Why Bother With Stocks?

[ShokWaveRider]

Interesting Article.. perhaps

http://money.cnn.com/2006/03/21/pf/expert/ask_expert/index.htm

 

[Maximillion]

Thanks, interesting, I would read this as a sure sign of a merket top.

 

[Cool Dood]

You would read what as a sure sign of a market top?

 

[cute fuzzy bunny]

It might be time for me to tie an onion to my belt again.

Dont make me do it.

 

[Martha]

I thought this thread was "Why Bother with Socks"? and was going to go on a rant and rave about how Greg refuses to wear socks. Even in the dead of winter.

 

[justin]

I thought this thread was "Why Bother with Socks"? and was going to go on a rant and rave about how Greg refuses to wear socks. Even in the dead of winter.

Why does this bother you so much, Martha? Does looking at his bare feet make you cold?

 

[unclemick]

The women of the household used to get pissed when I took my socks off and let the dog lick the grotty parts between the toes.

Bye the bye - VG Asset Allocation fund - one of my bellweathers is still showing 100% stocks versus bonds and cash.

I'm going the opposite direction somewhat - selling some and building cash.

I'm usually wrong - based on my track record since 1966.

heh heh heh - don't say I didn't I didn't warn ya!

 

[yakers]

Bye the bye - VG Asset Allocation fund - one of my bellweathers is still showing 100% stocks versus bonds and cash.

unclemick2, my Roth is in the VG AA fund(VAAPX). The reason I like them is whenever I decide to change my % of bonds/FI VS stocks, I look over at the VG AA fund and they have already made the change I am contemplating. The fact that I think right now I ought to have a high % equities and the AA fund is almost 100% equities is a "reality check" for me. Now all this could mean is VG & I will be making the same mistake. But somehow I feel better that the fund manager and I see things the same way.

 

[MasterBlaster]

But somehow I feel better that the fund manager and I see things the same way.

if I recall correctly the VAAPX fund uses a dividend discount model and prevailing interest rates to set the allocation of stocks/bonds/cash. Therefore all the high stock allocation tells you is that interest rates are low relative to dividends. But you knew that already...

The manager, I thought, didn't have alot of discretion to change the mix based on his hunch(es).

 

[ladelfina]

The women of the household used to get pissed when I took my socks off and let the dog lick the grotty parts between the toes.

I encourage the dog to do that to my DH! It's a win-win situation, far as I'm concerned.

 

[mikew]

On moringstar's CEF board, some of the guys have replaced their stocks with CEF income. They can get stuff that will produce somewhere between 7-10% by buying at a discount. If you use a SWR of 4% with inflation rate of 3%, CEFs could be a good idea. Don't know about the risk they are taking on.

Also, my dog's tongue spends a good amount of time between his legs. I don't know I would call anything he licked clean.

Mike

 

[Martha]

The women of the household used to get pi##ed when I took my socks off and let the dog lick the grotty parts between the toes.

heh heh heh - don't say I didn't I didn't warn ya!

UncleMick: I hope you wear pants.

--Greg

 

[Dawg52]

UncleMick:  I hope you wear pants.

--Greg

 

[unclemick]

Yep

Safety first!

heh heh heh heh heh

 

[brewer12345]

On moringstar's CEF board, some of the guys have replaced their stocks with CEF income. They can get stuff that will produce somewhere between 7-10% by buying at a discount. If you use a SWR of 4% with inflation rate of 3%, CEFs could be a good idea. Don't know about the risk they are taking on.

Aha, the risk is indeed the issue. Many of the funds that pay out such hefty sums use leverage to achieve their return. That means the fund borropws money to buy risky assets. Not a low risk strategy.

 

[cute fuzzy bunny]

Sounds like if you wanted a 7% yield with a little very low risk, buy the vanguard high yield corporates and hold em...hold em between your knees!

Edit: changed to make Brewers contentions correct and to remove the joke so that it appears I was more serious than one might be led to believe so its a real backside whuppin.

 

[sgeeeee]

Aha, the risk is indeed the issue.  . .

Reading this right after unclemick's "safety first" comment about wearing pants made me think you were talking about something else entirely.

Keep your pants on, unclemick. We don't want to hear about that kind of accident.

 

[brewer12345]

Sounds like if you wanted a 7% yield with a little risk, buy the vanguard high yield corporates and hold em...hold em between your knees!

Eh, not a low risk strategy, either, especially when default rates go back up. TANSTAAFL, unfortunately. Sorry, guys.

 

[cute fuzzy bunny]

Riskier than CEF's?

 

[brewer12345]

Riskier than CEF's?

Depends on the CEF strategy. If we are comparing the VG junk fund with a leveraged portfolio of junk or preferred as in many CEFs, yeah, the CEF is riskier. If we are comparing a levered muni fund, it depends on the path of interest rates and changes in the shape of the curve.

My point was that the VG junk find is not what I would consider "low risk".

 

[cute fuzzy bunny]

That wasnt my point either.

Read my post again.

Then read my sig.

 

[MJ]

Then read my sig.
If there is any doubt as to wording or intent in what I have written, presume the most unlikely explanation. Next, choose the most minute aspect of the post, remove it from context, proclaim it wrong, proceed to pick it to death, then agree with it, and then disagree with yourself.

Huh

 

[brewer12345]

That wasnt my point either.

Read my post again.

Then read my sig.

You mentioned "low risk" in the same breath as VG junk. I guess that reasonable people might disagree about what "low" levels of risk are, but I think it is worth remembering that there is a reason you are getting paid 250 BP over treasuries. Don't get completely lulled to sleep by the last 18 months (remember 2002).

 

[cute fuzzy bunny]

I did not use the word "low" in my post. Anywhere.

To avoid making you scroll back up, I said "If you wanted a 7% yield with a little risk" about the vanguard high yield fund in the context of comparing it with a CEF yielding a similar rate. Indicating if someone wants a high yield at a risk, there are simpler ways to get it without taking on a lot more risk. Perhaps less. Note that I wouldnt recommend anything risky in exchange for a lousy 7% return compared to current CD rates. But if I had to pick one...

If you can find a 7% CEF that has a lower risk profile (providing we can agree on what 'risk' means, and what 'lower' is in context with that), please do share.

 

[brewer12345]

If you can find a 7% CEF that has a lower risk profile (providing we can agree on what 'risk' means, and what 'lower' is in context with that), please do share.

I'm gonna decline to split hairs (hares?) with you on this one. Too much wine consumed to deal with semantics.

On CEFs with less risk than VG junk: what kind of risk do you wish to bear? VG junk is mostly credit risk, which tends to be correlated with the equity indexes (my main knock on junk in a diversified portfolio). If you prefer currency risk, GIM delivers 7% or better. If you prefer interest rate risk, there are lots of mortgage REITS and CEFs that will deliver yield if you are willing to bear interest rate/yield curve shape risk. Probably wise to have a little bit of all of it, at least over the long term.

Over the short term, well, let's just say that I find credit spreads to be vanishingly small at the moment and I am less than eager to pile into junk for exactly that reason. But that doesn't mean that spreads won't gring tighter before the inevitable capital markets crash that gaps them out.