Met Moshe Milevsky Last Week...........

[haha]

What did she reveal?

I read that Cramer has most of his money in safe investments like TBills and CD's, that is a joke.

Mostly municipal bonds, some stock and personal real estate.

Ha

 

[RockOn]

Mostly municipal bonds, some stock and personal real estate.

Ha

Sorry, I think you are right, I remember it was low risk compared to 100% stocks. I think the guy pushing stocks and timing to an obviously uninformed crowd (have you heard the questions asked on that show?) should be drinking the koolaide or he should just SHUT UP.

 

[Nords]

I saw Suze Orman once; she disclosed her AA early in the talk.

I know she's been around for years, but I don't remember any personal AA talk until recently. I'm sure that would've stuck in my mind during the 1990s & 2000s when she was doing her "Young, Fabulous, & Broke" tour...

 

[haha]

Sorry, I think you are right, I remember it was low risk compared to 100% stocks. I think the guy pushing stocks and timing to an obviously uninformed crowd (have you heard the questions asked on that show?) should be drinking the koolaide or he should just SHUT UP.

Oh, I guess I wasn't clear. I was referring to Suze Orman, not Cramer.

Ha

 

[RockOn]

Oh, I guess I wasn't clear. I was referring to Suze Orman, not Cramer.

Ha

It is strange how some of those with a lot of money do not hold stocks, stocks seem best for the want-a-be crowd.

Imagine having $50 Million. If you have that much it is likely outside of tax deferred accounts. You could put enough in dividend paying stocks to have an income tax of only 15%, if you wanted to; or, better yet buy Muni bonds and avoid all income taxes. The AMT doesn't touch them. That is being rich.

Most reasonably well off, but not rich (maybe up to 3 or 4 Million even), Americans have a large percentage of their money in tax deferred accounts, they pay income tax rates on those withdrawals. Some get hit with the AMT, like I did this year.

Maybe if I buy some of those pink sheet stocks, I'll get there.

 

[Meadbh]

Did he explain (1) the personal-capital earnings potential of an early retiree, and (2) his own asset allocation?

In his book Wealth Logic WealthOutput Milevsky doesn't show us his personal asset allocation but does reveal his father's strategy (self insurance), the fact that he ran out to buy life insurance the day his first child was born, and his mother in law's atraction to sexy stocks. Based on the papers he has written, I'll bet that he doesn't DCA but invests equally in equities and fixed income when he has spare cash, has a balanced portfolio, and factors in the U of Toronto (defined benefit) pension plan. He sounds like a very engaging teacher. If I ever get the chance to hear him speak, I will.

 

[barbarus]

Cramer was so powerful in his on-air tirade that he frightened the Fed into slashing rates.

Lets see Milevshy do that!!

 

[FinanceDude]

Cramer was so powerful in his on-air tirade that he frightened the Fed into slashing rates.

Lets see Milevshy do that!!

I had the cable connection to my TV taken out today............I don't need CNBC poisoning my day anymore...........it's a total waste of time..........

 

[Sarah in SC]

Now just unplug the whole apparatus and get outside for some exercise, FD! It will do wonders for your optimism! Good job!

We have a really insane guy who isn't really a client, but who calls when the market is down and asks hysterical questions while CNBC blares loudly in the background! I am always glad to answer him that I'm buying while it is all on sale! Drives him crazy

 

[Art G]

Considering Milevsky is currently a strong proponent of variable annuities and the living benefits of such, I'm really surprised to see so many here admiring him.

 

[brewer12345]

Considering Milevsky is currently a strong proponent of variable annuities and the living benefits of such, I'm really surprised to see so many here admiring him.

I am not wild about variable annuities, but Prof. Milevsky is the leading academic light delving into a matter dear to all our hearts: what is the best way to optimize one's standard of living in retirement?

 

[FinanceDude]

Considering Milevsky is currently a strong proponent of variable annuities and the living benefits of such, I'm really surprised to see so many here admiring him.

More interesting is that back in 1999-2000 he thought they were expensive worthless products, and has changed his tune.........

I think if the industry "invents" a fixed product with COLA adjustments, folks would be less critical.........oh what, that's been done, it's called a Govt Pension.......

 

[bongo2]

Come to think of it, I don't know Dave Ramsey or Scott Burn's asset allocation mix either..........

If you're curious Scott Burns does write an annual "Mea Culpa" column:

"This is the column where I tell you what I've been doing with my own money, with particular attention to mistakes. It also lets you see if I eat my own cooking and, if so, whether I choke on it."

I'm curious what Milevsky had to say about tontines. They seem like the perfect vehicle for the ERF crowd - people who don't trust insurance companies, like equities, and could use the few percent annuitization bump in yield. Are they legal these days?

 

[W2R]

More interesting is that back in 1999-2000 he thought they were expensive worthless products, and has changed his tune.........

I think if the industry "invents" a fixed product with COLA adjustments, folks would be less critical.........oh what, that's been done, it's called a Govt Pension.......

Here's how the FERS (Federal Employee Retirement System) pensions are COLA'd. You will notice the FERS COLA isn't the full Consumer Price Index increase.

• If the CPI is less than 2%, the FERS COLA equals the CPI.

• If the CPI is 2-3%, the FERS COLA is 2%.

• If the CPI is over 3%, the FERS COLA is 1% less than the CPI.

Those on the old pension system CSRS (Civil Service Retirement System) get the full CPI, I believe. These (CSRS) are mostly employees who began work with the federal government 20+ years ago.

I guess my point is that there are COLAs, and then there are COLAs!! I'm glad to have any.

I can also get a COLA'd benefit by buying an inflation adjusted immediate lifetime annuity from MetLife through the TSP. Probably won't, though.

 

[FinanceDude]

I'm curious what Milevsky had to say about tontines. They seem like the perfect vehicle for the ERF crowd - people who don't trust insurance companies, like equities, and could use the few percent annuitization bump in yield. Are they legal these days?

Outlawed in New York state in 1906, and by 1908, all 50 states. Apparently a certain NY senator thought they were a "rip-off",, so SS came along to replace it in the 30's.........

 

[Independent]

I'm curious what Milevsky had to say about tontines. They seem like the perfect vehicle for the ERF crowd - people who don't trust insurance companies, like equities, and could use the few percent annuitization bump in yield. Are they legal these days?

To me, a classic "tontine" pays out nothing until the next-to-the-last death, and then gives everything to the sole survivor. That doesn't seem very useful to retirees.

Milevsky talks about a series on one-year "tontines" in which all the funds are paid every year, regardless oft he number of deaths. This type of "tontine" seems useful to me. As he points out, it is closely related to a payout annuity, which is certainly legal.

 

[chinaco]

Interesting.

I will stick with the balanced diversified portfolio as the main portion of our assets.

I have a hodge podge of small pensions coming including SS (whatever I get from it). I might purchase an annuity to form a base income around 65.

Some one commented about wealthy people having too much fixed. I do not know if it is true or not. But, it seems to me that once one (average well-to-do person) has arrived, they do not want to go back. It would seem reasonable to be somewhat conservative. Most people would like to have more money, but they probably want to maintain their lifestyle more.

 

[ats5g]

In case people are still wondering about Milevsky's portfolio, check out:

http://books.google.com/books?id=Sudxra83RQkC&pg=PA225&lpg=PA225&dq=is+your+client+a+stock+or+a+bond&source=web&ots=nzDA9H9jZv&sig=qJa0MiK1k9L7Rpjy-0O82-4gpDY&hl=en]Human capital and AA]

Is that Client a Bond or a Stock?

Appears to me as if he's 100% stocks. Now Milevsky has a very stable job and an expected pension, his job is probably quite immune from shocks to stocks, and is in his 40's [probably], so if his stocks tank he can always work longer.

Contrast that with Zvi Bodie who is near retirement [in his 60's] with no pension [only defined contribution plans], and if his stocks tanked he probably wouldn't want to be working into his 80's. He is roughly 90% laddered TIPS/i bonds, and 10% stocks/options.

My father is in the same boat [prof in his 60's looking to retire within 3 years] as Bodie and is roughly 70% bonds/ 30% stocks, and will probably annuitize a good portion of those bonds at retirement.

There is certainly nothing wrong with either of these 3 asset allocations because they are very client specific.

Some one commented about wealthy people having too much fixed. I do not know if it is true or not. But, it seems to me that once one (average well-to-do person) has arrived, they do not want to go back. It would seem reasonable to be somewhat conservative. Most people would like to have more money, but they probably want to maintain their lifestyle more.

Ah, the diminishing marginal utility of wealth.

- Alec

 

[Nords]

Is that Client a Bond or a Stock?

In regards to the first, what exactly do you mean?

Hey, that's the article I read about. Thanks, Alec!

As a tenured university professor, my human capital—and the subsequent pension I am entitled to—has the identical properties of a fixed income bond fund with monthly coupons. I am truly a walking inflation-adjusted real return bond. Therefore, I have very little need for fixed income bonds, money market funds and GICs in my financial portfolio. As a result, my total portfolio of human and financial capital is well-balanced, despite the fact that individually my financial capital and human capital are not.

Furthermore, if you think of the flexibility involved in the decision of when to retire or whether to work overtime, then you can extract more human capital if and when needed to offset losses from your financial assets.

It'd be interesting to see what he thinks of ERs.

 

[FinanceDude]

It'd be interesting to see what he thinks of ERs.

Would you like me to email him, get an answer, and report back on here??

 

[Art G]

I'm curious as to when these professors find time to teach? I understand the current theory is "publish or perish", but with Milevsky jetting all around the country, who the heck is teaching his class? I'd be a tad ticked if my kid was taking his class and sitting through lectures with a teacher's asst.
The biggest problem I have with the University of Texas is that the school is more of a publishing school, so the professors deal with the kids like they are a necessary evil. They take in the money, but teaching has become secondary. Just strikes me as something wrong here.

 

[FinanceDude]

I'm curious as to when these professors find time to teach? I understand the current theory is "publish or perish", but with Milevsky jetting all around the country, who the heck is teaching his class? I'd be a tad ticked if my kid was taking his class and sitting through lectures with a teacher's asst.
The biggest problem I have with the University of Texas is that the school is more of a publishing school, so the professors deal with the kids like they are a necessary evil. They take in the money, but teaching has become secondary. Just strikes me as something wrong here.

Common theme in business schools.........I'll bet Moshe takes time for the MBA and PhD students........

 

[Art G]

FD, he's been on the road for months! Perhaps he e-mails them their assignments?

 

[Nords]

Would you like me to email him, get an answer, and report back on here??

Dude, absolutely. Thanks!

 

[Art G]

and don't forget to ask him about Uruguay!