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Old 04-11-2009, 08:43 AM
 
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Just got off the phone with my friend in Maryland. He has been one of those one the fence sitters for the past 5 years. He's been renting the past 5 years. While renting, he had a sizable amount invested in stocks because he's still young (earlier 30s). He always kept 100K cash around just for emergencies, but up to 450K was in taxable accounts (I'm excluding retirement accounts). He told me so far he's lost about 150K in his taxable stocks (you only get to rollover 3k losses a year). The stock market has rallied a little the past 5 weeks but its still significantly down from its Oct/Nov 2007 peak. Most people do not predict the stock market to return to its peak until another 3 years, or even more.

So my question is that for all of you "one the fence sitters" how much money have you lost in your taxable accounts while renting and waiting?

So unless you absolutely timed the market (transferred all of your stocks to money market funds and sold your home in 2005/2006) you would have lost money in this economic crisis.
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Old 04-11-2009, 09:19 AM
 
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Yes your friend took a big hit on his taxable investments....however for his sake I hope he DID NOT sell out his position and turn those paper losses into realized losses. That would be a knee jerk reaction and totally inappropriate. If he is in his 30's he has one important factor on his side.....TIME.....he has time to recoup those losses when the market roars back even if it takes 10- 15 years and then he should take a look to reposition his portfolio as he nears retirement. Now is the time to sit tight and bite the bullet but whatever he does hopefully he doesn't panic and sell out.
As far as the $3,000 carryover on capital losses many don't realize that IRS guidelines usually limit the time frame on those losses to 15 years so IF your friend did sell out his position he would be able to write off a total of only $45,000 over 15 years and he would have to eat the remaining $100,000 loss. Another reason to sit tight and let time do its thing.
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Old 04-11-2009, 09:42 AM
 
Location: Bellingham, WA
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Fence-sitter here. The money I've put aside for a home purchase was never put into stocks. It's spread around among several different credit unions to ensure everything is NCUA insured. Even now, the returns on the CDs are paying about 85% of my yearly rent at my condo on the bay (but with no view).

I have lost money on my retirement accounts, but I've never had any intention of dipping into them. I'm 34 and can't retire until I'm at least 50. Call me crazy, but my contributions into these accounts are still 100% going into our stock option. I figure the market has 16 years to turn around and when it does, my accounts will rebound in a big way.

I'd love to buy a house. But my market (Western Washington) was late to the bubble-bursting party. There's too many signs of instability in my market to make me want to buy. I simply cannot justify exposing my savings to considerable losses simply because I'd like to buy right now, especially when this condo is a pretty darn nice place to live and my returns are practically paying for it. Renting, at least for me, isn't the worst thing imaginable despite what some on here would like you to believe.

The houses I'd like to buy were about $190K in 2003. Now people want $340 or more for them, and they're not moving. These are 1500 square foot homes on 6500 square foot lots - I'm not an "entitled" first time buyer who wants a mansion. Too bad the bubble screwed everything up - if those homes had appreciated normally and were now in the mid $200K range, I wouldn't hesitate to buy.

I can't believe there are people on these boards who defend the bubble - you know who you are.
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Old 04-11-2009, 10:16 AM
 
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Wow - sounds like somebody can't sell.

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Old 04-11-2009, 11:44 AM
 
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No, my friend didn't sell out most of his stock positions. He sits tight for the most part. Did some balancing acts (you know sell 30K in losses while selling 25K in capital gains just to somewhat even out losses/gains).

The thing is that you can't hold onto stocks forever. Kinda of like buying Citigroup in the 40s or 50s. Even if it recovers, it may only reach $6-10 in a couple of years. It will never fully recover. Sometimes you have to just take your losses. Look at Cisco (at peak during the internet boom was trading around $70). It's hovered around $10-20 for 6 plus years. It will never return to its heyday.

I'm just saying most of those on the fence were younger in their late 20s and 30s who accumulated a lot of cash but invested most of it in stocks (at least that was the general rule to invest in about 85-90 percent stocks at that age). He already saved a lot for a downpayment (set aside over 100K and had that in cash ready to go at anytime). But he also had tons of cash leftover and you just can't keep everything in cash and that's why most people such as him invested in the stock market (being younger about 85-90 percent in stocks, very little in bonds) and than the stock market suffers a 40% hit.

You just can't keep everything in cash forever. That's why most of those siting on the fence (with a load of cash in hand for downpayment) still invested heavily in the stock market and lost money that way.

I just do not believe the stock market will return to its peak levels for at least 3 years.

I'm just saying everyone loses with the real estate declines. Drags down everything (home values, stocks). Unless you just got lucky and cashed out in the stock market in Oct/Nov 2007 and/or sold your home in 2005/2006. The majority of people cannot time the market like that.
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Old 04-11-2009, 12:38 PM
 
Location: Great State of Texas
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fence sitter here. I got out of the stock market in 2007. Invested very conservatively and made 5% in 2008; no loss for me.
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Old 04-11-2009, 01:19 PM
 
Location: Montgomery County, PA
2,771 posts, read 5,413,632 times
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Quote:
Originally Posted by aneftp View Post
Just got off the phone with my friend in Maryland. He has been one of those one the fence sitters for the past 5 years. He's been renting the past 5 years. While renting, he had a sizable amount invested in stocks because he's still young (earlier 30s). He always kept 100K cash around just for emergencies, but up to 450K was in taxable accounts (I'm excluding retirement accounts). He told me so far he's lost about 150K in his taxable stocks (you only get to rollover 3k losses a year). The stock market has rallied a little the past 5 weeks but its still significantly down from its Oct/Nov 2007 peak. Most people do not predict the stock market to return to its peak until another 3 years, or even more.
Currently sitting on a ~30k paper loss (off a ~75k cost basis). I'm not too worried about this for two reasons:

(1) I'm not leveraged, but the home purchase is. So if house prices drop 10% and the stock market drops 10%, I still have a net gain.

(2) The stock market tends to lead everything else including home prices. So I think the stock market will recover before home prices.

I'm not putting more in right now, but I'm not pulling anything out. By early next year, I'm hoping to have enough money for a down payment that I won't need to sell anything.
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Old 04-11-2009, 01:22 PM
 
Location: Marion, IN
8,191 posts, read 27,455,458 times
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Sold in early 2007 and put all of the money into CDs & Money Market accounts. Made close to 4.5%. I will never put money that I can't afford to lose into the stock market.
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Old 04-11-2009, 01:24 PM
 
Location: Montgomery County, PA
2,771 posts, read 5,413,632 times
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Quote:
Originally Posted by aneftp View Post
I'm just saying everyone loses with the real estate declines. Drags down everything (home values, stocks). Unless you just got lucky and cashed out in the stock market in Oct/Nov 2007 and/or sold your home in 2005/2006. The majority of people cannot time the market like that.
The bursting of the bubble is the cure, not the disease.
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Old 04-11-2009, 02:06 PM
 
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For those of you who pulled out of the stock market in 2007, put everything in cash and CDs, you are either just plain lucky or had insider knowledge the rest of us didn't have. Especially those younger than 35 years old. We were all trained to have that 2 year emergency savings, have that big downpayment set aside already. The rest of the money goes to investing.

Seriously, if you already had 150-200k cash saved up (for the downpayment) plus another 200K in emergency savings. What do you do with the other 400K-500K you have remaining? You already put aside over 45K a year into your SEP. You would probably have invested it in the stock market. Don't kid yourself. Most (I'm saying at least 80 percent especially the younger crowd in their earlier 30s) would have invested that money while waiting out the real estate bubble. So those who waited out the bubble saved themselves in real estate values declining, lost money in the stock market crash.
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