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March 22, 2010


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Unemployment is currently sitting at 19.7% in the area where I live, and just over 25% in the town my girlfriend lives in.

I'd wager that has something to do with it.

Ditto. National unemployment rate is still almost 10%. Even here in Austin which usually weathers recessions well, the unemployment rate is the highest since the early 80's. If you're unemployed your net worth is most likely decreasing.

We weathered 3 job losses in the past 5 years and we're up from the economic downturn, but a friend isn't as lucky. She was unemployed for 3 1/2 years, took a job making substantially less than her previous salary, had to cash in a retirement annuity to cover expenses, had her salary cut (like so many of us), and then got slammed with a tax bill for the penalty for cashing in the annuity! Definitely shows the importance of a strong emergency fund whenever possible. We had to dip into ours when we were out of work, but priority #1 after getting back to work was to put that account back where it was.

I'm doing ok. Ahead of where I was before the downturn. I didn't panic; also I didn't lose a job which is a big help. I could be wrong but the negative numbers are mostly because of folks who pulled out of the market.

I too stuck it out through the credit crunch and continued to invest in my retirement investing strategy.

During the 2nd quarter of 2009 while the average was rising 4.5% my net worth rose 12%. While 3rd quarter of 2009 was 5.5% I managed 20.2%. Finally, while 4th quarter was 1.3% I managed 6.4%.

I do however fully admit to being a little different to the average person. My strategy has taken me away from 'consumerism' and has me focused on retiring in 7 years. I live very frugally to the point where I do not own a car and focus almost obsessively on minimising my ongoing costs to free money for investing.

I am in a lot better position than where I was before hand. That's also due to the new job and the 25% pay increase... my investments, however are back to where they were (not counting any new stock purchases, only what I had beforehand).

What scares me the most is what effect this new legislation will play on our future. Never mind looking back on our past, what lays before us may make or break us!

None of the few mutual funds I have are back where they were. I didn't panic, and kept everything 'as is', but none of it is back yet to where it was before the recession. Neither are my parent's mutual funds. :(

Unemployment and house values. My sister in CA lost $300,000 in value (50%), I did better in MA, it is back to what I bought at in 2003. My investments did much better. But if you price your investments in gold, they have only increased 35% since the bottom. If you believe it is gold bubble, you don't have to worry, if you believe it is a sign of inflation coming - well your net worth isn't what you think it is. I look at Obama spending like there's no tomorrow, and I am very worried about taxes and inflation.

The stock market is still down quite a bit from its peak (Dow 14k peak, 6700 trough, 10700 now). Housing costs, too. So in aggregate, the net worth of Americans as a whole should be down.

I personally had ~75% of my net worth in cash a year ago, and bought into the stock market pretty close to the bottom. That means my net worth is way, way up. But whoever sold their stocks to me for my cash has a net worth that's down even more.

I rode out the storm following Warren Buffett's advice: "Be fearful when others are greedy, and be greedy when others are fearful"

So I bumped up what I was contributing to my 401(k), and did some "dollar cost averaging" to neutralize some of the banking stocks that I bought on the way down...

So, I'm good... not spectacular, but good...

The answer is jobs and housing. Unemployment burns through savings very quickly, and the housing market in many places still has not recovered.

Housing is our downfall. If I remove housing from the picture, our net worth is at an all time high, but when you factor in the decline in our housing, we still are down compared to before everything went in the tank.

Housing, job losses or pay reductions, and market still over 20% below the peak is probably the reasons.

Once the Fed's morphine injection wears off, I expect the market to turn south again. So we may be having this conversation in three years.

S&P off 07Q3 close by 25% still. I am off by 17%.
Our savings is now at about 10.9X annual income, over 13 at peak, down to 6.9 at end of 09Q1. Imagine watching 6 years worth of income (not saving, income) flame out in just over a year's time. Gained 4 of them back, though. Didn't panic.

My net worth is about $20K higher today than it was prior to the stock market drop. I tried to be careful to ease my savings from stock funds to bond funds and cash during the drop, and ease back into growth stock funds and foreign (especially Latin American) stock funds during the recovery.

Since I stopped trading in My 2006 and moved into income investments (Bonds and Cds) our investment portfolio has not had a down month and has increased at an annual compound rate of return of 5.1%. Our home and our condo values are below their highs but not significantly. I no longer consider real estate that is owned for personal use and that is free of debt as a financial asset since neither property will ever be sold, they will be passed on to two children upon our demise.

@Old Limey,
Just asking for my own purposes; Do you own bonds or bond funds? I'm guessing bonds. Hope this isn't too personal.

We didn't lose our jobs or pull our of the market, so our net worth is higher than ever (laughable to most who read this, but higher than ever for us, lol).

Job loss has stopped progress for the people I know. My friend's husband lost his job while being the sole earner. She got the best job she could in customer service while he was unemployed for 6 months.

My other friend's husband lost his job as well...luckily that friend had a stable job already. He's still looking for something permanent while teaching at a community college part-time.

I'm very thankful for job stability.

I own individual municipal bonds, purchased at an average of 1% below par value in Oct/2008, maturities 2010-2022, average yield 4.955%. They will all be held until maturity. However since prices of muni bonds have gone up about 10% since I bought them, when one matures it's nigh impossible to find a replacement that meets my requirements so I am investing the proceeds along with the semi-annual interest they pay into a muni bond fund - SXFIX. It's also handy to have some money in a bond fund in case I need to raise some cash.

My net worth is holding up well. Sold a condo (yes, a condo) that I held for just over 3 years with a 4.5% annual growth rate in 2009, added about $15k extra to net worth last year while investments, mostly in 457/401 plans, recovered. I bought reasonably sizeable positions in PGH and GML ETFs at low points a la Buffett (greedy when others are fearful) and both have increased in value over 100%. I did not panic and pull money out as my retirement accounts crashed, but I did rebalance at the bottom, taking care to make sure the stuff I moved to had also tanked that year.

In sum, my net worth has more than doubled since this time last year and I am pushing a six figure net worth for the first time. (age 35) Savings will continue!

@Old Limey
Thanks. Bond funds seem odd to me. the risk of equities without the guarantee of bond reaching maturity. I'll have to research SXFIX. As for me:

I have put much of my 457 into guaranteed contracts (As you may know, this is in addition to a defined benefit pension I have). Last couple of years earning4% and a hair more. I have moved much ofmy savings to safety cause it will earn enough for me when I tap it. You have to know when enough is enough. always appreciate your comments.

Careful of muni's...the news lately on these have been discouraging. What once was a solid offer is becoming questionable.

My net worth has not come back all the way - almost, but not quite. My stocks are up higher than they were before (partly due to the fact that we never stopped adding to them) but my home has lost a ton of value. It's lost almost 100k in value since buying it 3 1/2 years ago. So yeah, I'm part of that lower net worth group.

I have been reading the same about muni's and bond funds in general. seems to be a lot of folks thinking that the Fed will raise interest rates long about November. No safe haven for money anywhere it seems except money market funds. Ouch!

Any other ideas?

KC and BillV
The secondary market for muni bonds does not have any attractive offerings. If you want a high interest rate you will pay through the nose for it and then take a significant capital loss at maturity. The new issue market has very low interest rates and even to get something over 3% you have to go out far too many years. If you didn't buy them between October 2008 and March 2009 you have missed the boat, it's sailed too far away. The same thing has happened with CDs, if you go out ten years all you can get is 3.65% whereas back in October 2008 you could get 5.15% on a 7 year CD. Junk bonds have had a fabulous ride but they are in dangerous territory right now.

The low interest rate environment seems to have only helped the big investment banks like Goldman Sachs who are using cheap money from the Fed and program trading to prop up the stock market. Commercial banks have been unwilling to refinance high rate mortgages because they are under water, and people that were living on their interest income have seen it plummet. For example, Fidelity's FDRXX money market fund currently has a 7-day yield of 0.03% and yet the Fed cannot raise rates or it would sink the economy. The USA is between a Rock and a Hard Place. The best thing we have going for us is that our dollar is holding up well, unlike some of the countries in the European Monetary Union, such as Greece, Italy, Spain, Portugal and Ireland.

Old Limey,
I was afraid you'd say something like the above. right now the 4% I getting in my deferred comp fixed account looks pretty good. We'll see what this year brings. At this stage, for me at least, it seems that there is--figuratively speaking--no such thing as too conservative. I do believe that things will get better, but not in the next 2-3 years. (they may not go to hell, but a lot of drift, and up and down).
Qx for you, if not too personal, you are putting some funds into a bond fund. doesn't that make you nervous at all?

Remember I am a market timer, if a fund loses its momentum I pull the trigger pretty fast. With something like a short term bond fund or a muni bond fund they are easily timed with a moving average and I have a tool that helps me decide the best value to use for a particular fund. If I needed to go even more conservative there is STSMX which is shorter term than SXFIX (tax exempt) and there is STADX which is shorter term than SSTBX (taxable).
By the way, these funds are now under the Wells Fargo name but they used to be in the Strong fund family which was one of the best. In these two cases I would simply do an exchange since they are in the same fund family.

I forgot to add that SXFIX is paying 4.2% and STSMX is paying 2.4% (tax exempt).
SSTBX is paying 2.5% and STADX is paying 2.1% (taxable).

Old Limey
As always, much obliged.

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