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we are now about 30% equities up from 20% as of the trades made this week in fidelity insight my newsletter.
the thought is that eventually money will flow out of bonds as stocks re-inflate from qe2 and that could be quite good for equities.
if you divide the earnings yield of the s&p by the 10 year treasury bond yield traditionally thats somewhere around 1. its at 2.3 making stocks very under valued compared to bonds on that note.
while im not convinced inflation is running away so fast at this stage the gains other then the interest your getting is becoming quite limited in bonds hense our change.
2) Where do you get money from other than investments? Robyn
Robyn55, My sincere apology for the very delayed response to your specific inquiry on 10/21. It was not intentional, by any means. I departed the US on 10/19 and returned on 11/3 and Internet connections are sketchy on European river travels and --- I confess that I was occupied by other interests than CD communications while traveling. It took me awhile to back-read the thread and understand TuborgP's references to bank robbery.
My answers to your questions are:
1) I prefer mutual funds with which I have had a long standing relationship/understanding thereof and trust in the specific investment company I've dealt with for decades (T Rowe Price). Do some serious research on ETF's and you may be surprised on the results.
2) "Where do you get money from other than investments?"
A bit of a bold question, but one which I will cheerfully answer. More importantly, what one might ask is the percentage of one's income to their BLE (basic living expenses). The % composition of my (and spouse's) retirement income is thus (please remember that this is a current snapshot):
Federal pension - 45%
VA Disability pension (9 fractures in the spine from combat duty in Viet Nam- which most of my age generation managed to avoid) - 10%
Social security - 10%
Mortgages held - 15% (I tend to sell homes and hold the mortgage)
IRA with drawdowns (mine & spouses) - 10%
Open taxables account returns in stocks, bonds & whatever -20%
Hopefully that answers your questions. My basic living expenses comprise less than 45% of my retirement income. Some of us have paid blood dues in defense of this nation's flag under fire. Some of us, unlike Clinton and Bush 2, are an embarrassment to the men and women who have ever served their nation in combat --- tidbit, Lass, most didn't go to Harvard.
Last edited by Pilgrim21784; 11-07-2010 at 03:10 PM..
I can certainly understand your prying yourself away from this chat board - however reluctantly - for a while to concentrate on more fun things in life . Hope you had a wonderful trip.
I didn't think my question was "bold" - but I'm glad you answered it. You see - I've been working on financial chat boards for over 20 years now - and it seems a lot of people who talk on these boards have very little skin in the game (for lack of a better phrase). Most tend to be younger people who still have many working years ahead of them - and they're gambling with their "pocket change". And they'll say things like - oh - I made 300% yesterday on my X/Y/Z options - stuff like that. IOW - they're engaged in cocktail party bragging kind of stuff. Not serious portfolio management.
This kind of talk is IMO fairly worthless in general - but it's especially worthless in a retirement forum. Most seniors aren't playing with pocket change - and they don't have another 30 years in the workplace to make up for bad investment results. Also - although you earned your pension and disability benefit (most of us are grateful we never earned the latter that you earned with your blood/sweat/tears) - a lot of seniors don't have those cushions (especially those in the boomer generation who were never public sector employees - the old defined benefit private sector pension is quickly going the way of the dodo bird). And - because you have those cushions - you can probably afford to take on more risk when it comes to your investment portfolio.
But - for many - all they have to live on is social security and investment income (whether from taxable or retirement accounts). And the risks have to be taken into account. I think it's perhaps somewhat easier for people our age in general (I'm assuming you're about my age). Because although I'm not young - I could - if the sh** hit the fan - go back to work. The people I've encountered who got totally creamed the last 10 years were people about my father's age - people in their 80's - 90's. Many of whom - for some reason that totally escapes me - wound up being invested more than 50% in equities (it was mostly their brokers and their kids who put them there - but the logic of why their "advisors" did this to them escapes me).
OTOH - in the interests of full disclosure - since you answered my question - I can tell you that I can afford to be conservative in terms of investing assuming our country doesn't turn into a banana republic. I don't have to make 5%/year to live ok assuming I live out my normal life expectancy. And - if I die young - my husband will live on less (neither of us is a huge spender - but he's less of a spender than I am - like Groucho Marx said - traveling abroad isn't expensive - now traveling *with* a broad - that's expensive ). And - unless I die soon - I stand to inherit some money (my husband already inherited some when his folks died). So - although you and I come at this from different situations - we are both basically ok. I don't think the same thing can be said for most "boomers" right now. It is a troubling situation to me when I think of the future of a lot of people our age (especially the "sandwich" members of our generation now caring both for parents and children who are not in great financial shape). Robyn
P.S. Don't think Harvard has much to do with anything at this point in my life. It's a nice degree - but doesn't help me in terms of reading the tea leaves in terms of what's coming down the road.
we are now about 30% equities up from 20% as of the trades made this week in fidelity insight my newsletter.
the thought is that eventually money will flow out of bonds as stocks re-inflate from qe2 and that could be quite good for equities.
if you divide the earnings yield of the s&p by the 10 year treasury bond yield traditionally thats somewhere around 1. its at 2.3 making stocks very under valued compared to bonds on that note.
while im not convinced inflation is running away so fast at this stage the gains other then the interest your getting is becoming quite limited in bonds hense our change.
You're looking at the old Alan Greenspan formula (and we know what he gave us). I'd be careful with it. I once tried to make a trading system incorporating it (tried for a long time) - and it never worked - ever. Not even a little - in any kind of market. Might as well have traded on the basis of how much rain we got in our yard in a particular month. And that was before QE - which is distorting lots of things - especially interest rates.
I think it is a useful exercise trying to take any conventional wisdom and turning it into a trading system. Not hard to do with a lot of trading software out there these days. I've been working on trading systems for a long time. And about the best I can tell you is trend following systems work best in terms of avoiding risk. OTOH - they will limit your gains during good bull markets. Anyway - right now - the trend is up for equities. Robyn
The people I've encountered who got totally creamed the last 10 years were people about my father's age - people in their 80's - 90's. Many of whom - for some reason that totally escapes me - wound up being invested more than 50% in equities (it was mostly their brokers and their kids who put them there - but the logic of why their "advisors" did this to them escapes me).
I work in this industry. I will tell you that a lot of the "advisors" get caught up in the hype, specifically the fear and greed of the market. At one point, I wanted to hang a sign in my front window saying "I fix other advisor's accounts." Too often I see retirees that are eating their principal alive to the tune of 10-15% per year in their 60s-70s. However, some broker told them that this was a sustainable level, because their holdings have a back tested return that is similar. What the "advisor" usually doesn't mention is the risk level they have to expose themselves to in order to potentially gain that annual return.
Too often, I see two types of "advisors." The first is like a doctor who is telling a patient to lose weight. The patient will ask how, and the Dr will tell them to exercise regularly and eat less than 2500 calories a day. Lay off the red meats and eat more vegetables and less processed foods. This advisor is giving great advise, just not very exciting.
The second "advisor" is like the Hydroxycut commercials. The advisor shows sexy numbers that really appeal to the retiree. Just like the weight loss commercials that tell you to take their pill and you'll just shed off the weight. It will just melt off if you buy their pill or hold their shake weight in your hand. Unfortunately, this type of advisor is very successful in the short term. They eventually burn out, because you can only lie so much. Yet, the companies that promote these snake oil salesmen are never at a loss for new sales recruits.
Robyn55 - an apology is due to you, my Harvard comment was simply dumb, please accept my apology. It was generated by the ongoing nonsense I deal with in the pro bono college financial planning/consulting that I do as a hobby. I also owe TuborgP a mea culpa for digressing from his excellent thread on QE. TuborgP is a wise and tolerate chap and will hopefully forgive me for my digressions.
Harvard, Princeton. Yale, MIT, Stanford, etc. are beyond the realm of most folks (myself included). Parents/grandparents and many kids beat themselves up trying for the "best" college that they can "finger nail" their way into, against (in my opinion) common sense. If one is so blessed to attend such schools, more power to you. Enjoy and benefit from being one of the ""chosen (whether as a legacy, superior talent, whatever). Go for it, but it is absolutely silly to spend large amounts of cash for an education from a non-premier school that doesn't buy you much, if anything.
However, most folks are best served (in my opinion) by obtaining an education at the least possible cost (and emphatically with no debt) that prepares them for a successful economic life. The issue has relevance to a retirement thread as many of us retired folks have a serious interest in providing assistance to future generations.
Later this month I will become a grandparent for the first time. The plans for college savings accounts are already in place. The advice I'm giving to my daughter and SIL about college planning is also in high gear. Its germane to both retirement planning and kiddie support because it deals with the issue of what to do with cash through time, a subject relevant to both grey hairs and young folks.
Recent economic history has shown us that many economic assumptions of the past are just that, history, however painful it has been for many folks. QE is a first (to my knowledge) new event in my lifetime (I'm 60) and one which I think is a watershed event, which TuborgP has accurately pointed out as being worthy of note.
The world has changed, buy and hold (which I did quite successfully for many years in my daughters' UTMA college accounts) is, in my view, no longer a viable option for any funds of less than 20+ years duration.
What grey hairs should do with their money is obviously subject to their specific circumstances, but going forward --- we are in perilous times. The US's position in the 20th century is history, the emergence of China and India (and other nations) in the 21st century is where one ought to focus their investment attention. A policy of QE by the Fed tells me that the powers that be are reaching for their last bullet as a desperate attempt to stimulate a pitiful economy. May the gods be kind to us. JMHO.
Last edited by Pilgrim21784; 11-08-2010 at 01:20 AM..
its all un-charted areas this qe stuff.we all have opinoions of what or could be the end result but we argue this stuff like we know. nobody knows how it will work out. so far its worked fine .
we may have avoided a financial collapse or a deflationary spiral that really would have kicked our butts. dont forget we talk about un-emplyment like its high but 85-90% of america is still gainfully employed and while not doing great most of us are at least treading water.
our investments are re-inflating, inflation is still nothing out of the norm and at this point ill just monitor the situation. i certainly cant predict if we are all going to be shopping with wheel barrows full of money at some point.
just the mere fact that almost 40 years after living through the high inflation of the 70's and 80's im now worrying about things deflating is proof things rarely turn out the way you think.the two biggest assets i have ,my salary and real estate were both deflated
Last edited by mathjak107; 11-08-2010 at 03:23 AM..
I work in this industry. I will tell you that a lot of the "advisors" get caught up in the hype, specifically the fear and greed of the market. At one point, I wanted to hang a sign in my front window saying "I fix other advisor's accounts." Too often I see retirees that are eating their principal alive to the tune of 10-15% per year in their 60s-70s. However, some broker told them that this was a sustainable level, because their holdings have a back tested return that is similar. What the "advisor" usually doesn't mention is the risk level they have to expose themselves to in order to potentially gain that annual return.
Too often, I see two types of "advisors." The first is like a doctor who is telling a patient to lose weight. The patient will ask how, and the Dr will tell them to exercise regularly and eat less than 2500 calories a day. Lay off the red meats and eat more vegetables and less processed foods. This advisor is giving great advise, just not very exciting.
The second "advisor" is like the Hydroxycut commercials. The advisor shows sexy numbers that really appeal to the retiree. Just like the weight loss commercials that tell you to take their pill and you'll just shed off the weight. It will just melt off if you buy their pill or hold their shake weight in your hand. Unfortunately, this type of advisor is very successful in the short term. They eventually burn out, because you can only lie so much. Yet, the companies that promote these snake oil salesmen are never at a loss for new sales recruits.
its far from a trading system.its only an indication of the relationship between bonds and stocks.
the real reason we made the switch is because you cant fight the fed. with the fed trying to inflate us away from possible deflation that could be bad for bonds and actually cause a melt up in equities.... not that rates will take off anytime soon but money loves a vacuum and it will flow naturally into whats going up.
if the economy does well on its own much qe2 wont be needed ,thats good for equities ,bad for bonds
if the economy is still sluggish then more qe will be used,that could be bad for bonds and good for equities.
all in all it looked like an increase in equities position would be the better choice.
at this stage of our lives though about 30% equities is our max range.thats a far cry from the 80-80% i ran with my entire life.
Pilgrim has made a great point and taken us to another interesting question. The equity part of your portfolio. Is it weighted domestic or international? I am heavier international over domestic with a greater long term perspective in my international funds. Like Robyn points out we are fortunate to have pension cushions in addition to SS and investments. For a number of reasons all any of us will do is talk in generalities and are specifics are very different. Much of the money the Fed is printing is flowing out of the country and being invested overseas.
I work in this industry. I will tell you that a lot of the "advisors" get caught up in the hype, specifically the fear and greed of the market. At one point, I wanted to hang a sign in my front window saying "I fix other advisor's accounts." Too often I see retirees that are eating their principal alive to the tune of 10-15% per year in their 60s-70s. However, some broker told them that this was a sustainable level, because their holdings have a back tested return that is similar. What the "advisor" usually doesn't mention is the risk level they have to expose themselves to in order to potentially gain that annual return.
Too often, I see two types of "advisors." The first is like a doctor who is telling a patient to lose weight. The patient will ask how, and the Dr will tell them to exercise regularly and eat less than 2500 calories a day. Lay off the red meats and eat more vegetables and less processed foods. This advisor is giving great advise, just not very exciting.
The second "advisor" is like the Hydroxycut commercials. The advisor shows sexy numbers that really appeal to the retiree. Just like the weight loss commercials that tell you to take their pill and you'll just shed off the weight. It will just melt off if you buy their pill or hold their shake weight in your hand. Unfortunately, this type of advisor is very successful in the short term. They eventually burn out, because you can only lie so much. Yet, the companies that promote these snake oil salesmen are never at a loss for new sales recruits.
Gosh - 10-15% - that is off the charts. Highest I've heard is perhaps 8-9%. Of course - drawing down large amounts of capital during down markets is a recipe for total disaster.
I've never heard of Hydroxycut - but get the drift.
I've just been doing slow and boring for years and years and years. My husband and I were in very speculative legal practices - so the last thing I wanted in terms of investing was the same kind of speculation (it's hard telling what juries will do - but even harder telling what markets will do).
OTOH - I really don't know what to make of today's investment climate. Bernanke is trying to get everyone to walk the plank and jump into speculative investments. But I don't like the feeling of having anyone pushing a sword into my back - trying to force me to do this. So I probably won't - because I don't have to. But what about retired people who can't live on 1% a year (average CD rate as of today is less than 1%)?
On my part - I still think there are some decent values in both tax-free and taxable municipal bonds. There is more risk in these instruments now than in years past. But diversification is a good way to minimize risk IMO (most munis can be bought in increments of as little as $5k - so diversification can work for average investors). Just curious what you think (you won't change what I do - but other people might be interested in knowing).
And - FWIW - there's an Oregon long term tax-free GO on the market today at about 4.2% - and a couple of weeks ago I bought a highly rated local Florida long term taxable water and sewer revenue bond at about 5.7%. People who are used to buying CDs aren't used to buying this stuff. So they probably need advisors to help them when they're taking their first "baby steps" (and note to investors - you'll pay a bit more in price - and a bit less in yield - for this advice - worth it IMO if you don't know what you're doing). Robyn
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. Hope you had a wonderful trip.
). And - unless I die soon - I stand to inherit some money (my husband already inherited some when his folks died). So - although you and I come at this from different situations - we are both basically ok. I don't think the same thing can be said for most "boomers" right now. It is a troubling situation to me when I think of the future of a lot of people our age (especially the "sandwich" members of our generation now caring both for parents and children who are not in great financial shape). Robyn
