is 3% swr the new 4% ,an interview with dr wade pfau (salary, benefits)

[Robyn55]

Originally Posted by mathjak107

who says? simple math says you couldn't have spent 4% inflation adjusted and gotten less than 1% real return average for the first 15 years.. one or more of those parameters were different if you did.

as you said you had the investment winds at your back so you are arguing about something that no one said otherwise about and it certainly does not meet the criteria i mentioned when i said what i did .. if you got more than 1% real return you can spend more for sure.

if you were referring to my comment about the s&p 500 evolving over time as to its holdings you would be wrong again as it could have been any broad based index.

in fact if they could have switched between the dow and s&p i would bet the overall results would vary little.

I'm not sure I understand what you're saying. We spent > 4% or so back then. We were earning much more than 4% (and still saving a lot of money). I didn't (and don't) adjust for any official inflation. OTOH - I keep close track of our spending - and our "personal inflation". I agree with you that "personal inflation" is much more important than "official inflation". All of our "shopping baskets" vary. Our personal inflation rate - except for health care expenses pre-Medicare - hasn't been a whole lot.* Also - we have a lot of flexibility in terms of discretionary spending. So if - for example - I embark on some redecorating projects (like I did last year) - I may cut back in other areas (like travel). Also - I try to be very tax efficient in terms of investing. I haven't said "ouch" in terms of taxes for years (we gave quite enough "at the office" ).

I've never tracked the differences in long term historical returns among the Dow - the SP500 - and other major indices. However I do track relative performance on a shorter term basis. The Dow has returned 13.24% over the last 52 weeks - the SP500 20.75% (and the Nasdaq 100 was the best major index at 32.26%). Over the last 24 months - the Dow is at 24.32% - the SP500 is 33.63% (and the best major index was the Russell 2000 at 44.06%). These numbers don't take dividends into account. So the results among major indices can be pretty different. I tried for years to come up with a way to improve my trading results by using relative performance. It wound up being a quest for the Holy Grail on my part (I was always a day late and a dollar short) - and I eventually gave it up. So I just trade a somewhat small number of different index ETFs today - without regard to relative performance. Robyn

*We lucked out in terms of our health care expenses too. Wound up in the Florida high risk pool before it closed to new enrollment in the early 1990's. The premiums weren't cheap - but they weren't total nosebleed and the coverage was exactly right for us. Then we lucked out again - going on Medicare pre-ACA. We dodged 2 bullets IMO (we may not be able to duck the next one - whatever it may be).

Also - it's often easier to keep housing expenses (a major cost in most households - including ours) under control if you own instead of lease. A state like Florida is pretty "homeowner friendly". Not only do we get a homestead exemption - our annual property tax increases (if any) are limited to the lesser of CPI or 3%. At this point in our lives - most increases in our housing costs are/will be the result of our house getting older - and our increasing reliance on others to help us with things we used to be able to do ourselves (we got a yard service for the first time last year - since my husband was having difficulty "mowing and blowing").

[Robyn55]

Originally Posted by Cameron60

...Bonds seem like even more of a bubble but I guess over the years the numbers don't lie.

There are "bonds" - and there are "bonds". The things that the fed has been buying (like treasuries) are those most likely to be in an "artificial bubble" IMO. Most people don't pay attention to how fed buying is distorting many - but not all - bond prices. I took a look at one Bogleheads discussion thread - and no one mentioned that munis have higher yields than treasuries today because the fed isn't buying munis. Robyn

[Robyn55]

Originally Posted by mathjak107

right now i use two different portfolios which hold a few different types of fidelity bond funds.

i have not been buying munis at all. that is not to say i won't but it isn't part of the models i use. i have to be careful with muni's because we get whacked with the amt tax every few years . whatever i buy has to be amt tax free.

right after we get squared away on this years taxes and find out how much my replacement implants will run i will be looking into cofinas which seem to still be a good deal even if i get hit with the amt tax from time to time.

i already know i will be hit with it this year from the lease rights sale..

It's very easy to avoid AMT bonds (especially if you're buying individual bond issues).

Why on earth would you go from no munis to cofinas (another flavor of Puerto Rico junk)? If someone recommended that to you - I'd fire that person.

I will give you the benefit of the doubt - because you don't do munis. Puerto Rico bonds are now the playground of leveraged (distressed debt) hedge funds. Who showed up at the door a while back when the bonds were yielding 10% or so. They pounded on the door of today's Puerto Rico sale (at about an 8-9% yield). If you don't know what you're doing here - and are a mom and pop investor - you will probably wind up being slaughtered - because you'll be the bag holder when the hedge funds leave for greener pastures a few months down the road. Puerto Rico is a basket case. It is at best a short term trade for expert bond traders. Certainly not a long term buy and hold for average investors:

http://money.cnn.com/2013/10/31/inve...o-hedge-funds/

I know a lot about munis - and am not a day trader when it comes to equities. But I would rather day trade Facebook - or even PLUG - than buy Puerto Rico munis. Note that when it comes to the bond market - it doesn't work like the stock market. I don't think anyone had a problem selling PLUG today - despite the huge decline. When it comes to bonds - if you want to sell - sometimes there are no bids at all - for days or weeks or months. IOW - you're stuck. Choose your bonds like you'd choose a spouse. Because it can at times be pretty hard to get rid of either .

BTW - it's easy to get about 4% in high quality munis today. Yields more than double that ought to set off warning bells in most peoples' brains. If it sounds too good to be true etc. Robyn

[mathjak107]

there are many pro's and managers loading up on cofinas right now. you may not like them but many top pros see them as a good opportunity.

most debt sucks in porto rico and is a time bomb but like i said many are buying cofinas and i will take a shot. i hope i don't have to say you were right but its not like its a big investment. .

i respect Robert Amodeo head of municipals at Western Asset Management alot as a manager .
he oversees about $30 billion of muni portfolios. He also co-manages several of its muni funds including Western Asset Managed Municipals Fund and Western Asset Municipal High Income Fund which are among the best performers in their category for the decade. Western’s muni team was named U.S. Fixed Income Municipal Manager of the Year for 2011 by Institutional Investor magazine.

anyway ROBERT is hot on cofinas and will touch little other puerto rican debt, that is good enough for me in my book to take the shot.

remember i am not smart enough to make my own decisions about certain things , i just try to know who is alot smarter then me.

i haven't been wrong yet about who's coat tails i follow.

[Robyn55]

Originally Posted by mathjak107

there are many pro's and managers loading up on cofinas right now. you may not like them but many top pros see them as a good opportunity.

most debt sucks in porto rico and is a time bomb but like i said many are buying cofinas and i will take a shot. i hope i don't have to say you were right but its not like its a big investment. .

i respect Robert Amodeo head of municipals at Western Asset Management alot as a manager .
he oversees about $30 billion of muni portfolios. He also co-manages several of its muni funds including Western Asset Managed Municipals Fund and Western Asset Municipal High Income Fund which are among the best performers in their category for the decade. Western’s muni team was named U.S. Fixed Income Municipal Manager of the Year for 2011 by Institutional Investor magazine.

anyway ROBERT is hot on cofinas and will touch no other puerto rican debt, that is good enough for me in my book to take the shot.

Then you are a fool IMO. It's not like you might double or triple your money. You're just being a yield hog. When I take a reasonably big risk - I want the possibility of a big return - not 8% a year with a hope and a prayer that I'll get my principal back. I trade a fair sized equities portfolio. Some years I can make or lose 8-10% - or perhaps make more (won't usually lose more). But I could never lose 80%+ of my principal - which it's easy to do in very junky bonds.

Anyway - you live and learn. BTW - when you say it's not a big investment - what kind of dollars are you looking at? My minimum muni investment is $25k - it's usually about $50k - and sometimes higher. The usual absolute minimum muni bond buy is $5k. So what kind of dollars are you thinking about putting into your first (junk) muni buy? Note that I assume you're talking about buying individual bonds. Perhaps you're talking about buying a muni junk bond fund that owns these bonds.

Also - since your only brokerage firm account is IIRC at Fidelity - does it impose any investor requirements on you when you buy these bonds? I have found Fido to be quite a stickler when it comes to individual bond purchases (like I sometimes need "clearance" if I'm buying AA+ 20 year state GO munis for my 95 year old father - because - in Fido's opinion - they might not be appropriate for him - don't have a clue why). Robyn

[mathjak107]

25k is what we would buy. No limitations as far as i know at fidelity for us.

Our assigned rep said no problem ,she can get them for us.

[Robyn55]

Originally Posted by mathjak107

25k is what we would buy. No limitations as far as i know at fidelity for us.

Our assigned rep said no problem ,she can get them for us.

I did a search on the Fidelity website this morning - and came up with nothing in terms of Puerto Rico bonds. So I called the fixed income desk. And it said it hasn't offered/won't sell Puerto Rico bonds to *any* individual/non-institutional clients. That has been its policy for a while now. FWIW - other brokerage firms - like Wells Fargo - have adopted the same policy:

Retail Misses Puerto Rico as Wells Fargo Leads Risk-Averse Camp - The Bond Buyer

OTOH - if I wanted to buy the bonds - I could buy them at my other online brokerage firms (which give me unfettered access to all Bonddesk* listings). The offerings are kind of eye-popping. Bid/ask spreads - to the extent that they exist at all - are often 10 to 15 points (IOW - the bid if you're selling is 60 - the ask if you're buying is 72). And these bid/ask spreads apply not only to smaller lots - but to larger lots too. Many of these issues - like most junk bonds (and often many high grade munis as well) - trade only by appointment - and the trades are all over the place in terms of prices. IOW - there's no orderly market. These are the kinds of risks that large hedge funds may be comfortable with - but they're not appropriate levels of risk for any individual investor IMO. Robyn

*BONDDESK Group, LLC

[mathjak107]

Thanks for the info, i will double check with my rep because she said she could get them for me.

perhaps because we are private access clients. I called because I did not see them listed either for purchase.

If she was wrong i am open to sources you may have

[mathjak107]

Just heard back , nope , she confirmed it is true even as private access clients she said she would not be able to swing it.

[Robyn55]

Originally Posted by mathjak107

Just heard back , nope , she confirmed it is true even as private access clients she said she would not be able to swing it.

I have a friend who's a large account size portfolio manager. He has his accounts at Fidelity. I suspect he can buy the stuff at Fidelity on the institutional side (but doubt he does). I'll ask him when I talk to him next. IMO - Fidelity is much too conservative when it comes to the kind of individual bond fixed income things it offers to its clients. For years - it wouldn't even offer any longer term callable federally insured CDs! Which led to the ridiculous situation that I couldn't buy a 20 year callable CD at Fidelity - but could buy/sell naked options .

FWIW - I spoke to my E*Trade bond desk today too. Their clients are flipping/trading yesterday's new PR issue like crazy. Here's the trading history:

Municipal Securities Rulemaking Board::EMMA

It's a whole lot of trades for a muni!

Note that the minimum purchase amount in yesterday's IPO was $100k (and there were other income/net worth requirements for individual investors too). Also - a lot of E*Trade's clients in this office are large sophisticated investors who tend to trade bonds (often on leverage). I don't deal with the office very often these days. Because it's easier and cheaper to do the kind of plain vanilla buy and hold stuff I do on line.

OTOH - if I wanted to buy COFINA bonds - I could do it on line at E*Trade (Zionsdirect too) - with a minimum purchase of $5k face amount of bonds. Note that bonds as tenuous as COFINA bonds - well there are dozens of issues. And you have to be concerned about whether you have first lien bonds - second lien bonds - etc. Originally - PR was thinking about issuing yesterday's issue as a COFINA instead of a GO issue. But the new COFINA issue would have to be a higher yield/less attractive 3rd lien COFINA bond. So it went with the GO.

Now maybe you have a full time muni bond credit quality analyst in house. I don't . And I don't have the time (or care) to sift through piles of junk to find one issue that might not be total garbage - and might not go under - one that might yield me a few extra $$$ a year in income. I do spend a fair amount of time when it comes to this bond stuff - but you're the one who says you spend like an hour a week on portfolio management. That amount of time isn't consistent with analyzing/managing a junk bond portfolio (which is why - when it comes to junk - I only buy/hold/trade JNK and HYG on a technical basis).

A suggestion. If you have any possible interest in buying individual fixed income issues - whether you're talking brokered CDs - munis - corporates (I do the first 2 individually - not corporates) - etc. - open an account at E*Trade and/or Zionsdirect. And do your searching/buying there (using the bond searches as a gateway to lots of specific issue information). I re-examine the issue every year or two. As of today - E*Trade and Zionsdirect are the only 2 brokerage firms in the US that will give you access to every secondary market bond issue available on Bonddesk (which is one of the largest - if not the largest - bond clearing house in the US today). At Bonddesk prices - without markups.

You will pay the same price an institution would pay - plus a commission. $9.95/purchase at Zionsdirect - $1/bond at E*trade. Which is why I prefer Zionsdirect .* Of course - there's another wrinkle when it comes to secondary market fixed income. It's not like stocks - where everyone selling right now is trying to get X (plus or minus pennies). One guy might be trying to sell a block of 25 at 102 - another a block of 25 at 100 - another a block of 25 at 98.

So you have to do your homework. Check out all the lots that are available. Also check them against recent prices (because some idiots will price a block 5 points above a trade 2 days ago). Pricing is much more transparent today - and all available when it comes to munis for free on EMMA. There was a front page WSJ article a couple of days ago about how muni pricing/markups/markdowns for retail investors was opaque and "mom and pop" were getting screwed. Which is total BS today IMO. Lazy investors and lazy reporters make for a bad combination when it comes to reporting the truth (I used to be a "check out the truth when it comes to individual muni investing stuff" source for Charlie Gasparino when he worked at the WSJ - and I don't think he would have let misstatements like this appear on the front page of the WSJ). You have to do your homework - and it takes a little time. But all the information is out there - and easy to locate if one takes the time to find it.

Also - when it comes to primary market issues. With brokered CDs - you can get all at E*Trade and Zionsdirect - and many (but not all) at Fidelity today. WRT new issue munis - Fidelity is the only firm of the 3 that offers access to any primary market issues. There are quite a few - but far from all - and I can't generalize about them. Except that none seem to be total junk when issued. You can sign up for Fidelity email alerts when it comes to new issues - and put in a buy order for the bonds when they're issued. The reason it's good to do that is many bonds are offered originally at prices like 97 or 98 - and - once they come to market a few weeks later - brokerage firms - especially "full service brokerage firms" - will try to sell them to you at par (100) and act like they're doing you a big favor. OTOH - if you start looking at these primary market issues - you'll see lots with bonds that have 5% coupons - but are priced at 110 or more (with - of course - much lower yields to maturity than 5%). Why? So mutual fund managers can buy these tranches and advertise high current yields to gullible mutual fund investors. Robyn

*Note that you can make a few bucks simply by moving money in some cases. E*Trade offers cash bonuses in various amounts if you open accounts of various sizes:

https://us.etrade.com/open-account/popular-accounts

Fidelity offers FF miles and free trades. Zionsdirect doesn't offer a thing - except the best commissions . I sometimes move a little money around every few years to pick up an extra $500 - or 50000 FF miles. It's a much safer way to put a few extra dollars in my pocket than junk munis .

OTOH - note that the primary reason I don't keep all my money in one brokerage firm is because I never want to be in a financial crisis and find that most of my money is in a frozen/screwed up position in one brokerage firm. I think it's totally imprudent to keep all of one's money in one place (and the office managers at the firms I deal with agree with me).