggest danger to ER is poor returns during the first 10 years. My plan is to have a buffer, plus a fully paid off house before ER, plus plan for $50k/year lifestyle, which I can dial back to $30k without any problems if there's a bad hit. My wife 'just' started to work as a realtor, so that work may continue even after I RE. We'll see. But I'm OK with One More Year (or 2), because at that point because I know for certain it won't turn into "Five More Years". With enough of a stash and low enough spending and the ability to dial down expenditures and also make side income if needed, all makes things pretty darn recession proof.
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I think the consensus around here is that the biggest danger to ER is poor returns during the first 10 years. My plan is to have a buffer, plus a fully paid off house before ER, plus plan for $50k/year lifestyle, which I can dial back to $30k without any problems if there's a bad hit. My wife 'just' started to work as a realtor, so that work may continue even after I RE. We'll see. But I'm OK with One More Year (or 2), because at that point because I know for certain it won't turn into "Five More Years". With enough of a stash and low enough spending and the ability to dial down expenditures and also make side income if needed, all makes things pretty darn recession proof.
Yes I don't see any other way personally... So 10 years seems unrealistic to me
One breath a post says all you need is 25 times your expenses to FIRE whilst getting 5% returns and that's all you need.. Yet if a recessions hits that's great too because we can get lots of cheap stocks? With what money? Your wealth is halved and according to another post don't sit. On cash so how would you take advantage on this just before FIREING? Just don't add up to me
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I felt this last post from Mmm to be really poor and misguided
Yes its great If you have enough money that even a 50% :reduction won't make you nervous but even for people just reaching fi with their stashes will hate the thought of a big recession just as they are about to hit the eject button
For people with jobs a recession is a disaster especially if you are in a sector where it will directly be effected
Even if you put plans in place I can't see any good from hoping for a recession where many plans will be ruined for alot of people trying to reach fi
If your FI money won't withstand one recession, even a big one, then you need to rethink your FI plan. The point is to be able to weather ups AND downs in the market, not just retire when all is well and assume that will be the pattern that follows forever after.
I also don't see an upbeat, not doom-and-gloom reminder that, at some point, sometime in the future, there will be a recession as being a negative. That's something that we should keep in mind during the booms. I know that being in an unstable economy (or at least feeling like it) makes me, at least, more focused on saving up "just in case". It makes me want to reach true FI all the more, because then I will truly be free from worry about money and the economy.
Hi
Even according to. Mmm.. Assume you use 4% rule and you get hit by a big recession or market drop when you just FIRE this puts you in alot of danger to recover
It's quite simple really.. Say you have 600k and we see a market drop of 300k straight after you retire then you would have to make some big adjustments to survive... I don't see how going back part time work as an answer as I'm sure most who want to fire actually don't want to go into that as they may aswell have jsut kept doing their normal job until there is. Enough cushion or flexibility to be able to withstand such a drop
Few of the many reasons I find the article poor to be honest
You may feel that you would need to make big adjustments, but technically you probably wouldn't need to.
In all of the other big crashes in history, a person retiring the day before a big crash and withdrawing 4% of their pre-crash stash annually, plus inflation, has not run out of money in 30 years.
The fact is for the stash to last 30 years it only needs to average returns of 1.3% above inflation, but historically equities have generated much more than this. The 4% SWR is the worst outcome arising from worst case sequence of returns, including a major crash the day after you FIRE. If you don't have major bad news in the first years post FIRE then it is likely you could be withdrawing more than 4%.
If you are properly prepared mentally, and properly diversified you don't need to be overly fearful.
Naturally I would think that nearly all people would react to such a major depletion of their stache by taking some drastic action. But if you hold an appropriate amount outside equities in property, cash and bonds then it is not likely you would see your stash drop 50% ever except in Armageddon. In such a scenario having a job is not likely to feel secure either.
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I found this line interesting as I've always considered this to be true of many forum members here:
"If you’re a sagely 27 years old right now, you may have never experienced a recession in your adult life – all you have ever seen is the good times. You’re in for an interesting surprise.
This is the line that made me stop in my tracks. I'm 27 and I currently freelance as an artist/painter/event designer. It's generally ok money-wise, but I've been thinking about going back into the "workforce" for a while, especially after I discovered MMM. This line basically sealed the deal.
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I think the consensus around here is that the biggest danger to ER is poor returns during the first 10 years or periods of high inflation.
Recency bias has most forgetting about the very real possibility of double digit inflation at some point in the future. In fact, this is what caused all the mid 1960's failures of the 4% rule, double digit inflation in the late 1970's/early 1980's, more than 10 years after a mid-60's retiree started their journey.
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I found this line interesting as I've always considered this to be true of many forum members here:
"If you’re a sagely 27 years old right now, you may have never experienced a recession in your adult life – all you have ever seen is the good times. You’re in for an interesting surprise.
This is the line that made me stop in my tracks. I'm 27 and I currently freelance as an artist/painter/event designer. It's generally ok money-wise, but I've been thinking about going back into the "workforce" for a while, especially after I discovered MMM. This line basically sealed the deal.
I'm a little older, but I only started my financial education about the time of the Great Recession's crash, so I've never "lost" assets from a recession before (the "loss" in the markets being imaginary as we know now, though.) It'll be interesting to see how I handle a recession considering I've never owned any serious level of possessions during one before.
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I found this line interesting as I've always considered this to be true of many forum members here:
"If you’re a sagely 27 years old right now, you may have never experienced a recession in your adult life – all you have ever seen is the good times. You’re in for an interesting surprise.
This is the line that made me stop in my tracks. I'm 27 and I currently freelance as an artist/painter/event designer. It's generally ok money-wise, but I've been thinking about going back into the "workforce" for a while, especially after I discovered MMM. This line basically sealed the deal.
I'm a little older, but I only started my financial education about the time of the Great Recession's crash, so I've never "lost" assets from a recession before (the "loss" in the markets being imaginary as we know now, though.) It'll be interesting to see how I handle a recession considering I've never owned any serious level of possessions during one before.
Same! I at least know not to freak out and make sudden moves during a recession - I'm glad I'm educating myself now, before it comes. Let's just see how much can be put into practice... :p
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Your wealth is halved
How is your wealth halved? By the time you FIRE, you should be in a mix of stocks & bonds - I've seen 60/40, 70/30 splits, but point being you're not entirely in stocks.
If you're invested in 2/3 bonds, 1/3 stocks, the absolute worst you could have done in a given year since 1985 was lose ~9%. Your non-inflation adjusted CAGR from 1985 to 2016 would have been ~8%. It's 5% if you adjust for inflation. Some of that, of course, is skewed by a bull bond market that is no longer there with the extremely low inflation rates, so going forward it might not be as easy as 67% bonds/33% stocks.
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Your wealth is halved
How is your wealth halved? By the time you FIRE, you should be in a mix of stocks & bonds - I've seen 60/40, 70/30 splits, but point being you're not entirely in stocks.
If you're invested in 2/3 bonds, 1/3 stocks, the absolute worst you could have done in a given year since 1985 was lose ~9%. Your non-inflation adjusted CAGR from 1985 to 2016 would have been ~8%. It's 5% if you adjust for inflation. Some of that, of course, is skewed by a bull bond market that is no longer there with the extremely low inflation rates, so going forward it might not be as easy as 67% bonds/33% stocks.
If you're FIREd and want money when you're old, you will not likely be two thirds bonds.
(Edit: Removed 'early' after FIREd... because... that's RAS syndrome).
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All those things are not entirely true or in any event somewhat stereotyped. Education doesn't have to be more expensive (community college, living at home or w roommates, going to secondary schools) but it is more expensive if you live in luxury student housing and you go to an overpriced school with a BS degree that doesn't translate into a cost appropriate salary.
Homes are ONLY more expensive in gateway markets (SF, NYC, Boston, etc) but this applies to everyone that lives in these areas regardless of age - go to other markets (even just going to the suburbs of the aforementioned markets makes a huge difference) and homes are actually a bargain but the jobs may be less robust.
Healthcare applies to everyone, at least the millennials could stay on parents insurance until 26 so that helped.
I think the bigger issue is that millenials should be subcatoregized into urban vs. suburban/rural as I think most of the spendy stereotype issues that come up seem to be related more to urban dwelling residents. I know plenty of millennials, even of the younger range, that own houses and cars, have started families, and seem to be financial prudent but they all are in the suburbs - Those in the city not so much.
As usual, it comes down to choices more than anything else.
You're right! College can be so cheap if you do all those things that Boomers never had to do to afford college! ... ... Also, the fact that you can't pay for a year's worth of college based on a summer's worth of work (barring outliers, naturally, because they're outliers and not the average) means that the cost of college tuition has gone up far faster than the price of a person's labor. So, you're wrong.
Also, I know plenty of young Xers and early Millennials who are thrifty homeowners in an expensive city. What's your point, other than "I know what I'm talking about, without needing pesky data"? Plus, in my expensive city the suburbs are actually even more expensive than the city prices, and that's on top of ridiculous commutes. You either rent, fight it out with a million other people for the affordable houses, or live an hour+ away from work. Those are fantastic choices. And why do people continue to live here? Well, perhaps because this is where the jobs they want to work in are. You know, those fantastic tech jobs we're all told we have to get to survive.
You make a lot of assumptions and gloss over a lot of reality.
Aren't you're doing some of the same stuff? Just like you said - it's hard to afford houses close to the places people want to work, but the truth is you don't have to work in a large corporation in a big city. I, personally, would not be in the location I am in were it not for my job. I like where I am, I wouldn't live in Siberia just to make an extra $15 grand or something, but there are definitely places around the country I'd enjoy more. And should we retire early we'll consider moving away.
The fact that Boomers didn't have to go to CC doesn't mean anything. Education costs are way out of control, you're absolutely right. The continued rise is ridiculous and, really, unsustainable. But still, with a large number of majors college is still a great investment, and it's certainly not the only option in the first place.
I'm not trying to start a huge back and forth, I just think you both can be right here. Certain costs can suck, it can be annoying to hear boomers say "Back in my day!" over and over again and yet it can still largely come down to personal choices.
The world is still pretty great for the majority of us lucky enough to be born in 1st world countries. Our actual needs are met with a ridiculously low amount of money relative to most any time in human history. You'd never think that after 15 minutes of perusing in internet, and that goes for all generations.
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A crash isn't the only option for an economic recession. Prolonged stagnation is an option too, one that would likely effect people aiming for FIRE worse than a crash.
Never heard of Zero Hedge. Looks like your typical kooky, conspiracy theory site. Can't say I'll be going back for any of their brilliant advice.
Conspiracy theory sites are actually pretty good IF you pick through the information. Often they call attention to unusual or interesting facts. Where they go wrong, of course, is when they draw insane or unknowable conclusions from the said interesting facts.
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https://finance.yahoo.com/news/consumers-businesses-likely-spurred-u-051201367.html
Gross domestic product increased at a 2.6 percent annual rate in the April-June period, which included a boost from trade, the Commerce Department said in its advance estimate on Friday.
So by definition, we will not experience a recession until 2017 Q4 (reported end of January '18) at the earliest.
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But if we're worried about a recession because of the preceding market correction, this type of reasoning won't help you.
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Inverted yield curves (https://fred.stlouisfed.org/series/T10Y2Y) as recession predictors?
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You're right! College can be so cheap if you do all those things that Boomers never had to do to afford college! ... ... Also, the fact that you can't pay for a year's worth of college based on a summer's worth of work (barring outliers, naturally, because they're outliers and not the average) means that the cost of college tuition has gone up far faster than the price of a person's labor. So, you're wrong.
...
I'm amused at the assumptions people make when they think it was so easy for boomers. My parents (Boomers) both went to commuter colleges (lived at home). I (gen x) went to a commuter college. We all worked full-time to pay our own way. It was hard. We all chose less expensive schools because we didn't want hefty loans.
My sister went to an expensive school but got hundreds of small local scholarships and grants to fill in the gaps where her main scholarships didn't pay.
things can be as expensive or as cheap as you make them. I think the biggest difference with generations is that my generation didn't have so much of the Kardashians so we weren't ALWAYS expecting to have expensive things.
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Frankly, recessions are good for the same reason that forest fires are good. They force a renewal and a burning away of dead wood.
As far as I'm concerned, if there's a recession, bring it. I'll back my skillset and my self-employment any day.
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Tell me more about the Kardashians...
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Funny, this thread started in 2017, it's 2019 - still waiting for this recession... Are we there yet? Are we there yet?
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Funny, this thread started in 2017, it's 2019 - still waiting for this recession... Are we there yet? Are we there yet?
This thread predates my switch to using notifications instead of new replies so I'm a little late noticing the thread necro. The SP500 is up ~15% plus dividends since then. Thanks for the fear mongering, MMM... But now I'm sure we're really due for a recession, right?
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Funny, this thread started in 2017, it's 2019 - still waiting for this recession... Are we there yet? Are we there yet?
This thread predates my switch to using notifications instead of new replies so I'm a little late noticing the thread necro. The SP500 is up ~15% plus dividends since then. Thanks for the fear mongering, MMM... But now I'm sure we're really due for a recession, right?
Well? https://www.cnbc.com/2019/04/08/the-stock-market-is-poised-to-overtake-its-record-high-set-back-in-september.html
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Just let me know when the top is in
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All those things are not entirely true or in any event somewhat stereotyped. Education doesn't have to be more expensive (community college, living at home or w roommates, going to secondary schools) but it is more expensive if you live in luxury student housing and you go to an overpriced school with a BS degree that doesn't translate into a cost appropriate salary.
Homes are ONLY more expensive in gateway markets (SF, NYC, Boston, etc) but this applies to everyone that lives in these areas regardless of age - go to other markets (even just going to the suburbs of the aforementioned markets makes a huge difference) and homes are actually a bargain but the jobs may be less robust.
Healthcare applies to everyone, at least the millennials could stay on parents insurance until 26 so that helped.
I think the bigger issue is that millenials should be subcatoregized into urban vs. suburban/rural as I think most of the spendy stereotype issues that come up seem to be related more to urban dwelling residents. I know plenty of millennials, even of the younger range, that own houses and cars, have started families, and seem to be financial prudent but they all are in the suburbs - Those in the city not so much.
As usual, it comes down to choices more than anything else.
You're right! College can be so cheap if you do all those things that Boomers never had to do to afford college! ... ... Also, the fact that you can't pay for a year's worth of college based on a summer's worth of work (barring outliers, naturally, because they're outliers and not the average) means that the cost of college tuition has gone up far faster than the price of a person's labor. So, you're wrong.
Fees at University of North Carolina at Pembroke for a year.
Minimum Cost for Full-Time Undergraduate
In-State Out-of-State
Full Year Tuition $1,000.00 $5,000.00
Full Year Fees $2,417.28 $2,417.28
Room and Board $9,116.00 $9,116.00
Health Insurance $2,623.00 $2,623.00
If local to the area and living with parents: drop the $9,116 for room and board.
If on parent's health insurance, drop the $2,623 for insurance.
So, basically, an in-state local student could graduate for LESS than the cost of a CHEAP new car!
An in-state non-local student could do so for about $50,000. Subtract out $24,000 from working 20hrs/wk 40 wks per year and 30hrs/wk the remaining 12 wks per year and we're talking less than the AVERAGE new car price.
Being out of state would only add $16,000 to that cost.
Yeah, I'm pretty sure I could earn $3,418 dollars in a year. Hey, I actually earned MORE at $3.65 minimum wage back in the 70s when I went to college. Then again, like most students I knew back in the 70s, I worked all year long. I know more students today who have NEVER EVER held a job than I did when I attended college.
If I remember correctly, 5 different UNC campuses have this cost structure.
For those who could afford this cost structure with room and board included, there are many other campuses where the tuition is higher, but the college is local so the room and board cost drops by staying at home.
College does not have to be an expensive choice. It's just that many people choose to make it so.
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Really a pretty poor article (prediction-wise) from MMM.
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In my country, a government agency publishes a really nice visual of where we are in the current economic cycle. We are definitely heading towards recession, but we're certainly not there yet and could possibly recover.
https://www.cbs.nl/nl-nl/visualisaties/conjunctuurklok
The website is in Dutch but red means below long-term average, yellow is growing, green is above long term average and orange is declining growth. Every dot represents one marker of the state of the economy (for example, unemployment, consumer trust etc). You can scroll back 20 years and compare the different months. Right now while the labour market is doing well in our country, consumers trust in the market is low and consumption is therefore slowing down as well. I think this mostly has to do with political unrest in Europe, people are scared of the future. Hopefully this will settle down a bit.
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Really a pretty poor article (prediction-wise) from MMM.
Why do you say that? There IS a recession coming. There's no implication that it's going to start tomorrow or even in the next few years. But it is coming at some point.
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^ Spot on. There is a stock market crash coming too.
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^ Spot on. There is a stock market crash coming too.
At least a correction on 12/26/18! Excellent call!
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I'll confess I took a lot of satisfaction in December 2018 that I'd been so focused on debt reduction instead of putting money into the market only to have it go down.
Unfortunately, I've continued on debt reduction since then, so now I'm...less satisfied.
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I'll confess I took a lot of satisfaction in December 2018 that I'd been so focused on debt reduction instead of putting money into the market only to have it go down.
Unfortunately, I've continued on debt reduction since then, so now I'm...less satisfied.
Despite what some folks here might say, you win either way.
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Just for the record, the index is now up over 20% since this thread was started. At this point, we could have a pretty gnarly recession and still come out financially ahead of someone who tried to time the market based on the information in this thread.
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Just for the record, the index is now up over 20% since this thread was started. At this point, we could have a pretty gnarly recession and still come out financially ahead of someone who tried to time the market based on the information in this thread.
You mean the information in MMM's blog post, right? As the thread starter I'd hate to be mistaken for someone who called a recession.
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Just for the record, the index is now up over 20% since this thread was started. At this point, we could have a pretty gnarly recession and still come out financially ahead of someone who tried to time the market based on the information in this thread.
You mean the information in MMM's blog post, right? As the thread starter I'd hate to be mistaken for someone who called a recession.
I think you may have missed MMM's point. Or at least his point as I understood it. He said straight up he did not know when the recession was coming, just that one is coming.
I'll co-sign that statement all day long. Same with the notion that a stock market crash is coming. I abso-fucking-lutey guarantee the stock market will crash. No idea when, but it will happen.
The point is to be prepared mentally and financially for those events, because they absolutely will happen.
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Just for the record, the index is now up over 20% since this thread was started. At this point, we could have a pretty gnarly recession and still come out financially ahead of someone who tried to time the market based on the information in this thread.
You mean the information in MMM's blog post, right? As the thread starter I'd hate to be mistaken for someone who called a recession.
I think you may have missed MMM's point. Or at least his point as I understood it. He said straight up he did not know when the recession was coming, just that one is coming.
I think RWD understood that point given the content of the original post
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Just for the record, the index is now up over 20% since this thread was started. At this point, we could have a pretty gnarly recession and still come out financially ahead of someone who tried to time the market based on the information in this thread.
You mean the information in MMM's blog post, right? As the thread starter I'd hate to be mistaken for someone who called a recession.
I think you may have missed MMM's point. Or at least his point as I understood it. He said straight up he did not know when the recession was coming, just that one is coming.
I think RWD understood that point given the content of the original post
Yes, thank you dragoncar. Of course I understood it. I'm still worried about it causing people to overreact either just based on the title alone or certain lines such as these:
With all those preparations in progress, I hope you’re ready, because there’s a recession on the way.
So we’ve had a good run. If we go on to tie the Clinton-era record, that still gives us a maximum of two years until the trouble hits.
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You can't really prevent people from missing the point no matter how clearly you write. The proof is in this thread.
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You can't really prevent people from missing the point no matter how clearly you write. The proof is in this thread.
Yup...
Despite MMM's best intentions we still get threads like this one (https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/):
Hi fellow mustachians! I’m a long time reader and follower, and first time poster. I’d love your thoughts on my situation. I agree with MMM that a recession or market correction is coming soon. I live in an expensive coastal city, where I’ve been renting for years. I’d like to buy a house at some point in the next few years, and I’d love for it to be when that recession is in full swing.
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Really a pretty poor article (prediction-wise) from MMM.
Why do you say that? There IS a recession coming. There's no implication that it's going to start tomorrow or even in the next few years. But it is coming at some point.
From the article...
It’s a lot easier to fix your problems right now, with a stiff economic tailwind at your back, than it will be in just a couple of short years (or less?) when the high seas and lighting bolts and whirlpools are ripping at your pockets.
So we’ve had a good run. If we go on to tie the Clinton-era record, that still gives us a maximum of two years until the trouble hits.
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I think you may have missed MMM's point. Or at least his point as I understood it. He said straight up he did not know when the recession was coming, just that one is coming.
I'll co-sign that statement all day long. Same with the notion that a stock market crash is coming. I abso-fucking-lutey guarantee the stock market will crash. No idea when, but it will happen.
The point is to be prepared mentally and financially for those events, because they absolutely will happen.
Cool. A stock market and economic boom are also coming. What's the purpose of stating this point?
He litters in some Zero Hedge garbage with vague guesses ("couple of short years (or less?) when the high seas and lightning bolts and whirlpools are ripping your pockets" and "that still gives us a maximum of two years until the trouble hits"). I'm not saying MMM was trying to predict when the recession would hit, but he clearly hinted that it would be "soon" or within 2-3 years. If his point is you don't know when the recession will come why is he throwing in these predictions at all?
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If his point is you don't know when the recession will come why is he throwing in these predictions at all?
Because after years of supplying brilliantly written and useful material, he managed to slip in a few less-than-perfectly-formed sentences to make his point. Jeesh. Sometimes people on this site forget we're not parsing out the red-letter words in the New Testament for their full meaning...
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He thought it would be sooner, which I think was a reasonable guess, ut he was clear that he couldn’t predict anything. The point is not to get killed into thinking the bull will last forever and to always be prepared for a downturn. This is good advice.
Has it even been 2-4 years yet? He could still be right
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He thought it would be sooner, which I think was a reasonable guess, ut he was clear that he couldn’t predict anything. The point is not to get killed into thinking the bull will last forever and to always be prepared for a downturn. This is good advice.
Has it even been 2-4 years yet? He could still be right
It's been almost 2 years (in June). Considering all the uncertainties in the world currently, and the timeline (such a long boom time), and all the indicators (inversions and credit ratings and debt, oh my!) it wouldn't be at all if a recession started...basically anytime. I'm even increasingly reading articles about major investors and huge companies that are preparing for a recession to start either this year or next.
I'm not saying this because we should do anything differently, really. Wasn't stay the course and be prepared sort of what the article was getting at? That was my takeaway, anyway, for those of us who are already generally pretty frugal. Plus, a long lead-up and preparation time is ideal, because we can be even more frugal and put more away "just in case".
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He thought it would be sooner, which I think was a reasonable guess, ut he was clear that he couldn’t predict anything. The point is not to get killed into thinking the bull will last forever and to always be prepared for a downturn. This is good advice.
Has it even been 2-4 years yet? He could still be right
It's been almost 2 years (in June). Considering all the uncertainties in the world currently, and the timeline (such a long boom time), and all the indicators (inversions and credit ratings and debt, oh my!) it wouldn't be at all if a recession started...basically anytime. I'm even increasingly reading articles about major investors and huge companies that are preparing for a recession to start either this year or next.
I'm not saying this because we should do anything differently, really. Wasn't stay the course and be prepared sort of what the article was getting at? That was my takeaway, anyway, for those of us who are already generally pretty frugal. Plus, a long lead-up and preparation time is ideal, because we can be even more frugal and put more away "just in case".
Flexibility is key, the ONLY thing I am doing differently now than 4 years ago is having a somewhat larger emergency fund. What else is there to do? I am going to keep buying and go down with this dang ship! (I say that as the market has never been higher!)
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In a fifty-year retirement, there are going to be all sorts of ups and downs. Being robust to them is the key.
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I rebalance quarterly on my birthday and the three month intervals afterward.
I've been shifting from all stocks to 20% bonds. The bond stake meant that I had a higher return in my retirement account than any co-workers (we all compare at the end of each year) for 2018. They are all 100% equities, including one of them who retired earlier this year.
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I think that we are going to see 20-30% correction in stock markets globally in 2020 or 2021. However, I'm not afraid of it, since I'm holding cash now. I wrote a blog post about my strategy. Basically I will keep investing every month and I am happy to buy more when the prices drop :)
Meanwhile you're losing money to inflation every day. Holding more cash than you need is a bet with the odds against you. I honestly have been expecting a 20-30% correction for several years now, and it has not materialized. If we had a 30% correction now it wouldn't even take us back 3 years. I would like to see one because I'm still buying, but I'm not expecting it. I'm only holding as much cash as I feel like I need for an emergency fund/cash buffer.
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I think that we are going to see 20-30% correction in stock markets globally in 2020 or 2021. However, I'm not afraid of it, since I'm holding cash now. I wrote a blog post about my strategy. Basically I will keep investing every month and I am happy to buy more when the prices drop :)
Meanwhile you're losing money to inflation every day. Holding more cash than you need is a bet with the odds against you. I honestly have been expecting a 20-30% correction for several years now, and it has not materialized. If we had a 30% correction now it wouldn't even take us back 3 years. I would like to see one because I'm still buying, but I'm not expecting it. I'm only holding as much cash as I feel like I need for an emergency fund/cash buffer.
Agreed. The core of the type of thinking that Financialnordic is using is that the markets are somehow "overvalued" and that not only will it correct by dropping 20% or 30%, but it'll also start over and not recover, or at least take a long time to recover.
If that's someone's underlying thinking, then they really shouldn't be investing in stocks. Or relying on the 4% rule. Because the 4% rule depends on stocks doing what they always have - go up.
Any other approach besides "buy and hold" is just some variation on timing the market. Which will almost always leave you worse off than if you'd just stayed the course. It's true in the drawdown stage, and it's even MORE true during the accumulation phase. Really, if people are still building their nest egg, they should never, ever dance in/out of the market. Not unless they want to be yet another sad example of the Dunning-Kruger Effect.
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I think that we are going to see 20-30% correction in stock markets globally in 2020 or 2021. However, I'm not afraid of it, since I'm holding cash now. I wrote a blog post about my strategy. Basically I will keep investing every month and I am happy to buy more when the prices drop :)
Meanwhile you're losing money to inflation every day. Holding more cash than you need is a bet with the odds against you. I honestly have been expecting a 20-30% correction for several years now, and it has not materialized. If we had a 30% correction now it wouldn't even take us back 3 years. I would like to see one because I'm still buying, but I'm not expecting it. I'm only holding as much cash as I feel like I need for an emergency fund/cash buffer.
I'm not sure what interest rates are in nordic...land, but here in the US you can easily get 2% on your savings account, which is more than the 2019 inflation rate of 1.65%. It's a myth that "cash" always loses to inflation, unless it's under you bed (https://www.businessinsider.com/this-chart-destroys-that-famous-myth-about-the-dollar-losing-90-of-its-value-2013-11). With 3-mo Tbills you do pretty well over long periods
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It would be silly to go with 80-90% ratio in stocks while there is a 10-year bull run behind us.
June 1952. Stock market has returned 12.2% per year (inflation adjusted!) for a decade without any major drops. Bad time to go heavily in stocks? The next 13 years the stock market continued to return 12.8% per year (also inflation adjusted).
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It would be silly to go with 80-90% ratio in stocks while there is a 10-year bull run behind us.
June 1952. Stock market has returned 12.2% per year (inflation adjusted!) for a decade without any major drops. Bad time to go heavily in stocks? The next 13 years the stock market continued to return 12.8% per year (also inflation adjusted).
Stop using logic to counter other people's gut feelings! lol, j/k of course :)
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In Europe, it's not possible to get a 2% interest on your savings account at this moment. Our interests are at 0.00% while you guys in the US have 2.5%. https://www.global-rates.com/interest-rates/central-banks/central-banks.aspx (https://www.global-rates.com/interest-rates/central-banks/central-banks.aspx)
And, I only have 9.8% of my net worth in pure cash. https://financialnordic.com/my-wealth-05-2019/
(https://financialnordic.com/my-wealth-05-2019/)
Another point why I'm holding cash and not going all in to stocks: I already have around 60% of my wealth in stocks (well, mutual funds) and I'm even buying more every month. It would be silly to go with 80-90% ratio in stocks while there is a 10-year bull run behind us. In 2007 and 2000, people were thinking that the money grows in trees. What goes up, must come down (until it goes back up and higher).
I am avoiding too many risks, and while it means that I might miss some good gains in stock market, it also means that I'm in a good position to make sure that I will make good gains long-term. Many people seem to forget how the markets work. Best buys are made in the down market :)
You're assuming you will know when the market is good and when it's bad. It's completely unpredictable.
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In Europe, it's not possible to get a 2% interest on your savings account at this moment. Our interests are at 0.00% while you guys in the US have 2.5%. https://www.global-rates.com/interest-rates/central-banks/central-banks.aspx (https://www.global-rates.com/interest-rates/central-banks/central-banks.aspx)
And, I only have 9.8% of my net worth in pure cash. https://financialnordic.com/my-wealth-05-2019/
(https://financialnordic.com/my-wealth-05-2019/)
Another point why I'm holding cash and not going all in to stocks: I already have around 60% of my wealth in stocks (well, mutual funds) and I'm even buying more every month. It would be silly to go with 80-90% ratio in stocks while there is a 10-year bull run behind us. In 2007 and 2000, people were thinking that the money grows in trees. What goes up, must come down (until it goes back up and higher).
I am avoiding too many risks, and while it means that I might miss some good gains in stock market, it also means that I'm in a good position to make sure that I will make good gains long-term. Many people seem to forget how the markets work. Best buys are made in the down market :)
I think everybody remembers the part in bold. Which is why everybody says be very careful with this strategy. The market can trickle up or trickle down for long periods of time. Very often it isn't entirely clear you are in a down market until after the fact. Sometimes well after. In the meantime, don't forget to account for the opportunity cost of going to cash. You think you are avoiding risk, but you won't know if that's true or not until the future. Maybe years in the future.
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The market can trickle up or trickle down for long periods of time. Very often it isn't entirely clear you are in a down market until after the fact. Sometimes well after. In the meantime, don't forget to account for the opportunity cost of going to cash. You think you are avoiding risk, but you won't know if that's true or not until the future. Maybe years in the future.
That’s true. But you can also objectively look at measures such as the CAPE ratio and say that US equities are very pricey. You can look at 10 year bond yields of around 2% and say they’re utter crap. Everyone has their own risk/reward requirements. Mine aren’t being met so cash looks like one of the less ugly girls at the dance.
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The market can trickle up or trickle down for long periods of time. Very often it isn't entirely clear you are in a down market until after the fact. Sometimes well after. In the meantime, don't forget to account for the opportunity cost of going to cash. You think you are avoiding risk, but you won't know if that's true or not until the future. Maybe years in the future.
That’s true. But you can also objectively look at measures such as the CAPE ratio and say that US equities are very pricey. You can look at 10 year bond yields of around 2% and say they’re utter crap. Everyone has their own risk/reward requirements. Mine aren’t being met so cash looks like one of the less ugly girls at the dance.
Are you in accumulation or drawdown phase?
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I rebalance quarterly on my birthday and the three month intervals afterward.
I've been shifting from all stocks to 20% bonds. The bond stake meant that I had a higher return in my retirement account than any co-workers (we all compare at the end of each year) for 2018. They are all 100% equities, including one of them who retired earlier this year.
And they all probably crushed you in 2019.
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Has it even been 2-4 years yet? He could still be right
It has been 2.5 years. No recession.
The advice given in the post was fine. The vague framing of an incoming recession ("two years or less?") was obviously dubious. And time has shown it to be wrong. Don't make predictions - the internet never forgets.
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Market is up 32% plus dividends since MMM's blog post. A recession at this point isn't even guaranteed to wipe out those gains.
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Has it even been 2-4 years yet? He could still be right
It has been 2.5 years. No recession.
The advice given in the post was fine. The vague framing of an incoming recession ("two years or less?") was obviously dubious. And time has shown it to be wrong. Don't make predictions - the internet never forgets.
Lol, a sentence ending in a question mark is now a prediction and you are complaining that it was too vague? Isn’t your whole point that you can’t predict recessions and therefore a specific prediction would be foolhardy?
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h/t Dave Ramsey:
" THEY have correctly predicted 2 out of the last 12 recessions. "
There will always be talk of a coming recession and more often it does not materialize. This is heightened when everything seems to be going well; we all expect the bursting bubble and the talking heads on TV like to appear clever by making dire predictions that they are never held to account for later. Further, the recession is only actually truly identified after it has begun, that is how it is understood to be a period of retreat after a time of growth. Obviously.
A long-ago FIRED individual who no longer visits these boards lamented that the market was a bit too hot and he was expecting a big pullback, but kept up his investing toward the ultimate freedom goal. The Dow was at 15,000 at the time he put the thought into writing. He was wrong but who cares, he still proceeded with his FIRE plan and has been cubicle-free since 2015.
My message? Work your plan and put away any panic.
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Has it even been 2-4 years yet? He could still be right
It has been 2.5 years. No recession.
The advice given in the post was fine. The vague framing of an incoming recession ("two years or less?") was obviously dubious. And time has shown it to be wrong. Don't make predictions - the internet never forgets.
Lol, a sentence ending in a question mark is now a prediction and you are complaining that it was too vague? Isn’t your whole point that you can’t predict recessions and therefore a specific prediction would be foolhardy?
That was Pete's own advice, which he didn't follow. Sad.
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Has it even been 2-4 years yet? He could still be right
It has been 2.5 years. No recession.
The advice given in the post was fine. The vague framing of an incoming recession ("two years or less?") was obviously dubious. And time has shown it to be wrong. Don't make predictions - the internet never forgets.
Lol, a sentence ending in a question mark is now a prediction and you are complaining that it was too vague? Isn’t your whole point that you can’t predict recessions and therefore a specific prediction would be foolhardy?
That was Pete's own advice, which he didn't follow. Sad.
There weren't any predictions in that post except that a recession would come at some point. I don't think there was any advice about a specific timeline given.
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There weren't any predictions in that post except that a recession would come at some point. I don't think there was any advice about a specific timeline given.
From the article:
So we’ve had a good run. If we go on to tie the Clinton-era record, that still gives us a maximum of two years until the trouble hits.
Whether it comes in two weeks or four years, I hope all of us are prepared for next hill on this roller coaster – it’s a lot more fun when you know it’s coming.
Not a hard commitment to a specific timeline but definitely suggesting that it's quite likely sooner rather than later.
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There weren't any predictions in that post except that a recession would come at some point. I don't think there was any advice about a specific timeline given.
From the article:
So we’ve had a good run. If we go on to tie the Clinton-era record, that still gives us a maximum of two years until the trouble hits.
Whether it comes in two weeks or four years, I hope all of us are prepared for next hill on this roller coaster – it’s a lot more fun when you know it’s coming.
Not a hard commitment to a specific timeline but definitely suggesting that it's quite likely sooner rather than later.
Yeah I guess a suggestion, but not a very strong one based on the second quote.
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There weren't any predictions in that post except that a recession would come at some point. I don't think there was any advice about a specific timeline given.
From the article:
So we’ve had a good run. If we go on to tie the Clinton-era record, that still gives us a maximum of two years until the trouble hits.
Whether it comes in two weeks or four years, I hope all of us are prepared for next hill on this roller coaster – it’s a lot more fun when you know it’s coming.
Not a hard commitment to a specific timeline but definitely suggesting that it's quite likely sooner rather than later.
Yeah I guess a suggestion, but not a very strong one based on the second quote.
He made a guess and made it clear it was a guess and moreover that it shouldn’t affect your investing strategy. To continue to break out pitchforks and revive this thread every six months, rehashing earlier arguments, is just as foolhardy as predicting the next recession
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Has it even been 2-4 years yet? He could still be right
It has been 2.5 years. No recession.
The advice given in the post was fine. The vague framing of an incoming recession ("two years or less?") was obviously dubious. And time has shown it to be wrong. Don't make predictions - the internet never forgets.
Lol, a sentence ending in a question mark is now a prediction and you are complaining that it was too vague? Isn’t your whole point that you can’t predict recessions and therefore a specific prediction would be foolhardy?
That was Pete's own advice, which he didn't follow. Sad.
There weren't any predictions in that post except that a recession would come at some point. I don't think there was any advice about a specific timeline given.
It’s a lot easier to fix your problems right now, with a stiff economic tailwind at your back, than it will be in just a couple of short years (or less?) when the high seas and lighting bolts and whirlpools are ripping at your pockets.
The "advice" is really run-of-the-mill stuff -> perhaps only paying off your mortgage early would have cost you in the previous ~3 years.
So if the point of the post was to continue making the financial moves you need to make to reach FI regardless of the current economic climate, why throw in these "suggestions" of when the next recession is coming? It reads entirely as click bait. I guess it's easier to get people to click on your article if you dress it up with some gloom and doom predictions/suggestions about the next recession being close while giving out the same, relatively boring advice on how to reach FI or any other financial goals outside of the mainstream. Don't waste money on luxury items, live well within your means, eliminate and don't take on consumer debt, etc. It's the same stuff with a bunch of stuff about a recession that may or may not hit in the next two years.
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Yup, fix your financial problems in good times because bad times will inevitably come. Most financial advice is run of the mill these days. We can’t all be doing original research (there are better blogs for that)
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Yup, fix your financial problems in good times because bad times will inevitably come. Most financial advice is run of the mill these days. We can’t all be doing original research (there are better blogs for that)
Yeah, most of MMM's stuff isn't so much original ideas so much as original ways of presenting existing ideas. That's important, too, though. All the original research in the world isn't worth anything if nobody knows about it.
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I rebalance quarterly on my birthday and the three month intervals afterward.
I've been shifting from all stocks to 20% bonds. The bond stake meant that I had a higher return in my retirement account than any co-workers (we all compare at the end of each year) for 2018. They are all 100% equities, including one of them who retired earlier this year.
And they all probably crushed you in 2019.
It's true. SP500 returned over 31% during CY 2019, so these co-workers--all of whom had a higher share of SP500 relative to other risky assets, and none of whom have a higher bonds stake than I do--beat me this year. Hoping for a rotation back to value and international this year!
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The point of the post is that eventually a recession will arrive - that is a fact. Not that he was predicting one soon.