Ant, you are no doubt right but I promise you I yield to none in my admiration for American positive mental attitude and kick ass optimistic outlook. I love it. May it always thrive!
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Some folks see the glass as half full.
Some folks see the glass as half empty.
A few folks don’t see the glass.
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Some folks see the glass as half empty.
A few folks don’t see the glass.
The glass is always full.
Cheers
Qazulight(Its a good thing too!)
I remember, maybe more than 2 years ago, Tom Gardner (Dave’s brother if you don’t know who he is) wrote a bit in the SA newsletter about how he was “keeping his powder dry” in preparation for inevitable market correction. The market had been advancing for “too long” based on historical patterns, and so it was only prudent to keep a good percentage of one’s portfolio in cash in order to go on a shopping spree when the market took a dive. The dive was predicted to be “soon.”
I, like Saul, and I’d venture quite a few other folks who follow this board, didn’t actually disagree so much with the sentiment. But, I disagreed with the notion that the timing of this blood bath was sooner as opposed to some unknown and unpredictable time in the future. Could be “sooner,” but it could be off in the future far enough that the opportunity cost of sitting on a pile of inactive cash had the potential of a much greater loss than staying invested and suffering through the inevitable downturn when it arrived.
I don’t know, but maybe Tom is still sitting on a bunch of cash waiting for those discount days. I’m fully invested. I’m up about 35% for the year.
I was talking to my wife this morning about our investments. She’s Chinese and really doesn’t get the whole idea behind investing. She’s just pleased that we’re up as much as we are and speculates about how much money we will have by a given date if things continue. I caution her that the market giveth and it taketh away. I do my best to invest in good companies that will probably weather a severe downturn and come back even stronger after the financial beating has taken out a lot of the competition.
I asked her, “OK, say our investments perform just as you speculate and we reach that magic dollar amount by such and such a date. Then what? What should we do differently?” I reminded her that about 1/3 of our investments are in a taxable account, so if I sell everything to cash in a given year, a whole bunch goes away in the blink of an eye to pay taxes. So what do we do with what’s left? Stick it under the mattress? Put it in the bank? Buy something? How will having the cash now help insure a comfortable life in several years after inflation has eroded the value of our pensions?
Turns out we agree. Just keep on keeping on. There’s really no sensible alternative.
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The glass had 100% reserve capacity, allowing it to continue to function over a wide variation of contents.
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Engineers see that the glass is too big by half. 
The Captain
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I asked her, “OK, say our investments perform just as you speculate and we reach that magic dollar amount by such and such a date. Then what? What should we do differently?” I reminded her that about 1/3 of our investments are in a taxable account, so if I sell everything to cash in a given year, a whole bunch goes away in the blink of an eye to pay taxes. So what do we do with what’s left? Stick it under the mattress? Put it in the bank? Buy something? How will having the cash now help insure a comfortable life in several years after inflation has eroded the value of our pensions?
Turns out we agree. Just keep on keeping on. There’s really no sensible alternative.
My wife and I live off our portfolios and have done so for 14 years. Our increasing expenditures have been huge. For every $1 we spent in 2003 we spent $4.14 in 2016. 2016 was overly large due to a partially taxable merger of one of my holdings. Expenses have normally been about 3 Times 2003 Expenses and they are climbing every year… Currently a little over 60% of our assets are in taxable accounts due to the increasing shift of funds out of our IRA’s due to the RMDs we are required to take. Normally our largest taxable event are the RMD’s.(Except as noted above for 2016)
Since we are continually withdrawing funds to live on I try to avoid taking capital gains and have positioned the portfolios to continually pay out dividends/distributions that are as much tax deferred as possible. In 2016 92% of dividends/distributions were tax deferred.
Much of the growth has to come from increased income above the amount needed for all our expenses. In 2016 we spent 57% of all income received and reinvested the 43% excess income for growth.
As of today I am projecting for 2017, a 19.4% increase in income over 2016 and with no unexpected taxable mergers I am projecting to spend about 25% of 2017 received income and reinvest the 75% excess for growth. I consider the income portion of investing to be more stable than the capital gains portion. Because management, who know what’s going on are the ones declaring the dividend–It can’t be faked–Capital gains are due to the either bullish or bearish mood swings of the investing public that usually haven’t got a clue as to what’s going on. --Someone sells so they assume he knows what he’s doing and also sells. The selling continues and the prices go down and then if everything is alright, management, who is the only ones that know what’s going on in the company, declare the regular or increase the dividend, and some get back in. But most watch as the price rises without them. And another valuable investment has been ripped out of the public’s hand due to fear.
To access a capital gain I have to sell the asset-Pay the taxes due and the worst part IMHO give up the income stream that that investment produced. Then spend what I wanted to and reinvest in another unknown security and hoping it’s going to be good to you.
When a security pays me a dividend/distribution I have the money and the investment that is still working for me. If I need the money I spend it. If I don’t need the money, I either drip the money into additional shares or add to another stock that works for me.
good luck
b&w
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B&W,
Thanks for the reply. I am interested in your approach, but it is difficult to compare our circumstances, at least it is difficult at present.
We don’t talk dollars on this board and I think that benefits all. When we start talking in term of capital holdings some folks will stop paying attention because they don’t see how it has anything to with them if they’re in a different ball park (be it bigger or smaller). But given that, I’m quite sure that your capital position is quite different from mine.
The other thing is cost of living. My cost of living is pretty steep. As my wife is Chinese an still has a lot friends and family in China we spend about 3 months out of the year in China. We maintain two homes, one in a pretty expensive part of the US, and the other in a more or less average city in China. Throw in annual travel budgets and expenses mount up pretty quickly. Then I’ve got a daughter who recently completed an MFA at Columbia Univ (not bad for a HS dropout). But with abysmal credit, I co-signed her college loans. I don’t have a moment of regret, but I have a significant debt obligation. At present, she has nowhere close to sufficient income to pay the loans.
So yeah, I hope to reach a level comparable to your own where dividends are adequate to fund our cost of living. But one needs a pretty substantial capital base in order to do that. I don’t see that happening from dripping the dividends into a low growth equity.
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Hi Brittlerock:
So yeah, I hope to reach a level comparable to your own where dividends are adequate to fund our cost of living. But one needs a pretty substantial capital base in order to do that. I don’t see that happening from dripping the dividends into a low growth equity.
Stop beating on yourself. You appear to have a lot on your plate and are probably doing better than me. I started with nothing. And built everything one dollar at a time–early in our marriage I was recalled into military service-Had to give everything up for about one year-Then a few years later illness prevented me from working for about 3 years. Then I hocked myself up to the eyeballs to buy a small retail business (I couldn’t handle my previous type of work) 14 hour days-7 days a week became the norm.
And on and on–and here I am now. Retired 14 years and my portfolio is supporting my wife and I. If I can do it, anyone can. Start by upgrading your portfolio-Buy income securities-Preferably partially or wholly tax deferred. In 2016 92% of all dividends/distributions I received were in some way tax deferred.
good luck
b&w
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Hey b&w,
For every $1 we spent in 2003 we spent $4.14 in 2016
Okay, if my math is right, that’s almost a 12% increase year-over-year. Curious why that’s so high? I mean, inflation should only be 2-3%.
Since we are continually withdrawing funds to live on I try to avoid taking capital gains and have positioned the portfolios to continually pay out dividends/distributions that are as much tax deferred as possible.
You’ve been advocating dividends since day one, and I think you finally got to me. My portfolio is 23 stocks right now, with 8 that pay dividends. So I’m now using that as one additional factor when investing new money.
So, thanks for that.
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Curious why that’s so high? I mean, inflation should only be 2-3%.
I can’t wait for Buyandwin’s reply, but as one-in-his-seventies I can say that 2-3% inflation does not necessarily apply. Excludes food and energy. And, of course, medical. I used to crawl under the sink and do hated plumbing job. Not so much anymore. Ever try to look through bi-focals when the close up work is centered in the distance part of the lens? Medical expenses are a huge increase. I’m still one-a-day vitamin guy but just the increase in medical insurance… Well, depends on where you are. But labor costs and needing just a little help can ratchet up the expenses.
Growing old ain’t for sissies but beats the Hell out of the alternative.
Anyway, glorious morning today. Air crystal clear, light breeze, a thousand shades of green, puffy white clouds, blue sky, sparkling water.
KC
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Hi Fdoubleol
Okay, if my math is right, that’s almost a 12% increase year-over-year. Curious why that’s so high? I mean, inflation should only be 2-3%
I covered that 2016 spike in the original post-- It was due to a partial taxable merger. If you remember I mentioned that all expenses I have are paid for from drawings from our portfolios. The only other income I have is from minimal SS which doesn’t even pay our FED and STATE taxes each year.
For every $1 we spent in 2003 we spent $4.14 in 2016. 2016 was overly large due to a partially taxable merger of one of my holdings. Expenses have normally been about 3 Times 2003 Expenses and they are climbing every year…<<<<
At this point in time, I expect 2017 expenses to go back to around 2015 levels + or - a bit.
. My portfolio is 23 stocks right now, with 8 that pay dividends. So I’m now using that as one additional factor when investing new money.
Upgrade your portfolio, if it needs to be done
Good luck going forward
b&w
Ever try to look through bi-focals when the close up work is centered in the distance part of the lens?
Reminds me of a time years ago when my father took over as Director of the Health Service and UIUC. The prior director was a fundamentalist who thought that undergraduates shouldn’t be doing anything related to sex (even though some of them were married!) so there was no OB-Gyn on staff. Papa immediately launched a recruiting campaign to hire one, but he really wanted a woman, so it took a year or more before a hire was made. In the meantime, since the other doctors were shy, he took up the slack … in a big way, it turns out, since he became a popular lecturer in fraternities and sororities and the like in the Big 10 … for sex lectures. But, one of the amusing pieces of this is that he ended up getting himself a set of trifocals … reading at the bottom, distance in the middle, and mid-range at the top … I will let you imagine how this figured into gyn exams! 
My own contribution to this effort was to find a semi-antique folding screen such as one used to screen off the area where a patient was to disrobe and cover one side with a somewhat lewd Beardsley print and the other side plain white. Papa would use it or the plain regular screen depending on what he knew of the specific patient.
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Hi 0forfive:
How about what I call the “Getting Older Inflation Expenses” you didn’t even mention those. What are they?
How about the going out to dinner 5-6 or 7 times a week because it’s easier for my wife than cooking at home. Lunch at the senior center 3 times a week for the same reason Help coming in 8 to 15 hours a week to do laundry, and house cleaning etc. . And on and on. 2% 3% inflation rate–You keep believing that govt nonsense and you won’t even be able to afford cat food or dog food when you get older. All of these extra getting old expenses require you to earn more money and when you do earn more you have to pay more taxes and after 70 1/2 the RMD’s come back and bite you in the rear.
Wait till you find out what the “Doughnut Hole” is, in your Medicare drug plan.
These are all the reasons I keep harping about focusing on TAX DEFERRED DIVIDENDS/DISTRIBUTIONS as opposed to making huge capital gains and paying even more taxes to the government.
I would suggest rethinking those government statistics–
Curious why that’s so high? I mean, inflation should only be 2-3%.
best to all
b&w
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I understand, but for me, tax on dividends is much higher than on capital gains and so I prefer to take income in the form of capital gains. I take little interest in yield or ‘total return’ as a direct result (although it is true that I enjoy GARP investing a great deal more than equity-income investing!).
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