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iShares TIPS Bond Message Board

  • harry.tong harry.tong Jun 9, 2011 7:46 PM Flag

    To markm0722

    What did you invested in before when you retired back in 1999? What was your cost basis? How did you know tech bubble was going to burst the next year? Regardless, bravo to you for making prophetic calls.

    p.s. Im still kicking myself for selling out my Freddie Mac preferred stock that I bought for 2 cents on the dollar and now selling for a loss, then see it rise up to 10 cents on the dollar. $170,000 opportunity loss in less than 1 year. I am heavily invested in the for-profit education sector, a contrarian bet.

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    • I can't answer all of your questions without doing a lot more research.

      Although I did feel there was a dotcom bubble (and avoided dotcom stocks), I didn't put all the pieces together. I did own some technology. My saving grace was that I did not bet the farm on it and my non-technology stocks carried me through the storm.

      Here's a list of the stocks I owned in December 1999 (not equal weighting). I mostly tried to diversify across various industries.

      Alaska Air Group
      Applied Materials
      Chase Manhattan
      General Electric
      Hansen Natural
      Kimberly Clark
      Mens Wearhouse
      Nortel Networks
      Oracle Systems
      Outback Steakhouse

      As you can see, I was not as prophetic as you might have thought. It didn't hurt that I was 31% cash when few others were. It also didn't hurt that I sold Hansen for 6x what I paid for it in 2004 and it offset a great deal of those tech losses.

      In fact, had I held Hansen until today then the original $22,000 investment in it would have retired me yet again. As of today, it is up well over 100 times what I paid for it. I would not have done that though. It was hard enough to watch it become my largest holding. The temptation to diversify was too great. I would also point out that I felt that the "energy drink" run was about over. I was so wrong! As a side note, they didn't even have an energy drink when I invested in them. I just saw their products at Costco and thought the stock seemed cheap.

      I felt serious pain in the early 2000s recession. I did not want to repeat it. It was my bank stock holdings that concerned me the most in 2004, due mostly to all those ridiculous mortgage offers filling my mailbox. I figured if I was right about banking stocks, then the whole economy was in peril. I did a lot better weathering that downturn than I did the previous one. I exited the stock market permanently (more than likely). My TIPS did experience some losses as deflation set in but it was temporary.

      Had I kept the gold and silver I bought in 2004 until today (I put 1/3rd of my nest egg in it and sold in 2006 for a 50% gain) then that too would have retired me again. I sold silver at roughly $10. Good grief. It is over $35 now.

      That said, early in and early out didn't exactly hurt me. I wish I would have done that with tech stocks in 1999. What stopped me? I didn't want to pay the tax on the gains. I got my wish. I eventually sold Nortel for the tax write-off, lol. Sigh.

      • 1 Reply to markm0722
      • I want to add one more thought to what I wrote here.

        During the very depths of the stock market collapse in the early 2000s, I felt serious pain. Fortunately, I did not sell. I simply held on and hoped for a recovery. It wasn't until 2004 that I exited. Overall, I was made whole (and then some).

        I never want to go through that experience again. I slept much better during the next big crash even as the value of my TIPS fell. It was no big deal at all to me. I knew what they were worth to me and I was planning to hold them until maturity anyway.

        I think investors today just assume that it can't happen again, especially now that unemployment is 9%. Things can only get better.

        I'm not in that camp. I think things could easily get much worse before they get better. It is my opinion that we simply delayed much of the pain. We tried to solve a debt problem by throwing more debt at it. I'm skeptical that it can work long-term.

        It is just an opinion of course.

        There's still a chance that this economy can financially ruin me. I do own TIPS and I-Bonds. We could hyperinflate or simply default on our debt.

        As Greenspan said in 1966, "There is no safe store of value."

        I believe that. I think TIPS and I-Bonds are safer though. If I am financially ruined by owning them, then I am quite confident that I won't be the first to be ruined.

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