Seeking Alpha

David Crosetti

View as an RSS Feed
View David Crosetti's Comments BY TICKER:
Latest  |  Highest rated
  • The 4% Rule Examined [View article]

    You keep making the assumption that I am the one who created this notion of 1000 shares of JNJ being purchased in 1970.

    I am not the initiator of that model. Another commenter made the construct and I've been doing nothing more than responding to the lack of reality in his model.

    If you bought a can of freaking tuna in 1970, it would be worth more today than it was back then. I don't understand your point.

    Suffice to say, if as the original commenter suggested, a guy with enough money in 1970 to purchase 1000 shares of JNJ would have been one very rich sob, because the average stiff was taking down $2.25 an hour in a union job back then.

    Stop and think about it for a minute. What did a brand new 1970 Chevy Corvette cost back in 1970. In today's money it looks like chump change and one can wonder why everyone didn't own a Corvette back then.

    The reason is the same as today. Because a 1970 Corvette was about as expensive as a 2014 Corvette is today back then and the average Joe couldn't afford to own one.
    Sep 14 08:38 PM | Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    I am sitting there (almost) with my Jackson 5 stocks. The income from dividends with those 5 stocks (PG, CL, KMB, KO, JNJ) that were purchased beginning in 1984 and held will throw off more than 4 times my Social Security benefit at age 66 (next year).

    Again, why would I sell a single share? To take profits off the table? Heck, my cost basis on KO is $1.72 a share. Think I'm concerned about a market correction and a price decline of 30% on KO?

    Nope. The income from KO is larger than my SS benefit that I would be drawing in 2015. And, unlike SS, my KO income goes more than 6% a year, every year, for the last 15 years.

    Like I keep telling people. Don't dismiss anything, Do the math.
    Sep 14 08:31 PM | 2 Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    No, I went to the JNJ Investor Relations Site to look at the numbers. They only go back to 1980, so I used the 1980 numbers, because at least I know they will be accurate as opposed to numbers coming from a site like Yahoo for example.

    Most DG investors, will reinvest dividends. Not all DGI, but most. I used the numbers, because the earlier comment by the contributor suggested that if you bought 1000 shares of JNJ back in 1970, it would be worth "X" today.

    Since I could not confirm the numbers from 1970, I used 1980. No deception implied or used.

    But, then you would have seen that had you actually read my comment as opposed to not having read it.

    Here's the upside. Either way, 1970 or 1980, 1000 shares of JNJ would have done well for you, with a buy and hold.

    However, in 1980, those shares would have cost $76k. For the average American, that was about what a house would have cost (well, at least in California where I lived and bought my first home in 1980 for 110k).

    But, when I went to purchase my home, I was not able to pay cash for it. You see, I had to take out a 30 year mortgage, because I was broke, except for my Coca-Cola paycheck which was $30k a year.

    So, I would seriously doubt that anyone who was "Joe Six Pack" was in any kind of condition to be able to invest in JNJ and purchase 1000 shares, as the earlier commentor suggested in his initial post.

    Anyway in either case (1970 or 1980) the investment with dividends reinvested or without dividends reinvested (take your pick) would have done very well and in either case with a current $2.80 a share dividend that JNJ currently pays, either investment would be throwing off a hell of a lot more money than most of us are making at our jobs.

    In my example, over 200k of income. In his example more than 400k of income. Just from ONE stock. Think if he owned KO, PG, CL, and KMB as well as JNJ? Holy moley.

    I digress.

    Back to my own original question. WIth that kind of income (pick which one you want to use, I want you to be happy) why would you consider doing anything like selling shares to live on or supplement your income?

    You have all the freaking income that you could possibly need, unless you are really Brad Pitt or George Clooney with $400k a year, don't you think?

    Having the option to sell is one thing, but actually choosing to sell is another.

    So, please take a minute, read the post and before you comment, think about it.

    Sep 14 08:26 PM | 1 Like Like |Link to Comment
  • The 4% Rule Examined [View article]

    I had a real good friend who told me about Netflix. Heck, my kids were users of their service and would come over to the house and hook up their computers and we'd watch movies.

    At that time, the stock was selling for around $295 a share. We didn't buy any, because all of our funds were tied up in companies like JNJ, PG, KO, CL, KMB, MCD, MO, T, VZ, COP, CVX, RAI, SO, etc.

    The company (NFLX) decided to change their pricing structure soon after I was exposed to the company as a potential stock purchase. Well, I sure was glad that my being a DGI put limits on what I could and could not purchase, as the stock closed at $54 a share, not to long after that.

    I really missed out big time on that one.

    Well, I had some discretionary income and actually bought NFLX at $60 a share. Seemed more reasonable, fundamentally at the time. I sold it, though, in July at $439 a share. I guess I should have kept it, because now it's at $475 a share...............

    Live and learn, right, Jerry?
    Sep 14 08:12 PM | 1 Like Like |Link to Comment
  • The 4% Rule Examined [View article]

    Yep. Perfectly reasonable and obvious that major corporations increase their dividends so that they can remain on some random list.

    Yeah, that makes perfect sense to me.

    Thanks for pointing it out.

    Sep 14 08:04 PM | 1 Like Like |Link to Comment
  • The 4% Rule Examined [View article]

    Having options to do whatever is always good. But the original context of the comment stream was about selling for "income." My question still stands. The original author followed up with saying that his example had even more shares (from 1970 vs. my 1980) and in that scenario, the income is over $400k a year from that one position in JNJ.

    I think you might be overthinking this, as you have a tendency to want to see the good in people. I don't believe the original commentor was being genuine and his original post is just plain ignorant of the realities of the strawman that he set up.

    All I'm doing is asking a simple question. If you were in his situation, getting 400k of income from one stock position, why would you need to sell?

    Don't overthink it, Paul. The correct answer is "You wouldn't NEED to sell any, but you could if you wanted to."

    Sep 14 03:08 PM | Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    I just asked you a series of questions. If you just want to sit there and sing Kumbaya, then good for you. Don't post then, if you don't expect some questioning.

    Sep 14 02:36 PM | Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    If you own 500 shares and you sell 100 shares, then how many shares do you have left? Let's see......................

    Is that less than the 500 you started out with?

    You are either being obtuse or just don't understand simple math. Which one is it?
    Sep 14 02:33 PM | Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    How is the 4% withdrawal rate "constant?" If you withdraw 4% of your portfolio value and inflation is running 4% then how do you plan on paying for gas, food, insurance, housing etc in an inflationary environment (even a low inflation environment)?

    If you worked at a job for 10 or 20 years and you never got a raise in your income would you be in good shape today or bad shape?

    Would you have looked for a better paying job somewhere along the way or would you have just stayed on and not received any more compensation year over year?

    If I own a DG portfolio with a 4% yield and a DGR of 6-8% wouldn't I be generating more income year over year vs. the non-DG portfolio?
    Sep 14 11:18 AM | 1 Like Like |Link to Comment
  • The 4% Rule Examined [View article]
    <<JNJ had 6 splits from 1970 to date. The first two were 3 for 1 and the other 4 were 2 for 1. Do the math, 1000 becomes 144,000.>>

    Ok, let's use your numbers, instead of mine, since the JNJ Investor Relations site only goes back to 1980. Ready?

    In your scenario you own 144,000 shares of JNJ. You are getting the same $2.80 a share, so you will receive $403200 in dividend income. Why in the hell would you sell a single share, when you are going to get $403k of income and that income is going to increase by 7% a year (based on JNJ's historical DGR)?

    Your next supposition? Here's your quote:

    <<<In early 1970 JNJ was selling for about $160 so that 1000 shares would have been worth around $160,000. However this article is about funding an early retirement. If you had been able to retire in your 40s in 1970 I think a portfolio of that size would have been called for>>>

    DM is not 40 and he is not retired "yet." As for your hypothetical investor, having 1000 shares of JNJ in 1970 would have been a pretty difficult thing to do, considering that in today's dollars, your $160k would have been worth $989K in 2014 dollars, based on an average 4% inflation rate since the 1970's. Unlikely that an investor would have that much money in one stock, much less a complete portfolio of many stocks with the same amount of value. Especially when the average American today has less than 100k of net worth. In 2014 dollars.

    You say:

    <<My point is with 144,000 of them I think if you wanted to sell some and buy that water front vacation home it would be alright to do. Those shares would be worth over $14 million today and that is without the reinvested dividends. With the dividends I'd guess more like $50 million.>>

    A "guess" is as good as an "assume" and you are aware of what happens when you "assume" something?

    But, again, where you are confused is that the average investor did not own 1000 shares of JNJ in 1970 and the author is holding JNJ and building a position moving forward.

    And, again, I ask, using your numbers--"if you actually owned 1000 shares of JNJ in 1970 and today you have 144,000 shares due to splits and those 144,000 shares were delivering $403k of income (from just ONE company) then why in the hell would you sell a single share, when you can leave those shares to a heir and that heir would get a stepped up cost basis of $104 a share and not owe a single dollar of capital gains taxes on $15M dollars if he chose to be the one selling out of the position?

    Use your brain, here and don't get all offended and pushed out of joint. I am attempting to teach you something--like how to think critically. It will serve you well if you learn how to do it.

    Sep 14 11:12 AM | 3 Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    They could put a little flag in the ground to mark the spot.

    Then I can come along, remove the flag, dig up the mason jar and make off into the night.

    At my age, I just don't see the value in beating around the bush.

    At my age, I just don't have enough time left to "teach" someone.

    Sep 14 10:54 AM | Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    Got CPA?

    Never make any financial decisions without one.

    Give you an example. When I got out of the Army, I was a qualified helicopter pilot. Decided to get my fixed wing. Then I decided to buy a plane. I didn't realize just how expensive owning a plane could be. My CPA set up an aircraft leasing program for my plane. Since I couldn't fly every day, but other people needed a plane, I let them use mine. Paid for the cost of maintaining (maintain the plane or you die), hangar fees, insurance, and operating costs (to fly the thing).

    I ended up owning three planes. And letting other people buy them for me.

    Sep 14 10:53 AM | 1 Like Like |Link to Comment
  • The 4% Rule Examined [View article]

    I've encountered people with that mind set.

    I've never turned down a raise over taxes.

    I employ a CPA to minimize my taxes. He does a great job and has been able to take my "hobbies" and turn them into business endeavors that reduce my taxes significantly.

    He is indispensable.

    Sep 14 10:49 AM | 2 Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    Why would you give him a link, when he has already said that he doesn't read them, but instead "infers" an error on your part?

    That's hopeless.

    Sep 14 09:32 AM | Likes Like |Link to Comment
  • The 4% Rule Examined [View article]

    Please. Stop and think a little bit, because you are making comments that are really confusing and not making a lot of sense.

    I don't know where you are getting your numbers from, because you haven't provided that. Perhaps you could go to the Investor Relation site for the company and get more accurate information. But, let me do it for you.

    The JNJ site goes back to 1980 and not 1970. Had you purchased 1000 shares of JNJ in 1980 (January 1) and reinvested dividends here's what would have happened for you.

    Jan 1, 1980 1,000 $ 76,750.00 72,985 $7,632,870.18 9,845.11%

    There were 5 splits along the way. But, here's the problem. In 1980 to buy 1000 shares of JNJ would have cost you $76,750, which a lot of people just didn't have. I was working for Coca-Cola in 1980 and I was being paid the princely sum of $30,000 a year with a company car as a "bonus."

    But, regardless. Let's just assume that you robbed a bank or something. Needless to say, your 1000 shares would be 72,985 shares with dividends reinvested.

    Now, today you decide to retire. Your current dividend with JNJ is $2.80 a share, which means that you are going to get $204,358 in dividends over the next 12 months (without factoring in the dividend increase that should come in May of next year?

    So, answer me this, Grasshopper. Why in the world would you need to sell a single share of JNJ in your portfolio, when the company is giving you $204k in dividends?

    Hell, I was born and raised in California (San Francisco) and $204k a year goes a long way there, even with the high cost of living.

    Now you could elect to sell the shares you own, but again, I am asking you to tell me why you would sell, specifically, and what you would hope to accomplish by doing so.

    I can't wait for your answer. Looking forward to it, actually. Should be interesting.
    Sep 14 09:28 AM | 2 Likes Like |Link to Comment