4%? How about 0%? What's going on?

[doushioukanaa]

Diversification may be helpful, but it is only $14,000..It's the jumping around due to impatience and yield chasing that causes the average investor to lose money even when the stock market is flying..I would just sit tight. Don't go chasing returns.

I don't understand New Thinking's advice.  First you downplay the importance of diversification, then you advise against yield chasing, then you suggest the person sit tight in a specific asset class, presumably to chase anticipated above average yield.

Bottom line, zaniew should diversify.  You can achieve diversification even if "it is only $14,000." As difficult as it may be to do, you should pretend the poor performance never happened and just invest the funds wisely, and as you would if you received it as your first cash windfall.

 

[bosco]

market timing is basically trying to better the return the market gives you by outsmarting it.....

I disagree strongly with this definition. A lot of market timing occurs, not to attempt to better the market returns, but in an effort to match market returns while minimizing risks. A consistent use of some rationl timing schemes can reduce drawdowns and hence protect capital, while sacrificing little or nothing to a buy-and-hold philosophy.

 

[kjpliny]

CT, I am about 55% cash and short bonds/TIPS. It is probably true that I would sell more equity were not for taxes. A good portion of this exposure is hedged into January with puts.

Also, I keep a core holding in energy and a smaller one in gold producers that I don't really try to trade. I believe that Peak Oil will become an important economic factor, probably sooner than most of us imagine. I also expect a $2000 gold price within 10 years, but I am not betting much on that outcome.

This allocation has me ahead about 15% for the last 12 months, even after paying my living expenses and considerable taxes.(An unavoidable byproduct of believing that most stocks should be bought and sold rather than just collected.) Most of that gain is from energy and gold, though they have both sold off rather viciously lately.

Lastly, regarding being the richest man in the graveyard- that as you probably know isn’t my goal. I just don’t like losing control, and in my opinion, a guy sitting there watching his portfolio take a big drawdown is out of control. He is in the land of believing in Santa Claus, only this Santa is called FireCalc.

While this may be cool for some, it isn't for me.

Ha

HaHa,

I am thinking the same way...the world is not prepared for Peak Oil and the economy is about to take a beating unlike any we have ever seen.  Add to that the housing bubble, rising interest rates and the islamic jihad infesting more and more countries and my thinking is that  cash and precious metals will fare better than most stock holdings regardless of sector over the next 10-20 years.

People with high percentage stock holdings are going to be disappointed because they think the ride we've seen over the past 50 years is going to continue.  Unlimited economic growth is unsustainable in a world of dwindling cheap energy supplies.

 

[Cut-Throat]

HaHa,

I am thinking the same way...the world is not prepared for Peak Oil and the economy is about to take a beating unlike any we have ever seen. Add to that the housing bubble, rising interest rates and the islamic jihad infesting more and more countries and my thinking is that cash and precious metals will fare better than most stock holdings regardless of sector over the next 10-20 years.

People with high percentage stock holdings are going to be disappointed because they think the ride we've seen over the past 50 years is going to continue. Unlimited economic growth is unsustainable in a world of dwindling cheap energy supplies.

I think you are ready for book by Ravi Batra called the ''The Great Depression of 1990,'' - I think he made a similar case, such as yours.

From a 1987 Atricle about his book

*********************************************************************************

THE 44-year-old Dr. Batra practices what he preaches. He rents a condominium in a Dallas suburb because he believes housing prices will plummet. His savings are in municipal bonds, a stock mutual fund and certificates of deposit. If things really get bad, he said, he plans to retreat to cash and gold coins kept in safety deposit boxes.

Dr. Batra has been a professor of international economics for 15 years at Southern Methodist University in Dallas. He said his research 10 years ago showed that, with few exceptions, the United States has experienced depressions every 30 or 60 years since the 1700's. Most of them, he writes, were preceded by increases in the money supply, inflation and government regulation, then a period of low inflation, stable unemployment and market deregulation. He concludes that because no depression occurred in the 1960's, one is all but certain, starting in 1990.
**********************************************************************************

 

[haha]

I think you are ready for book by Ravi Batra called the ''The Great Depression of 1990,''  - I think he made a similar case, such as yours.

Well, this pretty much settles it! 

Ha

 

[d]

g*ld and beaver-cheese!

 

[Cut-Throat]

Well, this pretty much settles it!

Ha

It certainly settles the fact the No one can predict the future!

 

[haha]

It certainly settles the fact the No one can predict the future!

While it may or may not be true that no one can predict the future, you only proved that Ravi Batra did not predict the future in the instance cited.

Anyway, it is not necessary to predict the future to do very well. You only have to avoid falling into some very deep holes, by being willing to make probabilistic assessments going forward.

For example, say one believes that crude oil very likely is not an eternal resource, and in fact that the recent large run-up in price may not be caused by hedge funds as is so hopefully suggested. but rather by a permanent change in the likely cost of supplying oil.

Although it would be hard to predict exactly how this might affect prices, investments, etc., one could surely safely predict that it would very likely be disruptive.

To me this is not exactly predicting the future, as being willing to spend the time and effort to understand the present.

Ha

 

[nvtashak]

Haven't checked them this month, but Federated Kaufman and the original Oakmark fund have done okay over the years--though I suspect the Oakmark International may be down a bit recently.
They both have websites if you care to check on them. Oakmark over the last ten plus years has added more fund choices, but I never moved to them.

 

[cute fuzzy bunny]

To be fair, Batra didnt say which 1990 he was talking about. I'm sure that some calendar system has another 1990 coming up sometime.

I think the same destructive prediction was made about the demise of the whaling/whale oil business.

While I share some concerns, I still have trouble making the leap from the problems that we may encounter and some of the solutions proposed. I think certain investments, products, ideas, services and so forth just push certain happy and sad buttons in peoples brains. It seems quite obvious to them. Not so much to others. :shrug:

It seems to me that some people play their best hand and hope for the best, and some people play to not lose badly, although the hand they play will almost certainly lose. To me its punting on first down and hoping your defense will keep the score 0-0 and maybe get a touchdown or field goal off an interception.

I guess whatever works for each of us is what works, good luck changing anyones mind, but jeez...dont be surprised when the rest of the crowd just doesnt get the massive beaver cheese buying.

 

[haha]

Thanks for the summary. 

Let's agree to compare notes in five years. Then we can decide who had the plan best suited to the environment.

Ha

 

[wabmester]

THE 44-year-old Dr. Batra practices what he preaches. He rents a condominium in a Dallas suburb because he believes housing prices will plummet. His savings are in municipal bonds, a stock mutual fund and certificates of deposit. If things really get bad, he said, he plans to retreat to cash and gold coins kept in safety deposit boxes.

Hmm, we didn't get a depression in 1990, but Japan did. And we did get a recession and a 6-year decline in real estate.

Not a bad call, IMHO.

 

[Cut-Throat]

Hmm, we didn't get a depression in 1990, but Japan did. And we did get a recession and a 6-year decline in real estate.

Not a bad call, IMHO.

Yeah, but if you would have sold all your stocks and your real estate and moved to the mountains as he suggested in 1990, you be bit disappointed today.

In fact I've seen interviews of people that followed his advice. They were not only in financial trouble, but highly embarrassed.

 

[cute fuzzy bunny]

Thanks for the summary.

Let's agree to compare notes in five years. Then we can decide who had the plan best suited to the environment.

Ha

Agreed, see you in five years. And dont think I wont remember.

But I'd like to check back in around 20 and maybe 30 years from now.

We wont be doing that by web forum though, it'll probably be by some implant brain interconnection powered by the exhaust from all the flying cars.

 

[ashtondav]

Here in the UK i can get an indexed linked annuity of 3.5% at 55.

Because our stockmarket has not been the growth beast of Wall St over the last 120 years the safe withdrawal rate here (UK) is calculated by some as 2.8% or less. You guys have been fortunate to be in the vanguard of 100 years of capitalism and are reaping those rewards with a long term steller stocks performance.

Our main index (FTSE 100) does have a dividend yield of over 3.5% so that's what i'm banking on. Based on that, and the fact i wish to leave nothing to my heirs I think i might take the annuity route.

 

[haha]

Here in the UK i can get an indexed linked annuity of 3.5% at 55.
Based on that, and the fact i wish to leave nothing to my heirs I think i might take the annuity route.

Honey, did they do nasty to you?

Ha

 

[rs0460a]

Honey, did they do nasty to you?
Ha

I'll reply to this one.  Not that they did "nasty" but they made it known that I would have to "find my own way" in the world.  I did not expect (nor did I get) any "remainder" of their estate.

Guess what?  I think they were correct.  I made my own way in the world, and didn't base my "existance" on their inheritance...

- R..

 

[2B]

Here in the UK i can get an indexed linked annuity of 3.5% at 55.

Our main index (FTSE 100) does have a dividend yield of over 3.5% so that's what i'm banking on. Based on that, and the fact i wish to leave nothing to my heirs I think i might take the annuity route.

I've chopped up your reply but the 3.5% IRR isn't much different than the current US annuities. The devil is, of course, in the details which you didn't provide. What impacts the return, what triggers adjustments, what is the minimum guaranteed return. It goes on forever.

As for your heirs, my father retired broke after a career as a mail carrier. I'm sure they are as well paid in Britain as in the US. After almost 20 years collecting his pension, he died with about $120,000 in the bank plus a paid for town house. You might be equally surprised with how quickly your expenses fall after you become an "old fart." That's probably a Yank expression but I'm sure you Brits have something equivalent.

The 3.5% is pretty good if it's "guaranteed" and real. The US and UK are a few of the stock exchanges that never "went to zero" like Germany, Spain, France, an earlier Chine, etc...... I have periodic conversations with people about what the probability is that the US will avoid and total collapse. It always unnerves them. The nice thing about a total collapse is that I probably wouldn't live through it.

I can't comment on English annuities but in the US I've never found one that could compare favorably with laddered CDs. They sound wonderful if you think you'll live forever but be real about your longevity. In the US the real rate of return is about 1 1/2% to 2% lower in an annuity than for laddered CDs.