QE Infinity & Asset Allocation

[aim-high]

Does anyone have any thoughts on Yellen replacing Bernanke?

It seems like artificially low rates and QE Infinity will continue for at least the next year.

Does that at all play into your Asset Allocation?

 

[samclem]

Does that at all play into your Asset Allocation?

I'll just continue as before: reduced bond holdings and short bond durations.

 

[2B]

I've maintained my equity allocation but I converted all of my fixed income to a 2 yr CD ladder as my longer term CDs matured or the FDIC redeemed them as the bank failed. It's obvious QE is ineffective in stimulating the brick-and-mortar economy but it does wonders for boosting the banking/financial sector. I can't comprehend why it has taken so long for everyone to realize that their is no magic but just someone behind the curtain pulling levers.

Yellen's claim to fame seems to be an article she co-wrote in Nobel Prize winning husband that said if people don't get paid a "fair" wage they don't work hard. I think that's laughable. I get paid an unholy amount of money and actually do very little. What's scary is that I have a good reputation for quality and meeting objectives. Project managers specifically request me.

 

[donheff]

I'll just continue as before: reduced bond holdings and short bond durations.

+1

 

[donheff]

Yellen's claim to fame seems to be an article she co-wrote in Nobel Prize winning husband that said if people don't get paid a "fair" wage they don't work hard. I think that's laughable. I get paid an unholy amount of money and actually do very little. What's scary is that I have a good reputation for quality and meeting objectives. Project managers specifically request me.

It is well known that a small number of talented workers stand out head and shoulders above their peers. They (rightly) get paid well and don't need to break a sweat (although some still do). That doesn't invalidate the proposition that people paid minimal wages may not be motivated. Some still will but the stats may show that a large majority are demotivated. I am guessing if the Yellens won the Nobel their research must have been pretty solid.

 

[aim-high]

I'll just continue as before: reduced bond holdings and short bond durations.

With your reduced bond holdings, do you stay in cash or move into equities?

Artificially suppressed rates seem to be a nightmare for savers who are risk averse.

 

[2B]

It is well known that a small number of talented workers stand out head and shoulders above their peers. They (rightly) get paid well and don't need to break a sweat (although some still do). That doesn't invalidate the proposition that people paid minimal wages may not be motivated. Some still will but the stats may show that a large majority are demotivated. I am guessing if the Yellens won the Nobel their research must have been pretty solid.

I worked the hardest when I was at or near minimum wage. The fast food restaurant would fire anyone that didn't work hard enough. The painting contractor I worked for was the same.

Now, I really don't care if I'm fired. It may be the only way I'll cure myself of the OMY syndrome. Of course, I could replace my employer in a couple of days and possibly be making more money.

She didn't win the Nobel Prize. She was listed as a co-author of a paper with him, I believe, after he won. I've always considered economics a "soft science." It's mostly conjecture with data used selectively with lots of anecdotal information. Much of it can be solid but it's certainly not like the periodic table or theory of relativity.

Yellen (and probably her husband) can probably be safely described as left of center. That conclusion of not working hard without "fair" pay is consistent with her likely political beliefs. I have no PhD in economics but I have seen continuous slacking amongst my coworkers on every job I've been on no matter what the pay. People work harder when they have some displeasure with their next best alternative to that job. Nothing like a round of performance based layoffs to tighten up the work ethic.

 

[ERD50]

.... That conclusion of not working hard without "fair" pay is consistent with her likely political beliefs. ...

Agreed, one must always take these sorts of biases (either way) into account.

I have no PhD in economics but I have seen continuous slacking amongst my coworkers on every job I've been on no matter what the pay. People work harder when they have some displeasure with their next best alternative to that job. Nothing like a round of performance based layoffs to tighten up the work ethic.

Exactly. I also have no PhD in economics, but aren't there also those studies that people get accustom to a certain level of pay, and there are diminishing returns?

But it seems obvious that how hard people will work will be affected by the alternatives. One very simple example - how hard is a third world laborer working, while getting paid maybe a few $ a day, compared to many minimum wage workers in the US, making 10x or more.

-ERD50

 

[2B]

As a total hijack, the most thought provoking economic books I've read in a long time are the two Freakenomics books.

 

[2B]

Exactly. I also have no PhD in economics, but aren't there also those studies that people get accustom to a certain level of pay, and there are diminishing returns?

When I worked in a manufacturing setting, I was always amazed at workers with high school or jr college educational levels compaining how they weren't paid what they were worth. By current wage scales they were making around $80-90 K/yr. Every so often one of the would go off on how economically disadvantaged they were. I loved pointing out to them what the median wage was for the US. I also let them know they were in or very nearly in the top 10% of wage earners. Plus, an employed spouse would guarantee they were in the top 10%.

People also become disconnected between their own financial status and reality. We are all poor because we know someone who makes/has more.