While  suturing a cut on the hand of a 75 year old rancher, whose hand was
caught in the squeeze gate while working cattle, the doctor struck  up a
conversation with the old man.

Eventually the topic got  around to Obama and his role as our president.
The old rancher said,  'Well, ya know, Obama is a 'Post Turtle'.
Not being familiar  with the term, the doctor asked him, what a 'post
turtle'  was.

The  old rancher said, 'When you're driving down a country  road and you
come across a fence post with a turtle balanced on top, that's a  'post
turtle'. Have you ever seen one?

The old rancher saw the puzzled look on the  doctor's face so he continued
to  explain:

"You know  he didn't get up there by himself,
                    he doesn't belong up there,
                    he  doesn't know what to do while he's up there,
                    he's elevated beyond  his ability to function, and    
                     you just wonder what kind of dumb jerk  put him up
                        there to begin with."

Anything that does not try to quantify the risk-adjusted return is bullshit.  Define the benchmark you are trying to meet or beat.

"Trading" is a sucker's word for "speculation."  Always remember that the professional "traders" do it with other people's money.  In the case above, YOUR $99.

If your object in INVESTING is to accumulate enough money to retire at a reasonably young age, then pay attention at Bogleheads.org.

At the start of the year Grantham of GMO figured the market would go down around October, but recently said he thinks it will happen sooner.

I'm more of a buy, hold, rebalance  index fund Boglehead than a stock trader.

I'm trying to figure out what inflation will do; I could get enough growth in bonds as long as they are not eroded by inflation.

Its a tough market.  People who are retired & depend on fixed income can get killed easily by rising rates + inflation.  They need a large "bucket" for current expenses.

What are lucid analysts saying about increases in interest rates and inflation?  And the chance of unexpected inflation?  Should bond holders pre-emptively shorten their duration, or is everything priced in to the market already?  Its important since the NAV of bond funds have often risen in the last couple of years, so swapping will incur some capital gains taxes.

One thing about a ROTH that is never stated is very important -- even if you think an IRA and a ROTH will be a wash for your tax bracket in retirement, there is another savings.  Withdrawals from a ROTH do not count as part of the normally non-taxable income which is added to your normally taxable income to figure out how much tax you pay on your Social Security.  That makes a ROTH conversion worthwhile even if your tax bracket remains the same.  And a reason to always fund a ROTH instead of an IRA.

I've read that the losses (stock market?  economic ? ) in Japan are running $600-800 Billion. If Japan sold that much in Treasuries, it would go a long way to reversing QE ? Or the other way around ?  The Fed would take the "phantom" QE  "bank reserve" money and give "real" money to the Japanese... and investors would buy some of the bills..  ?

Odd that Japan index ETFs are selling for 5% over NAV in expectation of a quick recovery.

Japan might need cash, so it might sell its US Treasuries, or at least stop rolling them over.  What would those occurrences do to "the market"?

Bothered by outing the locations of these places.  Yea there is backup, but its not instant.

Remember the Star Trek episode with the two planets at war controlled by computers?  The people in the destroyed sectors just walked to the disintegrator machines.  Their culture was never destroyed until Kirk broke the machine & instigated real nuclear retaliation.

Is Khosla Ventures something ordinary people can buy stock in?  What is the utility of 6 month old articles?

WRT hedging downside variance -- This guy Milevsky theorizes a sort of annuity which does exactly that.  Other intersting papers on the site too:

A Different Perspective on Retirement Income Sustainability:
Introducing the Ruin Contingent Life Annuity (RCLA)

http://www.ifid.ca/pdf_workingpapers/WP2007SEPT15_RCLA.pdf

He's of the same school as Otar apparently; talking about the main risk being a bad sequence of returns in the first years of retirement.

This product would be a "reverse" index, based on a particular year matching your year of retirement.  If the index goes to zero, it means your portfolio probably has become unsustainable as well.  So the product would then begin paying out a defined amount to you for the rest of your life.  Very clever idea; it separates the growth and the risk components of Immediate Annuities.  You keep ownership of the growth part and export the risk to the policy.  Its cheaper if you are older (because you live for fewer years, if it needs to pay out).


worth quoting:

IN SUM
The creation of a stand-alone ruin contingent life annuity (RCLA) would be a triumph of
insurance and financial engineering. On the one hand it is a type of long-term equity put
option, but it also provides true longevity insurance. Indeed, it is currently embedded
within an assortment of GLiBs on variable annuities, but we believe they should be
given a separate life of their own and sold on a stand alone basis.

Another use of such a concept product is that it provides us with a mark-to-market (or at
least mark-to-model) value for one’s retirement income plan. If a 7% spending rate is
truly unsustainable, then the cost of 7% RCLA would tell us by how much – exactly.

If mom and dad are spending too much, the relevant x% RCLA value would provide the
beneficiaries with a rough (average) estimate of what it will cost them – in value terms –
to cover their anticipated spending if and when they run out. The children
might want to set this sum of money aside now, in a risk free saving account, to cover
the cost of a life annuity if-and-when mom and dad ever run out of money.

At the very least, the creation of such products would enable retirees and their financial
advisor to put a market price – as opposed to just simulation values -- on the risks they
are running by spending too much, not investing appropriately or simply living too long.
In this case, market prices would function as economic signals or even warning signs.

Crap, posted to the wrong thread.. that's what I get for finding it by using the email reply notification...

I just realized that the Crash of 2008 is 100% the fault of Roosevelt.

If the vast amount of money owed by Social Security was instead invested (real money, not phantom money replacing the real money stolen by the Govt to use for accounting trickery to hide inflation over the decades) by private insurance companies -- the financial greed of the 2000's would not have occurred.  Insurance companies would have placed all that money in truly rational, safe investments.  The percentage of the economy in whacky derivatives etc would have been small.

Hmmm. no Edit key...

worth quoting:

IN SUM
The creation of a stand-alone ruin contingent life annuity (RCLA) would be a triumph of
insurance and financial engineering. On the one hand it is a type of long-term equity put
option, but it also provides true longevity insurance. Indeed, it is currently embedded
within an assortment of GLiBs on variable annuities, but we believe they should be
given a separate life of their own and sold on a stand alone basis.

Another use of such a concept product is that it provides us with a mark-to-market (or at
least mark-to-model) value for one’s retirement income plan. If a 7% spending rate is
truly unsustainable, then the cost of 7% RCLA would tell us by how much – exactly.

If mom and dad are spending too much, the relevant x% RCLA value would provide the
beneficiaries with a rough (average) estimate of what it will cost them – in value terms –
to cover their anticipated spending if and when they run out. The children
might want to set this sum of money aside now, in a risk free saving account, to cover
the cost of a life annuity if-and-when mom and dad ever run out of money.

At the very least, the creation of such products would enable retirees and their financial
advisor to put a market price – as opposed to just simulation values -- on the risks they
are running by spending too much, not investing appropriately or simply living too long.
In this case, market prices would function as economic signals or even warning signs.

WRT hedging downside variance -- This guy Milevsky theorizes a sort of annuity which does exactly that.  Other intersting papers on the site too:

A Different Perspective on Retirement Income Sustainability:
Introducing the Ruin Contingent Life Annuity (RCLA)

http://www.ifid.ca/pdf_workingpapers/WP2007SEPT15_RCLA.pdf

He's of the same school as Otar apparently; talking about the main risk being a bad sequence of returns in the first years of retirement.

This product would be a "reverse" index, based on a particular year matching your year of retirement.  If the index goes to zero, it means your portfolio probably has become unsustainable as well.  So the product would then begin paying out a defined amount to you for the rest of your life.  Very clever idea; it separates the growth and the risk components of Immediate Annuities.  You keep ownership of the growth part and export the risk to the policy.  Its cheaper if you are older (because you live for fewer years, if it needs to pay out).

If you can't use bonds to reduce volatility risk... I don't know what to do.

I just spent the whole day reading this guy's 500 pg book (I got the hardcopy, but at the moment you can download a PDF for free)
Jim Otar:
http://www.retirementoptimizer.com/

It didn't make my eyes glaze over.

He points out that retirement portfolios fail when they are overdrawn during the first 4 years due to the random (bad luck) of retiring at the start of a sideways or bear market.  He focuses on planning to prevent the worst 10th percentile outcomes using historical market backtesting.  He says that the Monte Carlo, Gaussian calculators are not correct models for the distribution phase because it is not true that asset allocation is responsible for 90% of performance in a _distribution_ portfolio.  He says the _sequence of yearly returns_ and inflation rate are the major drivers of failure.

So maybe keeping a lot more in the cash "bucket,' to cover more years of bad markets, might be necessary in the future.  Which means that your safe withdrawal rate from the equity/bond portfolio will be much lower.

Done.

Is the bond market undergoing a secular change?  The last 20-40 years have been characterized by a steady direction of interest rates that increased the value of bonds over time.  Now they say its changing.  That would mean that all of the retirement calculators, as well as the training & personal experience (= habits & biases) of professional investment advisors, are no longer correct.

I'm really wondering if everything I know about how to adjust my ratio of stocks : bonds over time is still statistically useful.

Bonds are used to adjust your "risk" element down to a variance that you can sleep with.  You re-balance your mutual fund allocation yearly or quarterly or when it goes outside of a "band."

I wonder also if buying option puts or LEAPs might be a cost effective way to hedge downside variance, at least during periods when its difficult to sleep.  If you have a portfolio that has a calculated return of say 9% with a variance of 25%, could you pay something reasonable like 1% of your portfolio value to limit any losses to say 15%.  So your resulting numbers would be 8% with 15% downside variance.  I've never seen anything talking about that sort of risk management for long term, retirement portfolios.

PIMCO says (of course, its their business) that investors will need to use actively managed bond funds instead of passive.  OTOH the Vanguard/Bogle camp of statistical analysis proves that extra gains from active management over long periods is no better than luck.

I thought about that, but the stock market thread seems to be focused on active trading of stocks, which is not at all the same.  And asset protection is the legal structure for owning valuable things in general, not stocks or funds themselves.  What do you think?

Is the bond market undergoing a secular change?  The last 20-40 years have been characterized by a steady direction of interest rates that increased the value of bonds over time.  Now they say its changing.  That would mean that all of the retirement calculators, as well as the training & personal experience (= habits & biases) of professional investment advisors, are no longer correct.

I'm really wondering if everything I know about how to adjust my ratio of stocks : bonds over time is still statistically useful.

Bonds are used to adjust your "risk" element down to a variance that you can sleep with.  You re-balance your mutual fund allocation yearly or quarterly or when it goes outside of a "band."

I wonder also if buying option puts or LEAPs might be a cost effective way to hedge downside variance, at least during periods when its difficult to sleep.  If you have a portfolio that has a calculated return of say 9% with a variance of 25%, could you pay something reasonable like 1% of your portfolio value to limit any losses to say 15%.  So your resulting numbers would be 8% with 15% downside variance.  I've never seen anything talking about that sort of risk management for long term, retirement portfolios.

PIMCO says (of course, its their business) that investors will need to use actively managed bond funds instead of passive.  OTOH the Vanguard/Bogle camp of statistical analysis proves that extra gains from active management over long periods is no better than luck.

There are three religious truths:

a. Jews do not recognize Jesus as the Messiah.

b. Protestants do not recognize the Pope as the leader of the Christian faith.

c. Baptists do not recognize each other in the liquor store or Hooters.

Its always illuminating to examine the tax returns of political candidates.

My need is for a house & savings.  Many books on Am*zoid, but I'd like some recommendations on which.

Some states tax inherited trusts but not estates...  so finding something state specific would be great.

"Every building in our area has natural gas already connected.  It is just a matter of investing in dispensing and compressing equipment"

Ka-BOOM!  gas stations have underground tankage & fire suppression...  More ways for nutjobs to blow up a city block...

I'm familiar with the rudiments of a Living Trust, but I'm looking for the best source of information on various asset protecting strategies before I go looking to hire a lawyer to set it up.  I'm having a hard time specifically finding info on the Net about lawsuit protection; searches get spammed by estate planning focused sites (which I'm also interested in).

Apparently Joint Tenancy doesn't protect the assets if one partner is suied, although in some states marital real property is protected by Tenants in the Entirety.  An Irrevocable Living trust protects assets (but not distributions) and Revocable Living Trust exposes the assets.  According to one book a Family Partnership discourages collection of a suit, but an Offshore Trust is better.

Looking for something that protects from lawsuits AND avoids Probate.  No fancy asset ownership structure, just husband & wife.

"The fact is, if we just turned our 18-wheelers to natural gas right now, we would reduce our dependency on oil by 50 percent"

No infrastructure to gas up.  Same problem w/ electric cars.

What are the precursors to a downturn in 2011?

I don't think people can afford to be out of the market any longer.  Need to keep compounding _something_ for retirement.  The easy stock bargains have recovered.

How does Wesbury's point of view complement Grannis?

I'm wondering if 2011 is going to be another Mid-Cap boom year.

Has anyone looked at actually studying stock investing?  The Investors Business Daily (IBD) paper supports a method by the founder O'Neill called CAN SLIM that is a momentum system.  But "reading" the chart and turning it into a quantified result seems like voodoo to me.

I'm a BogleHead, but maybe only because I can't do the Quant math.

Let's review some of these posts.  At the end of July, the WSJ article said:

"The market's really cheap right now. The P/E is only about 13...
Ask your broker about other valuation metrics...No metric is perfect, but these three have good track records. Right now all three say the stock market's pretty expensive, not cheap."

But in mid September, a supply side economist said "Despite cries of "uncertainty" that reverberate through the financial markets, U.S. equities remain grossly undervalued. Risk premiums are exceedingly high. Too high!"

So how do we determine who is right?