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Everybody get out their crystal balls and predict the future. I have a few questions.

Will the Foolish Four or one of the other approaches do ok in a market downturn? It has not been tested during a long downturn or recession. The bull market won't go on forever.

Will the government screw up by collecting more revenues now (traditional to Roth IRA conversions) and run short later and then come after the Roth IRA?

Will inflation stay low?

What will happen to the stock market when all the boomers start removing their funds for retirement and when?

Will social security be means tested? (I believe so.)

Give your opinion and add your own questions. Answers to these are always helpful.
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Will the Foolish Four or one of the other approaches do ok in a market downturn>>>>

All I can say is, it has before, in fact, several of the variants even MADE money during the great bear market of 73-74

and run short later and then come after the Roth IRA?>>>

Oh, probably! Will undoubtably be labelled the 'enemy of the people' should some one like D. Gebhart (sp?) gets elected, and that cess-pool of corruption known as the democratic (little d) congress gets back in power. Hopefully a lot of Fat Cat Democrat Limosine Liberals get us grand-fathered.
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durn it! hit the Submit button by mistake!

Will inflation stay low?>>>

Lord I hope so! Call pychic friends and let us in on the answer

when all the boomers start removing their funds for retirement>>>>

Unless the country gets caught up in a massive economic down-turn, there is little reason for them to do so.

Will social security be means tested? (I believe so.)>>>

I concur -- us rich(?) who took unfair advantage of our riches(?) and actually SAVED SOME MONEY will be poorly treated so the right honorable Dingbat can get elected. Lets face it -- it's easier to blame some one else than put your own financial ouse in order....
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PSUEngineerFool,

<<Everybody get out their crystal balls and predict the future. I have a few questions.>>

O.k., just so long as we recognize that predicting the future about nearly everything is pretty much of a crapshoot, let's speculate.

<<Will the Foolish Four or one of the other approaches do ok in a market downturn? It has not been tested during a long downturn or recession. The bull market won't go on forever.>>

It along with other variants have been backtested, and they hold up quite well. In fact, the Retired Ralph Redux portfolios I constructed (see http://boards.fool.com/registered/Message.asp?id=1040013000079000&sort=postdate and go to Retiree Portfolios - 22 or 23) used a straight BTD4, the old FF, and the Dogs of the Dow ala the HY10 along with indexing. The models revealed that starting in the bear market of 1966 and continuing through the one in 1968 and the worst in 1973-1974, both the BTD4 and FF held up quite well and trounced the index approaches. Will that hold true in the future? I have no reason not to think so. Then again, anything can happen.

<<Will the government screw up by collecting more revenues now (traditional to Roth IRA conversions) and run short later and then come after the Roth IRA?>>

A future Congress might go after the Roth if it wants to commit suicide. Personally, I think they'll come at it some other way rather than via a direct tax on Roth withdrawals. A national sales tax or flat tax comes to mind along with means testing for Social Security and medicare. However, those will affect all sources of income, not just Roth withdrawals.

<<Will inflation stay low?>>

Don't hold your breath for a continued 2% or lower. Try almost double that for a long-term average.

<<What will happen to the stock market when all the boomers start removing their funds for retirement and when?>>

Not much. IMHO there's too much hoopla about that issue. First, it conjures up an image of the boomers all rushing to sell stocks on the same day. That just won't happen. Even if they all sold every equity position on the day they retired, you're still talking about a 20-year sell-off. Besides, there are still generations behind them - better savers, too! - that will be in the equities market. Nope…..At best it will be a minor long-term blip of statistical note only to academicians.

<<Will social security be means tested? (I believe so.)>>

Yes, above a minimum level. And it will be fully taxed, too. But that's not the real issue. The bigger question is will Medicare survive? And to that, I'll respond, "No way, Jose." The medical care system in this country for the elderly is broken beyond repair. Triage will be the norm except for those having the ability to pay for private care. Medicare will evolve into the worst possible socialized medicine imaginable and cost far more than it does today. Plan on dying early because you won't be able to afford the care necessary to live.

Now, check back with me in 20 years and we'll see how correct these prognostications were.

Regards…..Pixy


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Everybody get out their crystal balls and predict the future. I have a
few questions.Will the Foolish Four or one of the other approaches do ok
in a market downturn?
--Yes

It has not been tested during a long downturn or
recession. The bull market won't go on forever.
__ Yes it has. I posted info on returns broken down by decade and by market condition in the last month on the DDA board.

Will the government screw
up by collecting more revenues now (traditional to Roth IRA conversions)
and run short later and then come after the Roth IRA?
---Depends what you mean by "screw up". If you mean "make a mistake", the answer is no. But if you mean something like "purposely do something other than the stated action", then the answer is "probably yes". The only question is how probable it is. WHen I listen to folks like Gephart, Kennedy, etc. I think this probability is close to 100%.


Will inflation stay
low?What will happen to the stock market when all the boomers start
removing their funds for retirement and when?
Nothing. Money going into the stock market is not the same as money going into a mattress. It's used to produce things. And production is what lets us consume things.

Will social security be
means tested? (I believe so.)Give your opinion and add your own
questions. Answers to these are always helpful.
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<Money going into the stock market is not the same as money going into a mattress. It's used to produce things.>

Nice in theory, but only the money going to purchase IPO's does this. The rest is just shuffled around between investors and making a little money for the brokers. None of it gets back to the companies that produce things. There has a net decrease over the last decade or so in investment in productive enterprises (though, of course, there are exceptions). More shares have been bought back than new shares issued. Most of it is used for one company to take over another, and this does not, in itself, create new productive capacity. It may permit layoffs of redundant people and increase one measure of productivity. Unfortunately, these layed off people cannot create effective demand for products or services, so that on a global or even national basis, this is not a real productivity increase. Most real investment capital comes from internal corporate financing or the issuance of debt (not equity) instruments.

<And production is what lets us consume things.>

I certainly agree with this, but it is not closely related to the trading volume of stock markets, for example.
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<< <Money going into the stock market is not the same as money going into a
mattress. It's used to produce things.>Nice in theory, but only the
money going to purchase IPO's does this. The rest is just shuffled
around between investors and making a little money for the brokers. None
of it gets back to the companies that produce things. >>

This isn't correct. This is only true is you only pay attention to direct consequences and ignore indirect actions and reactions. If nothing else, a secondary market is necessary for the primary market (IPO's) to exist. If those who invest in an IPO were stuck in that investment, few would do so. The existance of the secondary market enables the IPO market to exist. The secondary market is therefore the sine-qua-non of the direct investments to companies. I don't think you would claim that indirect investments are any less "real" than direct investments, would you?

I keep hearing this argument on Usenet. This is the equivalent as saying that the freedom of the press is important to authors, or freedom of speech is only important to public speakers.

<<Most of it is used for one company to take over another, and this does
not, in itself, create new productive capacity. It may permit layoffs of
redundant people and increase one measure of productivity.
Unfortunately, these layed off people cannot create effective demand for
products or services, so that on a global or even national basis, this
is not a real productivity increase.>>

Yah. This is what Europeans (esp. France) thinks. They wonder why they, with all their "worker protection" plans have such poor economies, while the US, with full freedom to layoff, downsize, etc. has a booming economy.

Dallas Federal Reserve Bank, economist (economic historian) W. Michael Cox:
Our economy, he points out, has added 35 million jobs since 1982, a
growth rate almost four times the job growth in Europe. In the last six
and a half years alone, our economy has added 15 million new jobs."And
that's net new jobs," he says. "It's been estimated that 25 million jobs
were destroyed during that period so we really created 40 million new
jobs." 3/29/98

Sorry to go on so long.
Ray

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<<Dallas Federal Reserve Bank, economist (economic historian) W. Michael Cox:
In the last six and a half years alone, our economy has added 15 million new jobs."And that's net new jobs," he says. "It's been estimated that 25 million jobs were destroyed during that period so we really created 40 million new jobs." 3/29/98>>

Now for a side comment completely off the original track:

I suspect that the 25m jobs destroyed were high quality, Reagan-era jobs and the 40m jobs created were those wonderful Clintonite positions like midnight basketball counselors and paid Americore "volunteers" (or whatever that bogus program was called). Although, I do think a significant number of the new positions may indeed have been for lawyers, most of whom are now being retained by the White House.
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"I suspect that the 25m jobs destroyed were high quality, Reagan-era jobs and the 40m jobs created were those wonderful Clintonite positions like midnight basketball counselors and paid Americore "volunteers" (or whatever that bogus program was called). Although, I do think a significant number of the new positions may indeed have been for lawyers, most of whom are now being retained by the White House."

I suspect that neither Reagan nor Clinton created any of the jobs in our economy. They were created by entrepreneurs and other sorts who were willing to work hard and take on risk to start or expand a business. There is at present a shortage of MBAs and companies are going at it hard to get them right out of college, giving signing bonuses among other things. College graduates are in huge demand in many skilled occupations. I suspect that many of the job losses were in things like textile mills and manufacturing facilities while many of the new ones are in high skilled positions. Some of the displaced manufacturing workers may not have the higher education needed for these new positions forcing them into lower paying service positions. So yes some good jobs were lost and replaced with lower paying ones, but there are great new job openings paying good money out there.
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<I suspect that the 25m jobs destroyed were high quality, Reagan-era jobs and the 40m jobs created
were those wonderful Clintonite positions like midnight basketball counselors and paid Americore
"volunteers" (or whatever that bogus program was called). >

Actually, if memory serves, this same complaint was laid at Reagan's feet during the '80s. RR was criticized extensively for allowing steelworkers, etc. to be laid off and the Dems complained that *all* the new jobs involved the phrase "you want fries with that." The more things change...

Chris S.
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>huge demand in many skilled occupations. I suspect >that many of the job losses were in things like
> textile mills and manufacturing facilities while many >of the new ones are in high skilled positions.
> Some of the displaced manufacturing workers may not >have the higher education needed for these
> new positions forcing them into lower paying service >positions. So yes some good jobs were lost
> and replaced with lower paying ones, but there are >great new job openings paying good money out
> there.

A lot of the job loss is due to flattening out of the managerial structure. Thus a lot of highly paid paper shufflers lost their jobs.
Many of these people are *ON PAPER* qualified in technical fields, but in reality they spent too long in management not keeping up with their field.
Their true qualifications were middle manager--a field that doesn't employ nearly as many as before.

Clinton vs Reagan had nothing to do with this.
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My sense of humor (or lack of?) seemed to spark some serious responses. Let me respond with a couple of (somewhat) serious replies.

<<I suspect that neither Reagan nor Clinton created any of the jobs in our economy. They were created by entrepreneurs and other sorts who were willing to work hard and take on risk to start or expand a business.>>

Do you see any connection between risk/reward and tax rates? The *short* story from the economic perspective is that free markets foster entrepreneurship. Lower taxes are a clear indication of market freedom (although not the exclusive indication). One of the largest areas of control over the economy that Presidents can directly influence is tax rates. Reagan lowered them. Clinton raised them. Read chapter two for tomorrow and be prepared for a short quiz. Class dismissed.

<<There is at present a shortage of MBAs...>>

Hey, no talking in the back of the class. Now before you run off to get an MBA, here's something to think about. A significant (sadly enough) number of people coming out of undergraduate programs can't perform well in reading, writing, or arithmetic. It used to be that a high school diploma was proof of proficiency in those areas. If MBAs are in demand, it's only because of the devaluation of our educational standards (don't get me started on the NEA).

In addition, only one third of the schools granting MBA degrees are AACSB accedited. All schools combined churn out (I think) about 80,000 MBAs a year. So there are plenty of MBAs around that I wouldn't let operate on me... whoops, wrong profession... I mean... operate my business. What you probably meant to say was that there is a present shortage of *quality* MBAs. Now, go back to studying for your econ quiz.
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"My sense of humor (or lack of?) seemed to spark some serious responses. Let me respond with a couple of (somewhat) serious replies."

I didn't realize it was humor. Sorry about that.

"Do you see any connection between risk/reward and tax rates? The *short* story from the economic perspective is that free markets foster entrepreneurship. Lower taxes are a clear indication of market freedom (although not the exclusive indication). One of the largest areas of control over the economy that Presidents can directly influence is tax rates. Reagan lowered them. Clinton raised them. Read chapter two for tomorrow and be prepared for a short quiz. Class dismissed."

I understand economics fine, got an A in micro and macro. I was trying to make the political point that Presidents get way too much credit for the economy while they are in office. While lower tax rates are positive for growth, the economy does well IN SPITE of gov't intervention (trying to get at unintended consequences here). While this may just be a semantics argument, Congress technically pulls the purse strings while the President signs the bills. (Civics 101) :)

"Hey, no talking in the back of the class. Now before you run off to get an MBA, here's something to think about. A significant (sadly enough) number of people coming out of undergraduate programs can't perform well in reading, writing, or arithmetic. It used to be that a high school diploma was proof of proficiency in those areas. If MBAs are in demand, it's only because of the devaluation of our educational standards (don't get me started on the NEA)."

I don't buy the argument that we have bad colleges. While we do have some education problems I know of no college graduates who can't do the three "r's" reasonably well.

"In addition, only one third of the schools granting MBA degrees are AACSB accedited. All schools combined churn out (I think) about 80,000 MBAs a year. So there are plenty of MBAs around that I wouldn't let operate on me... whoops, wrong profession... I mean... operate my business. What you probably meant to say was that there is a present shortage of *quality* MBAs. Now, go back to studying for your econ quiz."

I defer to you on that one since I have no numbers on the schools or graduates. I was referring to articles I had read in some financial magazine and one of the newspapers about the MBA job demand. Maybe I should have thrown that quality tag on there.
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<<< ... MBA's ... >>

At my company, a typical MBA degree qualifies you to apply for a job running the Xerox machine.

Computer programmers and electical engineers, however ....... Current hiring standards are: Must be able to fog mirror held under nose. Ability to walk OR chew gum a bonus. Ability to speak English optional. Oh, and able to pee into a cup. Starting salaries are around $40,000+ ---TRULY OBSCENE.

At a recent division meeting, the president said that the industry requirement is something like 100,000 new hires per year, and only 30,000 graduates per year. Now, ask me if I am happy that I decided to become a programmer!

Ray
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<A lot of the job loss is due to flattening out of the managerial structure. Thus a lot of highly paid paper shufflers lost their jobs. Many of these people are *ON PAPER* qualified in technical fields, but in reality they spent too long in management not keeping up with their field. Their true qualifications were middle manager--a field that doesn't employ nearly as many as before.>

I imagine it is impossible to know what this is about. I was considered "management" where I used to work but, as far as I know, that was just a trick so that I would be exempt from The Fair Labor Standards Practices Act. Thus, I would have to work overtime for free, could not join the union, etc. I was certainly not management in that I could tell anyone what to do. I designed communications systems, compilation systems, wrote computer operating systems, etc. So when I was given early retirement, this counted as lowering the amount of middle (or lower) management at the company, but what they really did was get rid of an engineer. 11,400 of us left the year I did from that company, so it looked as though they reduced their management overhead, but they really reduced their research and development staff.
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>> At my company, a typical MBA degree qualifies you to apply for a job running the Xerox machine.<<

Mine, too, although I do know of places where this isn't true.

>> Computer programmers and electical engineers, however ....... Current hiring standards are: Must
be able to fog mirror held under nose. Ability to walk OR chew gum a bonus. Ability to speak
English optional. Oh, and able to pee into a cup. Starting salaries are around $40,000+ ---TRULY
OBSCENE. <<

Basically true, especially the ability to speak English part. Although our starting salaries are significantly higher. Plus, a $5000 referral fee (for any current employee who refers a successful candidate)! Anyone what to come and work in Chicago??? :)

Neil
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<<a typical MBA degree qualifies you to apply for a job running the Xerox
machine.>>

<<Computer programmers and electical engineers, however....tarting salaries are around $40,000+ ---TRULY
OBSCENE. >>

<<Anyone what to come and work in Chicago??? :)>>

Simple supply and demand. MBAs (plus BAs and BSs in finance or business) are a dime a dozen coming out of college these days, but CS grads have been falling for the last decade. (Can't speak for EEs, but would imagine the same trend as CS grads)

Not that I'm complaining. Life's good for the technically competent these days. And there's no reason to move to Chicago. Sunny Atlanta is green in more ways than one.....

Cheers,

Shealy
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