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Retirement: This Time Is Different

May 15, 2020 8:02 AM ET62 Comments


  • Investors always are tempted to sell everything in a bear market to avoid the emotional pain of seeing unrealized losses.
  • Unfortunately, this never works out well, especially for retirees.
  • This time may be different, but the end result will be the same. Patience and courage will reward investors who stay on course.
  • Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Get started today »

The four most dangerous words in investing are: This time is different.

It's a statement on our tendency to believe that we won't make the same mistake twice. We believe that what's happening today is completely different from the past, and therefore, we should sell our stocks before they drop even more. The old rules do not apply anymore!

In reality, this rationalization process happens in every crisis. People become scared, they start overthinking, and quickly come to realization that now is time to get out of the market before it is too late.

Consider the example of John, Earl and Tom:

The year was 1940. John Canterbury had $10,000 invested in the stock market. He thought to himself, "We are in the middle of World War II. I better start learning German. This time is different. The markets are dangerous." John took the money in cash and buried it in his backyard. Ten years later in 1950, his $10,000, had he had kept it in the stock market, was worth $35,035.

The year was 1950. Earl Pickett had $10,000 invested in the stock market. He thought to himself, "The Communists have infiltrated our government. I'm pretty sure my neighbor Bob is a Commie. This time is different. The markets are dangerous." Earl took the money in cash and buried in it his back yard. Ten years later in 1960, his $10,000, had he had kept it in the stock market, was worth $44,694.

The year was 1980. Tom Chadwick had $10,000 invested in the stock market. He thought to himself, "The Cold War menace is looming. Nuclear tensions are at an all-time high. Russian paratroopers could descend from the skies at any time. This time is different. The markets are dangerous."Tom took the money in cash

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This article was written by

Jussi Askola profile picture

Jussi Askola is the President of Leonberg Capital, a value-oriented investment boutique that consults hedge funds, family offices, and private equity firms on REIT investing. He has authored award-winning academic papers on REIT investing, has passed all three CFA exams, and has built relationships with many top REIT executives.

He is the leader of the investing group High Yield Landlord, where he shares his real-money REIT portfolio and transactions in real-time. Features of the group include: three portfolios (core, retirement, international), buy/sell alerts, and a chat room with direct access to Jussi and his team of analysts to ask questions. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (62)

wmenuet profile picture
Another solid article. Agree it’s time to buy. Have been adding Reits slowly and strategically in this downside, and am looking to buy more on the down days.. or weeks or months.. looking for income long term, not concerned about up and down value of the equity.. but am choosing carefully..
Jussi Askola profile picture
Well said. Thank you for sharing @wmenuet
I agree that it is important to be selective in this environment: seekingalpha.com/...
The biggest unknown is the ability of Ruling Elite to maintain current political and economic construct, avoiding prolonged civil and racial upheaval. Short of this, I suggest transfer a portion of ones capital into the environs of countries with strong democratic foundations and "law abiding population".
Example, Swiss Confederation, Norway, Denmark, Finland and jewel of South East Asia , Singapore.
No wonder, Jim Rogers , 15 years ago, wisely relocated his family and capital to Singapore .
Jussi Askola profile picture
I agree that international diversification is underappreciated by individual investors. We have an International Real Estate Portfolio at High Yield Landlord. We invest in Singapore, Finland, Germany, New Zealand, etc... Free Trial: seekingalpha.com/...
Market Map profile picture
I sold out of 80% of my equity based positions ( I retired last year ) the first week of May ( including small cap value, REITs, QQQ, and "large cap" dividend paying allocations ) and have allocated into Treasury bonds (VGLT ) because:

- The trend of the Conference Board Leading Economic index turned negative in April ** and
- the trend of the equity market, as expressed by the SP500 price in relation to its monthly basis moving average ( it crossed below Feb 29th 2020 ) has been negative.
Over a 50 plus year history, when "both" of these trends "confirmed" negative readings, declining equity markets resulted, with these periods encompassing some of the largest systemic decline years ( 1974, 2001, 2002, 2008 ) and also resulting in "mild" declines ( 1981 - 1982. 1990 ). Conversely, duration assets have produced positive returns during these negative periods in 100% of the occurrences ( Table 1 * ).

A strategy that generates couple / few transactions every 10 or so years, based on the evidence *, is no big deal.
As one gets older, a "leaning" towards capital preservation ( market timing ? ) is a natural progression and function of intelligent, "actuarial" investing, and can provide peace of mind, especially if one has accumulated enough assets and can derive a comfortable income from it. And if one is close to or early in the retirement cycle, then avoiding "sequence risk" is also a natural function of intelligent investing.

Now that the last 10 years equity market uptrend has grown my retirement assets to a sufficient level, through a portfolio of large cap, small cap value, REITs, and tech, in the upcoming years I am going to follow a premise put forth by Peter Lynch, and derive a flexible income through the use of an ETF based portfolio of quality dividend stocks, tech stocks, and duration assets ***

* tinyurl.com/ycn4a2a3 ( paste link into browser )
** tinyurl.com/y9rrzral
*** tinyurl.com/yaxhhzfj
Jussi Askola profile picture
No one in the history of the market has been able to time the market with any sort of consistency. Study after study has shown that the biggest losers long term in any market are those that pull their money in and out in the attempt to time.

If you own a portfolio that generates a lot of income, there is no good reason to pull out. It will mostly likely do much more harm than good. We are buying, not selling: seekingalpha.com/...
Investor since ‘73 profile picture
I’ll try again as the censors rule this board...I’m 8 years into a comfortable and debt free retirement. If, by taking 75% of my $ off the table, I am wrong and the market defies logic by actually going up as we enter a depression, I will still be comfortably retired. At this stage of life capital preservation is more important than growth. I believe it will prove to be a terrible mistake for anyone about to or already retired to stay long right now. If I was 25 it would be different.
hafen profile picture
Trump and the GOP is not a temporary crisis. They’ve ruined our country and it will take too many years to get back. They are awful. In the final analysis, that’s where the market is. It begins with jobs, schools, safety, etc.I support the mentality of the big guys, but they don’t support us this time.
Thank you for your articles. I chose to sell most of my individual REITS and Preferred stocks and bought RNP and PFF the same day to remain in the market and further diversify. The end percentage REIT & preferred remains 75 % / 25 %. Good strategy ? With no trading cost I do believe my choice was a conservative one.
Jussi Askola profile picture
I don't know about PFF, but RNP is too expensive in terms of fees. CEFs are poor vehicles for the REIT sector. We discuss why in our Course to REIT Investing: seekingalpha.com/...
My portfolio generates way more cash than I need. I know we are probably in the 1st or 2nd inning of this thing but so far I have had 2 dividend cuts and 1 deferred dividend on a cumulative preferred. I am down 20% ytd because of a 25% allocation to REITS some in the hotel industry which has been battered. I am collecting my dividends and keeping them in cash. Don't see a need to sell anything.
Jussi Askola profile picture
That's the right approach. If you are long term oriented, the lower prices should not be a concern. You were not planning to sell anyways.

Now is a great time to focus on the income and buy more shares while they are cheap: seekingalpha.com/...
Investor since ‘73 profile picture
Investing, like comedy is about timing. If you are 20 years or more from retirement, stay long, you will most likely recover from the losses soon to come. This is not yet a bear market, or anything like that, it is a great time to sell if you are already or soon to be retired. This market has not begun to reflect the economic reality of the 2nd Great Depression we are now just entering. The highest unemployment since 1932, more layoffs to come, head spinning national debt in an economy that is 70% consumer based and utterly clueless, grossly incompetent mis leadership from the highest office by a man who can barely tolerate only the most willing boot lickers in his presence. He listens to no one because his profound mental illness informs him that only he can save us. His words, not mine.

This is a great time to hold PMs and the miners, who have very bright futures as a desperate world prints paper at rates never before even imagined. For every winner in the just beginning depression, there will be a dozen losers and being comfortably retired, I simply can’t risk losing my nest egg at this time in my life. Capital preservation should be paramount for all those within 10 years of, or already retired. Aside from 3 stocks in the PM arena, I’m down to T and KHC for their fat, safe dividends and right now have 75% in cash/equivalents. I have absolutely no fear of missing out, I do fear having to go back to work in my 70’s. BTW, my portfolio is up about 5% YTD and at an all time high as of the close on Friday. To everything there is a season, a time to go long, a time not to go long. If you’re 30, stay long, you will likely recover what you will soon lose, if you’re 60+, staying long is economic suicide.
Jussi Askola profile picture
No one in the history of the market has been able to time the market with any sort of consistency. Study after study has shown that the biggest losers long term in any market are those that pull their money in and out in the attempt to time.

Being retired does not increase your chances of succeeding at market timing, which is more difficult than winning a gold medal in the Olympics.

If you own a portfolio that generates a lot of income, there is no good reason to pull out. It will mostly likely do much more harm than good.
Jussi, can you update your prior articles on HOMZ?
Jussi Askola profile picture
Note that we reserve 99% of our individual stock / ETF research to members of High Yield Landlord: seekingalpha.com/...

Enjoy your week end!
Value investing is not market timing, it’s taking the time to analyze an investment and drawing a conclusion. Many cannot be bothered to do this kind of work. For them, sticking with a plan is best.
It’s like grocery shopping. Value shoppers will look for sales while others just buy buy buy.
Buying the market today, is paying near the highest valuation in history. On the other hand, selling is taking advantage of a remarkable gift.
Jussi Askola profile picture
PS: REITs are today priced at their lowest valuation in 10 years. Only the 2008-2009 period rivals the current valuations. REITs nearly tripled coming out of the last crisis. We are buying at High Yield Landlord: seekingalpha.com/...
Sensible approach.
If the market is near all time valuation highs while REITs are near the lows, it might make sense to follow a long/short strategy. On the other hand, it might also mean that REITs are more impacted by the virus than other sectors and deserve a low valuation.
J-Flo profile picture
Excellent article couldn’t agree more..... I’m retired and staying the course!
Jussi Askola profile picture
Thank you for your support @J-Flo
Feel free to join us for a 2-week free trial to learn more about our Top Picks for this investment environment: seekingalpha.com/...
Another rational view of what is really happening in the markets. Thanks Jussi for articles.
Jussi Askola profile picture
Thank you for your support @kbalovesinvesting
Feel free to join us for a 2-week free trial to learn more about our Top Picks for this investment environment: seekingalpha.com/...
BMW7 profile picture
I use these panics to weed out the losers in my portfolio and upgrade to better risk adjusted investments . Sold all my REITS except OHI . Upgraded to Netflix , Microsoft , MSCI , Broadcom and Home Depot . Smartest thing I ever did . Selling SPG was difficult at $79 and bailing on Boeing at $210 was painful at the time but I feel great about it now.
Jussi Askola profile picture
That is a poor strategy in my opinion. You are trading very discounted equities for richly priced equities. That's essentially selling low to buy high. I would do the opposite.
For the most part, I’m buy and hold. However, not all my buys have been great, so I sold two to create a little cash to buy the next dip. I decided yesterday wasn’t a big enough dip. I want to see some May rent collection percentages. Watching closely, O, STOR, and MPW.
Jussi Askola profile picture
Thank you for sharing your thoughts. Personally, I would not focus too much on rent coverage of a few single months. We are living extraordinary times. These collection rates are not reflective of normalized conditions if the economy was open. Things will recover. You just need to think long term: seekingalpha.com/...
On Oct 25 1929 the day after the original black Friday John Verysmart said this time is different. The market is overleveraged, there will be margin calls, etc etc and sold his 10,000 investment for $9,000 a big loss. His neighbor Justin Knowitall said no and told all his friends buy more and doubled his investment to $20,000.

On July 8,1932 John still had $9,000 and still had his house. Justin had lost all of his money due to margin calls and also lost his house was living in his cousins barn.

Sometimes it is better to walk away and lick your wounds.
Jussi Askola profile picture
@Gadom Thank you for sharing.

However, if Justin had held on long, and hopefully kept buying, he would have earned very attractive returns in the long run, despite near term volatility. John, on the other hand, with this mentality of getting in and out of the market, he would not have earned long term market returns. And while it may work sometime, it has never worked consistently for anyone.

This is why the richest investors on earth are those like Buffett who hold on no matter what, and not market timers who get in and out.

It is only a question of time before Justin would outperform John.
The fact that Justin apparently bought on margin might have contributed more to his literary demise than his decision to stay long. I don't see the author recommending that anyone borrow to double their investment.
Jussi Askola profile picture
I am against margin and do not use it myself.
Trendhaven profile picture
While it is true that it may be next to impossible to time markets finding precise zeniths and nadirs, that level of precision is not required in order to outperform buy and hold investing and forego the lions share of drawdown. It is also true that most investors fall prey to their emotional responses to market moves and their advisor's suggestions in altering portfolio allocations. But practically speaking your assertion that no market can be timed successfully is just untrue. There is an old market adage that markets climb up the stairs, but come down the elevator. So, investors have have more to gain by missing the biggest down-days than they have to lose by missing the biggest up-days. Long term average returns are likely less important to recent retirees than sequence of returns risk.
Jussi Askola profile picture
The evidence says otherwise. It is not possible to predict the direction of the market in the short run. You cannot consistently forego the lions share of a drawdown and not miss the recovery. If you could, you would be a billionaire.
Justin sequence of returns risk is real world. None of us care about market returns over a 200 year period -likely the time you have to observe the market to see if someone can really beat the market (I did not make the time interval up).
For most of us 30 years is the time frame. And in that time frame strategic asset allocation (not timing the market) can be literally the difference between retiring and supplementing your income at 70 working in McDonalds.
This is also the reason people move the allocation ratio away from stocks and more toward bonds as they get older.

From a peak, on a closing basis, of 381.17 on Sept. 3, 1929, the Dow needed until Nov. 23, 1954, to return to its old high. That is 25 years. Humans can't wait that long.
Jussi Askola profile picture
@Gadom I agree with you.
Part of the attraction of investing in REITs is that you do not only depend on how the market is doing to earn returns. You are getting significant income while you wait. And while some REITs may temporarily cut or suspend payments due to the lockdown, most of these dividends will return as we reopen the economy and put the crisis behind us.
Even though I am 82yo, everything I buy is for long. I sold 500 ADP and another low yield equity for about 150k. I used this to buy some energy, banks, and pipelines. I may not see it recover but my children certainly will. I have about 30 blue chips on DRIPs buying more stock every month.
Great article.
Jussi Askola profile picture
Great comment @ccason2 Thank you for sharing.
I agree that now is a great time to be a buyer: seekingalpha.com/...
I did the same. Sold 1500 jd and invested in z, ps, midstreams, refineries 70% of them are double now or above. Cheers keep investing.
Once you buy a stock, consider yourself buy apart of the company. If you buy a reit stock, consider as the company owner:”will my real estate lose all the value after a few months lockdown?”. The answer is a big no, you just lose a few month of rent in the worse scenerio. Thus getting out of the market right now is the worst time.
Jussi Askola profile picture
@Trang-Nguyen Well said! Think like a landlord, not a trader: seekingalpha.com/...

Have a great day!
It does not have to lose all its value just enough to push it into financial distress.
Agreed, Gadom, but most of those in dire straits due to COVID were already having issues before it arrived.
Jussi, thanks for the article. It felt like it was written directly to me as a 63yo retiree. I have managed to hold on through this but it is very difficult to watch the paper losses and read about the dividend suspensions.
Also, I want to make sure I pronounce your name correctly in my mind; the only other place I’ve seen it is in a Jo Nesbo novel. Does it rhyme with fussy or juicy.
Thanks again, Tom
Jussi Askola profile picture
Hey Tom,

Thank you for your comment. For this reason, we always advocate thinking like a landlord when investing in REITs. This allows you to focus on income, ignore volatility and wait patently for long term appreciation. This is really the secret to long term success in REIT investing: seekingalpha.com/...

It would be closer to fussy :) Enjoy your week end!
Selling outright and going into cash hasn’t worked in the past and likely will not work this time However, selling and reallocating makes sense.
Many real estate investments will likely underperform the broader market going forward. Investing in Reits is akin to gambling.
Diversify and buy 4/5 Vanguard funds.
Jussi Askola profile picture
I agree that diversification is key, but your perception of the REIT market is not correct. You appear to think that all REITs are risky companies with overleveraged balance sheets and retail properties.

The opposite is true. Balance sheets are stronger than ever and only a small fraction of them own retail properties. There is a vast world of defensive REITs. We invest mostly in those: seekingalpha.com/...
I have had VNQ since inception. I am not disappointed. When will I sell? Never. I also overweight into some health care REITs. It's ok to have both!
Many high dividend Reits are highly levered and dependent on bank financing. My perception is that the average investor is not savvy enough to understand that risk. 
The underlying assets may be money good but there are a number of risks to consider including interest rates, shape of the curve, relationship with lender and the quality of Management.
You make a good point that not all Reits are created equal. But, generally speaking, the higher the dividend the more moving parts there are to consider.
normwho7 profile picture
Always love your articles jussi, very inspiring and up lifting. I’m skittish about MAC & EPR but I will NOT sell them. I am taking advantage of the dips in STOR, IRM. & STAG at the moment. Any thoughts on UMH & IRT? I’m 51 and still have time hopefully to catch the wave of recovery that will be happening as I approach retirement. Thanks for the articles on land lord mind set.
Stay safe
Jussi Askola profile picture
Thank you for your comment @normwho7

I expect to buy more apartment and manufactured housing communities through discounted REITs. I could do so in our next week's trade alert: seekingalpha.com/...

Note that Sam Zell recently noted that these two sectors to be the biggest winners.

If I can help with anything else, I am here for you. Enjoy your week end!
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