Krypto will check the Fund this morning; sell signals are looming.
Word of the Day
"Divaricate" - verb, intransitive [$10] T. S. Eliot
Divaricate means diverge, branch, separate widely.
Sentence: Tea Parties activists need to divaricate from the wishes of the billionaires funding parts of their movement, else they are simply working for their own enserfment.
Thursday, March 31, 2011
Wednesday, March 30, 2011
Words
Word of the Day
"Diacritic" - noun & adjective [10]
Diacritic means (noun) a sign (e. g. an accent, diaeresis, aedilla) used to indicate different sounds or values of a letter; (adjective) = diacritical; distinguishing, distinctive.
Sentence: A few American words, such as 'naive' used to be printed and written with diacritic marks [in this case a diaeresis as naïve], but those are usually left out now. Modern typewriters and now wordprocessors simply don't print those letters without extra work.
"Diacritic" - noun & adjective [10]
Diacritic means (noun) a sign (e. g. an accent, diaeresis, aedilla) used to indicate different sounds or values of a letter; (adjective) = diacritical; distinguishing, distinctive.
Sentence: A few American words, such as 'naive' used to be printed and written with diacritic marks [in this case a diaeresis as naïve], but those are usually left out now. Modern typewriters and now wordprocessors simply don't print those letters without extra work.
Tuesday, March 29, 2011
Words
Today's Word of the Day was used in George Eliot's masterwork, Middlemarch, which I am listening to via audiobooks in my iPad.
Word of the Day
"Droll" - adjective and noun [$10]
Droll means (adjective) 1. quaintly amusing; 2. strange, odd, surprising; (noun archaic) 1. a jester, an entertainer; 2. a quaintly amusing person.
Sentence: My dog, Lucky Star, put on a droll performance once as a puppy: she stuck her head into a sheepskin boot and proceeded to walk around the house with a boot on her head. The other dogs were surely thinking, "How droll!"
PS: 'drôle' is a very common word in French, meaning funny, comical, amusing.
Word of the Day
"Droll" - adjective and noun [$10]
Droll means (adjective) 1. quaintly amusing; 2. strange, odd, surprising; (noun archaic) 1. a jester, an entertainer; 2. a quaintly amusing person.
Sentence: My dog, Lucky Star, put on a droll performance once as a puppy: she stuck her head into a sheepskin boot and proceeded to walk around the house with a boot on her head. The other dogs were surely thinking, "How droll!"
PS: 'drôle' is a very common word in French, meaning funny, comical, amusing.
Monday, March 28, 2011
Times are Changing ...
All things must come to an end.
I began writing this blog in early 2007 and have written well over 1,000 posts aggregating over 500,000 words. Some predictions were blunders, some were brilliant. Krypto Fund survived and prospered in the toughest markets since the 1930s.
Bunkerman bashed billionaires, beefers, Bush, Barry and bloviating pundits and politicians. He championed the common man and woman trying to have happy lives.
Free Fraternalism was developed here as a coherent political philosophy.
I simply have little motivation to write daily now. The Well of Inspiration is dry. I plan to publish my "best" writings and ideas in other forums and with other methods (including printed pamphlets). Also, I will re-format this blog to make older, "good" posts more accessible with sidebar links.
And I want to have more time to help the not-for-profit corporation that a couple high school friends and I formed last year. The mission of that effort is to help small towns and cities across America survive and prosper in the 21st century. The principal tool: the human mind. We endeavor to educate people in those communities how to re-orient their economies and assets towards industries and uses that can prosper in the nation and world as it exists now. We've made some progress already in my hometown, causing long moribund efforts to be re-started, among other successes. Once we receive IRS approval as a 501(c)(3) entity, we will begin to raise $ to expand and do more. That process, unfortunately, takes many months. For all the governmental blather about wanting people to volunteer and do more, "they" put many roadblocks in the path of progress. No surprise, I suppose, that "they" want their toll.
I expect to write weekly or so, as events occurs and as I have new inspiration or "good" ideas to propound. I'll write of moves by Krypto Fund as they occur. I'll also continue the Word of the Day as an important intellectual effort. With all the reading I've been doing, my card file overflows.
Thanks for reading.
Word of the Day
"Jejune" - adjective [$10]
Jejune means 1. lacking nutritive value; 2. lacking interest or significance; 3. lacking maturity: puerile.
Sentence: Without motivation and inspiration, daily posts would certainly be mostly jejune, or worse, blather. Bunkerman will write less frequently now, perhaps roughly weekly.
I began writing this blog in early 2007 and have written well over 1,000 posts aggregating over 500,000 words. Some predictions were blunders, some were brilliant. Krypto Fund survived and prospered in the toughest markets since the 1930s.
Bunkerman bashed billionaires, beefers, Bush, Barry and bloviating pundits and politicians. He championed the common man and woman trying to have happy lives.
Free Fraternalism was developed here as a coherent political philosophy.
I simply have little motivation to write daily now. The Well of Inspiration is dry. I plan to publish my "best" writings and ideas in other forums and with other methods (including printed pamphlets). Also, I will re-format this blog to make older, "good" posts more accessible with sidebar links.
And I want to have more time to help the not-for-profit corporation that a couple high school friends and I formed last year. The mission of that effort is to help small towns and cities across America survive and prosper in the 21st century. The principal tool: the human mind. We endeavor to educate people in those communities how to re-orient their economies and assets towards industries and uses that can prosper in the nation and world as it exists now. We've made some progress already in my hometown, causing long moribund efforts to be re-started, among other successes. Once we receive IRS approval as a 501(c)(3) entity, we will begin to raise $ to expand and do more. That process, unfortunately, takes many months. For all the governmental blather about wanting people to volunteer and do more, "they" put many roadblocks in the path of progress. No surprise, I suppose, that "they" want their toll.
I expect to write weekly or so, as events occurs and as I have new inspiration or "good" ideas to propound. I'll write of moves by Krypto Fund as they occur. I'll also continue the Word of the Day as an important intellectual effort. With all the reading I've been doing, my card file overflows.
Thanks for reading.
Word of the Day
"Jejune" - adjective [$10]
Jejune means 1. lacking nutritive value; 2. lacking interest or significance; 3. lacking maturity: puerile.
Sentence: Without motivation and inspiration, daily posts would certainly be mostly jejune, or worse, blather. Bunkerman will write less frequently now, perhaps roughly weekly.
Monday, March 21, 2011
Friday, March 18, 2011
Obey the Machine
Investment Rule #7
Don't try to be a hero. Don't be a swashbuckler. Don't be a nervous Nelly. Don't listen to the bloviators on the financial press. Don't listen to the pundits.
Don't worry ... be Happy ... Obey the Machine.
Just follow the investment rules and be happy.
Keep your emotions under control.
If you try to "add value" to the Machine's prescription, it's rather likely you will subtract value. You'll be buying what's in favor when you should be taking profits; you'll be bailing out in panic when you should be buying cheap assets; or you'll simply be randomly adding risk with "coin toss" moves with no net returns.
Don't do it. Just Obey the Machine.
And read this blog.
Actions
The jobs number was good, some economic numbers were good. Stocks rallied worldwide. Hmm that morning I received an email from a pundit saying the correction had begun. Huh?
The Machine aka Krypto has no new actions.
Word of the Day
"Suspire" - verb [$100] a T. S. Eliot word
Suspire means (intransitive) 1. to sigh; 2. to breathe; (transitive) 3. to sigh, to utter with long, sighing breathes.
Sentence: Seeing a well-paid pundit write that the correction has begun after the markets are down about 5%, Bunkerman can only suspire with disgust, "what utter bilge".
Don't try to be a hero. Don't be a swashbuckler. Don't be a nervous Nelly. Don't listen to the bloviators on the financial press. Don't listen to the pundits.
Don't worry ... be Happy ... Obey the Machine.
Just follow the investment rules and be happy.
Keep your emotions under control.
If you try to "add value" to the Machine's prescription, it's rather likely you will subtract value. You'll be buying what's in favor when you should be taking profits; you'll be bailing out in panic when you should be buying cheap assets; or you'll simply be randomly adding risk with "coin toss" moves with no net returns.
Don't do it. Just Obey the Machine.
And read this blog.
Actions
The jobs number was good, some economic numbers were good. Stocks rallied worldwide. Hmm that morning I received an email from a pundit saying the correction had begun. Huh?
The Machine aka Krypto has no new actions.
Word of the Day
"Suspire" - verb [$100] a T. S. Eliot word
Suspire means (intransitive) 1. to sigh; 2. to breathe; (transitive) 3. to sigh, to utter with long, sighing breathes.
Sentence: Seeing a well-paid pundit write that the correction has begun after the markets are down about 5%, Bunkerman can only suspire with disgust, "what utter bilge".
Thursday, March 17, 2011
Taxes
Investment Lesson #6
Minimizing taxes will help increase your returns. Eventually and over time, you'll need to pay attention to taxes. The issues are very complex, however, and are different for many people. "What is to be done" about taxes depends on the tax rates, AMT or not, income expectations, prospects for tax rate change, etc.
Here are a few simple ideas.
For people able to save via an IRA, the Roth IRA is better for the long term. The traditional IRA is OK, however, if you are at least in the 25% rate bracket and can benefit from the income exclusion for IRA savings.
Having savings+investments in BOTH taxable accounts (normal brokerage, etc.) AND in tax-deferred accounts (IRA, 401K) is best. Then you can make adjustments to minimize taxes. Moves that result in gains are taken in the tax-deferred account; moves that result in taxable losses are taken in the regular account.
Try to keep the fixed income asset classes in the retirement accounts and the core parts of the long term equity classes in the regular taxable accounts. You'll not exchange those much, if ever, and any gain will be taxes at low, long term capital gains rates. The tax-deferred income can be reinvested tax free in the tax-deferred accounts, and when the income is drawn at retirement, it's simply taxed once.
Core gold & silver can be coins kept in the bank, but keep non-core amounts of the ETFs in a tax-deferred account. Those are taxes at higher rates so any exchanges (which are frequent) need to be done in a tax-deferred account.
I tend to dislike the tax-deferred annuity intensely; those are often sold to people who really should not invest in them and the fees are huge. One can buy VTI and not sell for 30 years, then pay a one time capital gains tax at a low rate. That's the ultimate tax-deferral and it costs nothing.
It's a complex area; be sure to consider any tax-driven decisions carefully.
Actions
None today.
Word of the Day
"Transvalue" - verb, transitive [$100]
Transvalue means to re-estimate the value of, esp. on a basis differing from accepted standards, reappraise, reevaluate.
Sentence: A major change in one's marginal tax rates must cause one to transvalue one's long term investments.
Minimizing taxes will help increase your returns. Eventually and over time, you'll need to pay attention to taxes. The issues are very complex, however, and are different for many people. "What is to be done" about taxes depends on the tax rates, AMT or not, income expectations, prospects for tax rate change, etc.
Here are a few simple ideas.
For people able to save via an IRA, the Roth IRA is better for the long term. The traditional IRA is OK, however, if you are at least in the 25% rate bracket and can benefit from the income exclusion for IRA savings.
Having savings+investments in BOTH taxable accounts (normal brokerage, etc.) AND in tax-deferred accounts (IRA, 401K) is best. Then you can make adjustments to minimize taxes. Moves that result in gains are taken in the tax-deferred account; moves that result in taxable losses are taken in the regular account.
Try to keep the fixed income asset classes in the retirement accounts and the core parts of the long term equity classes in the regular taxable accounts. You'll not exchange those much, if ever, and any gain will be taxes at low, long term capital gains rates. The tax-deferred income can be reinvested tax free in the tax-deferred accounts, and when the income is drawn at retirement, it's simply taxed once.
Core gold & silver can be coins kept in the bank, but keep non-core amounts of the ETFs in a tax-deferred account. Those are taxes at higher rates so any exchanges (which are frequent) need to be done in a tax-deferred account.
I tend to dislike the tax-deferred annuity intensely; those are often sold to people who really should not invest in them and the fees are huge. One can buy VTI and not sell for 30 years, then pay a one time capital gains tax at a low rate. That's the ultimate tax-deferral and it costs nothing.
It's a complex area; be sure to consider any tax-driven decisions carefully.
Actions
None today.
Word of the Day
"Transvalue" - verb, transitive [$100]
Transvalue means to re-estimate the value of, esp. on a basis differing from accepted standards, reappraise, reevaluate.
Sentence: A major change in one's marginal tax rates must cause one to transvalue one's long term investments.
Wednesday, March 16, 2011
Fees will Flatten You
The financial industry is fat. Bloated. Littered with fee traps. Teeming with piranhas and wolves who want your money, mostly for doing nothing. Certainly nothing of value. Half the industry should not exist.
If you want to succeed at long term investing, you must minimize the fees and pay only for value received.
Here's a simple example:
Krypto invests in no fee index funds in accounts with no wrap fees and other fees. Suppose she gets 8% per annum. After 20 years, every $10,000 Krypto invested in the beginning has grown to $46,600.
You invest in funds charging fees in accounts with management fees and pay transaction fees, all together amounting to 2% per year in fees for nearly the same investments. That means your net return is 6% per year. After 20 years, every $10,000 has grown to only $32,070.
Golly, you, a gullible human, end up with about 2/3 of what my dog gets. She's retiring on filet mignon while your get fried mystery meat.
Last Friday I told you how to avoid most fees: Use Vanguard index funds and / or Vanguard ETFs in a Vanguard brokerage account. The fees are as close to zero as possible, or are zero. Just follow the investment lessons of this blog and your investments will perform exquisitely: you're guaranteed average with no fees, thus you will out perform almost every professional money manager over a 20 year time horizon.
Just do it.
Exceptions
It's OK to pay reasonable fees for planning and advice, particularly tax advice. Just be sure you ask what they are and understand the costs in $ and %'s. I willingly pay some fees to a broker whom helps Mrs. B learn about investing. A good husband should do that, otherwise, if he gets run over by a truck, his wife will be prey to every shark & gigolo.
Actions
Krypto is buying some Pacific stock index funds this morning. The money will come from cash.
Gold+silver is still just a weak sell - we wait. Real estate is creeping closer to a sell signal (the 5% signal).
Word of the Day
None today - have to take the trash out.
If you want to succeed at long term investing, you must minimize the fees and pay only for value received.
Here's a simple example:
Krypto invests in no fee index funds in accounts with no wrap fees and other fees. Suppose she gets 8% per annum. After 20 years, every $10,000 Krypto invested in the beginning has grown to $46,600.
You invest in funds charging fees in accounts with management fees and pay transaction fees, all together amounting to 2% per year in fees for nearly the same investments. That means your net return is 6% per year. After 20 years, every $10,000 has grown to only $32,070.
Golly, you, a gullible human, end up with about 2/3 of what my dog gets. She's retiring on filet mignon while your get fried mystery meat.
Last Friday I told you how to avoid most fees: Use Vanguard index funds and / or Vanguard ETFs in a Vanguard brokerage account. The fees are as close to zero as possible, or are zero. Just follow the investment lessons of this blog and your investments will perform exquisitely: you're guaranteed average with no fees, thus you will out perform almost every professional money manager over a 20 year time horizon.
Just do it.
Exceptions
It's OK to pay reasonable fees for planning and advice, particularly tax advice. Just be sure you ask what they are and understand the costs in $ and %'s. I willingly pay some fees to a broker whom helps Mrs. B learn about investing. A good husband should do that, otherwise, if he gets run over by a truck, his wife will be prey to every shark & gigolo.
Actions
Krypto is buying some Pacific stock index funds this morning. The money will come from cash.
Gold+silver is still just a weak sell - we wait. Real estate is creeping closer to a sell signal (the 5% signal).
Word of the Day
None today - have to take the trash out.
Tuesday, March 15, 2011
Time Out on a Tuesday
Today I take a break from the investment lessons to write about how Krypto Fund is and will react to event unfolding events in and arising out of the aftermath of the huge earthquake in Japan.
Market participants who read books will likely be reminded of the scenes in that great trading book, Reminiscences of a Stock Operator, when lead character, "Larry Livingston", gets a 'feeling' to short stocks just before the San Francisco earthquake of 1906. When the telegraph stories of the quake appeared, he piled on the shorts, seeing that the reaction of most people would be slow and the true extent of the devastation would take days to come out. Lary Livingston was based on Jesse Livermore, of course, and his prescient shorting before the 1906 quake was legendary.
Krypto did not short, and did not pile on shorts on Friday. She really doesn't trade and doesn't pay that close attention. After, Krypto is a dog, albeit a beautiful and smart dog. But NOW, her model is making noises. This morning it's giving a moderately strong buy signal for Pacific stocks and a moderate sell signal for gold+silver.
Stock futures across the board are plunging, down around 2-3%; Tokyo is down 10% overnight, meaning some prices in the model are rather stale. That moderate buy signal is probably a strong one now. Real estate and fixed income is strong.
I choose to wait until the dust settles. I don't trust the prices and big drops often last three days. Waiting will let me move with the correct, full signal amounts from Krypto Fund.
BUT this is a perfect example of why we sell on the way up .... when all looks rosy. Who knows what the future may bring? Krypto was selling bits of stocks, Pacific included, for months. She has lots of cash, and seems soon to get some good prices for redeployment of that cash.
In today's markets, declines often occur so fast, only a short term trader can act in time and sell; an investor will miss a chance to sell near the top. By the time an investor with a normal life & job reacts, the top is ... a lot closer to the bottom. Those rapid market moves resemble a one way, nonstop elevator ride down.
Word of the Day
"Tropism" - noun [$10]
Tropism means the responsive growth or movement of an organism toward or away from an external stimulus.
Sentence: Although it's a mere computer model, Krypto Fund exhibits dual tropisms, perhaps reflecting the brain behind the model: she leans towards the cheap asset classes and away from the expensive ones.
Market participants who read books will likely be reminded of the scenes in that great trading book, Reminiscences of a Stock Operator, when lead character, "Larry Livingston", gets a 'feeling' to short stocks just before the San Francisco earthquake of 1906. When the telegraph stories of the quake appeared, he piled on the shorts, seeing that the reaction of most people would be slow and the true extent of the devastation would take days to come out. Lary Livingston was based on Jesse Livermore, of course, and his prescient shorting before the 1906 quake was legendary.
Krypto did not short, and did not pile on shorts on Friday. She really doesn't trade and doesn't pay that close attention. After, Krypto is a dog, albeit a beautiful and smart dog. But NOW, her model is making noises. This morning it's giving a moderately strong buy signal for Pacific stocks and a moderate sell signal for gold+silver.
Stock futures across the board are plunging, down around 2-3%; Tokyo is down 10% overnight, meaning some prices in the model are rather stale. That moderate buy signal is probably a strong one now. Real estate and fixed income is strong.
I choose to wait until the dust settles. I don't trust the prices and big drops often last three days. Waiting will let me move with the correct, full signal amounts from Krypto Fund.
BUT this is a perfect example of why we sell on the way up .... when all looks rosy. Who knows what the future may bring? Krypto was selling bits of stocks, Pacific included, for months. She has lots of cash, and seems soon to get some good prices for redeployment of that cash.
In today's markets, declines often occur so fast, only a short term trader can act in time and sell; an investor will miss a chance to sell near the top. By the time an investor with a normal life & job reacts, the top is ... a lot closer to the bottom. Those rapid market moves resemble a one way, nonstop elevator ride down.
Word of the Day
"Tropism" - noun [$10]
Tropism means the responsive growth or movement of an organism toward or away from an external stimulus.
Sentence: Although it's a mere computer model, Krypto Fund exhibits dual tropisms, perhaps reflecting the brain behind the model: she leans towards the cheap asset classes and away from the expensive ones.
Monday, March 14, 2011
Robust Rebalancing Rules
Investment Lesson #4
To maximize your returns and minimize your risks, you MUST rebalance your investment portfolio as needed. Rebalancing prevents any asset class from getting too large or too small; it captures gains from the mindless fluctuations of the markets; and it lowers your risks with countermoves to market volatility.
BUT we do NOT rebalance continuously, every day or week. We wait for the asset classes to get significantly out of line. And we give the classes room in time and price to make significant moves. We also cap certain rebalancing actions. The basic rebalancing rules (#1 and #2) provided below are simple enough, but the exceptions (rules #3-5) are where you need to pay attention.
Rebalancing Rule #1
If an asset class gets more than 5% away from its canonical share of your portfolio, buy or sell (or exchange) enough to put it back in line. Example: US Stocks rise and now US stocks represent 31.5% of your total portfolio value. Sell some index funds or VTI to bring it back to 30%. Buy whatever is low, or if nothing is significantly low, put the money into cash to wait for something to get cheap.
Rebalancing Rule #2
For asset classes that are rising, do this every time the class gets out of line.
Rebalancing Rules #3
For asset classes that are falling, after one 5% rebalancing, wait. The next rebalancing should be done (A) if the asset class gets an additional 10% too small, or (B) after six months if it is just meets the 5% test.
Rebalancing Rule #4
For asset classes that continue to fall, wait. The third and LAST rebalancing should be done (A) is the asset class gets an additional 20% too small, or (B) after one year if it just meets the 5% test.
Rebalancing Rule #5
No more for now, regardless of whether the asset class continues to fall. Three strikes and you sit down and wait at least two years. That asset class might be in a multiyear collapse and bear market like Japan suffered in the later 1980s and early 1990s, or as gold & silver suffered in the early 1980s.
DO NOT KEEP putting money into an asset class that keeps falling - this is a rule required to robustness of the model - to prevent a catastrophic loss of funds. Theoretically, if a market keeps dropping and you do NOT cut off the rebalancing towards it, that falling class will consume all your money, like a black hole consumes everything the gets into its clutches. Stop after three swings and sit down awhile. Let the dust settle.
Summary
These rules provide you simple instructions to buy low, sell high, and sell high, buy low. Think of all those times you hear that prices are low and it's time to buy. If you don't sell something at high prices, you won't have any money to buy when prices are low.
The cut-off rules prevent your portfolio from unduly suffering if one or more asset classes fall too dramatically. Obey them. Don't be a hero ... or a pig.
Actions
I will monitor Krypto Fund closely, the large fall in Japanese stocks might provide a buy signal in my Pacific stocks.
Word of the Day
"Behoove" - verb, transitive [$10] British 'behove' with the 'o' as in no.
Behoove means 1. (preceded by 'it' as subject) (formal) be incumbent upon; 2. (usu. with neg.) befit [it behooves him to protest].
Sentence: For the well being of your investments, it behooves you to pay attention to the above rebalancing rules.
To maximize your returns and minimize your risks, you MUST rebalance your investment portfolio as needed. Rebalancing prevents any asset class from getting too large or too small; it captures gains from the mindless fluctuations of the markets; and it lowers your risks with countermoves to market volatility.
BUT we do NOT rebalance continuously, every day or week. We wait for the asset classes to get significantly out of line. And we give the classes room in time and price to make significant moves. We also cap certain rebalancing actions. The basic rebalancing rules (#1 and #2) provided below are simple enough, but the exceptions (rules #3-5) are where you need to pay attention.
Rebalancing Rule #1
If an asset class gets more than 5% away from its canonical share of your portfolio, buy or sell (or exchange) enough to put it back in line. Example: US Stocks rise and now US stocks represent 31.5% of your total portfolio value. Sell some index funds or VTI to bring it back to 30%. Buy whatever is low, or if nothing is significantly low, put the money into cash to wait for something to get cheap.
Rebalancing Rule #2
For asset classes that are rising, do this every time the class gets out of line.
Rebalancing Rules #3
For asset classes that are falling, after one 5% rebalancing, wait. The next rebalancing should be done (A) if the asset class gets an additional 10% too small, or (B) after six months if it is just meets the 5% test.
Rebalancing Rule #4
For asset classes that continue to fall, wait. The third and LAST rebalancing should be done (A) is the asset class gets an additional 20% too small, or (B) after one year if it just meets the 5% test.
Rebalancing Rule #5
No more for now, regardless of whether the asset class continues to fall. Three strikes and you sit down and wait at least two years. That asset class might be in a multiyear collapse and bear market like Japan suffered in the later 1980s and early 1990s, or as gold & silver suffered in the early 1980s.
DO NOT KEEP putting money into an asset class that keeps falling - this is a rule required to robustness of the model - to prevent a catastrophic loss of funds. Theoretically, if a market keeps dropping and you do NOT cut off the rebalancing towards it, that falling class will consume all your money, like a black hole consumes everything the gets into its clutches. Stop after three swings and sit down awhile. Let the dust settle.
Summary
These rules provide you simple instructions to buy low, sell high, and sell high, buy low. Think of all those times you hear that prices are low and it's time to buy. If you don't sell something at high prices, you won't have any money to buy when prices are low.
Use cash as a buffer if nothing is cheap. Then when an asset class falls in prices, swoop in and scoop up some cheap shares.
The cut-off rules prevent your portfolio from unduly suffering if one or more asset classes fall too dramatically. Obey them. Don't be a hero ... or a pig.
Actions
I will monitor Krypto Fund closely, the large fall in Japanese stocks might provide a buy signal in my Pacific stocks.
Word of the Day
"Behoove" - verb, transitive [$10] British 'behove' with the 'o' as in no.
Behoove means 1. (preceded by 'it' as subject) (formal) be incumbent upon; 2. (usu. with neg.) befit [it behooves him to protest].
Sentence: For the well being of your investments, it behooves you to pay attention to the above rebalancing rules.
Friday, March 11, 2011
Thursday, March 10, 2011
Wednesday, March 9, 2011
Use Time in Your Favor
Investment Lesson #3
Time.
Time is your friend.
First, as you leave your money invested for a long period of time, you benefit from compounding: the gains of of one year are reinvested to generate more gains. Here's a simple example - the Rule of 72.
The Rule of 72 is a simple, quick way to estimate how fast your money will double assuming a rate of return AND compounding: divide 72 by the return as a percentage. Suppose you make an investment that will provide 10% returns and you can leave your money invested as long as you wish. Applying the Rule of 72 (72 divided by 10) gives the wonderful result that your money will double in 7.2 years (approximately). Leaving your money invested, your money will have quadrupled in 14.4 years and been multiplied by eight in 28.8 years! Simple, non-compounded returns over those 28.8 years could result in only a return of 288% (28.8 years x 10% per year), but compounding gives you a 700% return (800% less original investment = 700% return). You've done almost 3x better by simply sitting, riding that investment along to more profits.
Second, you need to be patient about putting your money to work. Simply barging into stocks or bonds or gold with all your money at any price or time is a very, very risky move. All those investment asset classes have returns that vary with time: the returns go up or down. One month, the total stock market index VTI might be 66 per share, in a later month it might be 70 or 62. Or the moves can be larger. Ditto for bonds, even US Treasury bonds. Ditto for Gold.
Remember Rule #0: we want to do just average and we want to invest for the long term. If you barge in and put all your savings into stocks, and they go down 10% in a normal fluctuation, you'll feel rather rotten. That pain might make you do something stupid, like pull all your money out & barge into bonds. Of course, interest rates might rise and those bond prices might go down 10%. You feel double rotten. You are now fodder for the Street and the hedge fund piranhas. They are going to whip & drive you emotionally every way and eventually to investment oblivion. Don't play their games.
Assuming you have no special knowledge (a very strongly supported assumption), you will be right 50% of the time. BUT the pain when you are wrong will be larger than the pleasure from being right. That's a fact of human behavior that underlies all economic theory. Almost all human beings are risk averse.
One can prove mathematically that by investing your money over time, in bits over the months and years, will reduce your risk a LOT. I saw this proof at MIT business school years ago; Fischer Black, the famous finance theorist, showed us the proof in class one day. I still remember it. He called it, time diversification. This is another free ride you can take, much like the asset class diversification.
Example: You receive $50,000 from a severance package. Don't put it all into your investments all at once. Put $5,000 a month into them, into whatever is cheap at the time (see rule #4), paying attention to your asset class percentages. You will reduce your risk and increase your chances of doing average.
The same applies to withdrawals, if you can wait. Suppose you know you'll need $50,000 in a year. Take out $5,000 a month from whatever is expensive - high prices, still paying attention to your asset classes.
Be patient. Use time as a tool for yourself. Get all the free benefits of compounding and time diversification. That's how you get the highest returns with the least risk.
Word of the Day
None today. I have to take the recycling out.
Time.
Time is your friend.
First, as you leave your money invested for a long period of time, you benefit from compounding: the gains of of one year are reinvested to generate more gains. Here's a simple example - the Rule of 72.
The Rule of 72 is a simple, quick way to estimate how fast your money will double assuming a rate of return AND compounding: divide 72 by the return as a percentage. Suppose you make an investment that will provide 10% returns and you can leave your money invested as long as you wish. Applying the Rule of 72 (72 divided by 10) gives the wonderful result that your money will double in 7.2 years (approximately). Leaving your money invested, your money will have quadrupled in 14.4 years and been multiplied by eight in 28.8 years! Simple, non-compounded returns over those 28.8 years could result in only a return of 288% (28.8 years x 10% per year), but compounding gives you a 700% return (800% less original investment = 700% return). You've done almost 3x better by simply sitting, riding that investment along to more profits.
Second, you need to be patient about putting your money to work. Simply barging into stocks or bonds or gold with all your money at any price or time is a very, very risky move. All those investment asset classes have returns that vary with time: the returns go up or down. One month, the total stock market index VTI might be 66 per share, in a later month it might be 70 or 62. Or the moves can be larger. Ditto for bonds, even US Treasury bonds. Ditto for Gold.
Remember Rule #0: we want to do just average and we want to invest for the long term. If you barge in and put all your savings into stocks, and they go down 10% in a normal fluctuation, you'll feel rather rotten. That pain might make you do something stupid, like pull all your money out & barge into bonds. Of course, interest rates might rise and those bond prices might go down 10%. You feel double rotten. You are now fodder for the Street and the hedge fund piranhas. They are going to whip & drive you emotionally every way and eventually to investment oblivion. Don't play their games.
Assuming you have no special knowledge (a very strongly supported assumption), you will be right 50% of the time. BUT the pain when you are wrong will be larger than the pleasure from being right. That's a fact of human behavior that underlies all economic theory. Almost all human beings are risk averse.
One can prove mathematically that by investing your money over time, in bits over the months and years, will reduce your risk a LOT. I saw this proof at MIT business school years ago; Fischer Black, the famous finance theorist, showed us the proof in class one day. I still remember it. He called it, time diversification. This is another free ride you can take, much like the asset class diversification.
Example: You receive $50,000 from a severance package. Don't put it all into your investments all at once. Put $5,000 a month into them, into whatever is cheap at the time (see rule #4), paying attention to your asset class percentages. You will reduce your risk and increase your chances of doing average.
The same applies to withdrawals, if you can wait. Suppose you know you'll need $50,000 in a year. Take out $5,000 a month from whatever is expensive - high prices, still paying attention to your asset classes.
Be patient. Use time as a tool for yourself. Get all the free benefits of compounding and time diversification. That's how you get the highest returns with the least risk.
Word of the Day
None today. I have to take the recycling out.
Tuesday, March 8, 2011
How to Do It
Investment Lesson #2
Yesterday in Lesson #0, I explained the Why - why I invest in the style of the Krypto Fund. And on Friday in Lesson #1 I listed the seven assets classes I use (really nine as one class has three parts).
Today we get specific. The How and the What. We stick to the K. I. S. S. method. [Taxes will complicate it a bit, but not excessively.]
All the investments are made in The Vanguard Group's index mutual funds and their exchange traded funds (ETFs). Those have the lowest fees. Our objective, remember, is to get average performance with almost no fees. That guarantees us excellent returns long term as we ride (for free!) the great bull elephant of world economic growth.
The minimum brokerage account at Vanguard is $3,000. In it, you can invest in Vanguard ETFs for free - no commissions. The annual fee is a mere $20. Those Vanguard ETFs have the lowest fees of all ETFs, and they are indexes - no human intervention to cause risk & losses. You can also invest in the Vanguard index mutual funds there for no fees; their management fees are the lowest and their service is excellent. You can electronically connect the accounts to your savings or checking account, enabling you to add or withdraw money quickly and easily. It's a fine deal for the common man and woman.
Cash: use Prime Portfolio
Treasury Inflation Protected securities - use the Inflation Protected Securities Fund.
Fixed Income - use the Total Bond Market Index Fund or the Long Term Treasury Fund.
US Stocks - use the Total Stock Market Index Fund - the ETF has the ticker, VTI.
Foreign Stocks - (a) 1/3 goes to the Pacific Stock Index Fund; (b) 1/3 goes to the European Stock Index Fund; (c) 1/3 goes to the Emerging Markets Stock Index Fund. The respective ETF tickers are VPL, VGK and VWO.
Real Estate - use the REIT Index Fund (REIT = Real Estate Investment Trust). The ETF ticker is VNQ.
Gold & Silver - Use the Vanguard Precious Metals Funds and/or the non-Vanguard ETFs, GLD and SLV that hold physical gold & silver at low cost. That Vanguard fund is not an index fund, but it invests in gold & silver mining stocks. I personally use a mixture of all three of these investment vehicles to invest in gold & silver.
That's it. Simple. Seven asset classes, nine if you count the three parts of the Foreign stock group.
What have we accomplished with these seven classes?
Notice that four classes are rather sensitive to inflation: Cash, TIPs, Real estate and gold/silver. In times of inflation, those classes have provided much protection at different times. For example in the 1970s prolonged high inflation environment, cash (i. e. money market funds) provided high yields, real estate boomed as did gold & silver. Now we have TIPs, too. Krypto Fund have much inflation protection.
For income we have the fixed income, the dividends on the US stocks and the REITs, and the income from the TIPs.
For growth, we have the US stocks, foreign stocks and the real estate. The
For Doomsday, we have the gold & silver and the cash.
These are the components of a well-diversified portfolio of investments - the Seven Pillars of investment.
How much do you put into each class? The depends on YOU - your risk characteristics: your How, What and When. How old are you? What is your future earnings outlook? When will you need the money?
Here are the canonical percentages to invest in each class. These are the baseline amounts, which you tweak (that's MIT-techie-speak for 'adjust') based on your own how, what and when:
0% cash
10% TIPs
15% Fixed Income
30% US Stocks
25% Foreign stocks (1/3 in each part)
15% REITs
5% Gold.
Make adjustments based on our age and future earnings and need to draw on the funds. But don't adjust them too much, except in extreme circumstances.
Why does cash get 0%? Because we will mostly use cash as a buffer - the place to put money when nothing is cheap and most other classes are expensive. And we use cash as a buffer to put some money that we will need to draw out over time as we need to use the money. Cash also connects your long term investments to your bank checking or savings account; it's the link bewteen your Krypto Fund and your daily operating life. You need that link.
That's it. Simple.
Taxes will complicate the matter, but those for another post.
Word of the Day
"Expatiate" - verb, intransitive [$10]
Expatiate means (usu followed by 'on', 'upon') speak or write at length or in detail.
Sentence: As Bunkerman expatiates on long term investing in this series of posts, you should try to absorb and read re-read each one each day to learn. If you have questions, grasshopper ;) you can post them in the comments (or call me if you know my phone number or email me if you know one of my emails.)
Yesterday in Lesson #0, I explained the Why - why I invest in the style of the Krypto Fund. And on Friday in Lesson #1 I listed the seven assets classes I use (really nine as one class has three parts).
Today we get specific. The How and the What. We stick to the K. I. S. S. method. [Taxes will complicate it a bit, but not excessively.]
All the investments are made in The Vanguard Group's index mutual funds and their exchange traded funds (ETFs). Those have the lowest fees. Our objective, remember, is to get average performance with almost no fees. That guarantees us excellent returns long term as we ride (for free!) the great bull elephant of world economic growth.
The minimum brokerage account at Vanguard is $3,000. In it, you can invest in Vanguard ETFs for free - no commissions. The annual fee is a mere $20. Those Vanguard ETFs have the lowest fees of all ETFs, and they are indexes - no human intervention to cause risk & losses. You can also invest in the Vanguard index mutual funds there for no fees; their management fees are the lowest and their service is excellent. You can electronically connect the accounts to your savings or checking account, enabling you to add or withdraw money quickly and easily. It's a fine deal for the common man and woman.
Cash: use Prime Portfolio
Treasury Inflation Protected securities - use the Inflation Protected Securities Fund.
Fixed Income - use the Total Bond Market Index Fund or the Long Term Treasury Fund.
US Stocks - use the Total Stock Market Index Fund - the ETF has the ticker, VTI.
Foreign Stocks - (a) 1/3 goes to the Pacific Stock Index Fund; (b) 1/3 goes to the European Stock Index Fund; (c) 1/3 goes to the Emerging Markets Stock Index Fund. The respective ETF tickers are VPL, VGK and VWO.
Real Estate - use the REIT Index Fund (REIT = Real Estate Investment Trust). The ETF ticker is VNQ.
Gold & Silver - Use the Vanguard Precious Metals Funds and/or the non-Vanguard ETFs, GLD and SLV that hold physical gold & silver at low cost. That Vanguard fund is not an index fund, but it invests in gold & silver mining stocks. I personally use a mixture of all three of these investment vehicles to invest in gold & silver.
That's it. Simple. Seven asset classes, nine if you count the three parts of the Foreign stock group.
What have we accomplished with these seven classes?
Notice that four classes are rather sensitive to inflation: Cash, TIPs, Real estate and gold/silver. In times of inflation, those classes have provided much protection at different times. For example in the 1970s prolonged high inflation environment, cash (i. e. money market funds) provided high yields, real estate boomed as did gold & silver. Now we have TIPs, too. Krypto Fund have much inflation protection.
For income we have the fixed income, the dividends on the US stocks and the REITs, and the income from the TIPs.
For growth, we have the US stocks, foreign stocks and the real estate. The
For Doomsday, we have the gold & silver and the cash.
These are the components of a well-diversified portfolio of investments - the Seven Pillars of investment.
How much do you put into each class? The depends on YOU - your risk characteristics: your How, What and When. How old are you? What is your future earnings outlook? When will you need the money?
Here are the canonical percentages to invest in each class. These are the baseline amounts, which you tweak (that's MIT-techie-speak for 'adjust') based on your own how, what and when:
0% cash
10% TIPs
15% Fixed Income
30% US Stocks
25% Foreign stocks (1/3 in each part)
15% REITs
5% Gold.
Make adjustments based on our age and future earnings and need to draw on the funds. But don't adjust them too much, except in extreme circumstances.
Why does cash get 0%? Because we will mostly use cash as a buffer - the place to put money when nothing is cheap and most other classes are expensive. And we use cash as a buffer to put some money that we will need to draw out over time as we need to use the money. Cash also connects your long term investments to your bank checking or savings account; it's the link bewteen your Krypto Fund and your daily operating life. You need that link.
That's it. Simple.
Taxes will complicate the matter, but those for another post.
Word of the Day
"Expatiate" - verb, intransitive [$10]
Expatiate means (usu followed by 'on', 'upon') speak or write at length or in detail.
Sentence: As Bunkerman expatiates on long term investing in this series of posts, you should try to absorb and read re-read each one each day to learn. If you have questions, grasshopper ;) you can post them in the comments (or call me if you know my phone number or email me if you know one of my emails.)
Monday, March 7, 2011
K. I. S. S.
Keep it simple, stupid.
I'm talking to myself here, not you. This is why I invest long term according to the Krypto Fund methods. I don't want to spend my life looking for stocks, commodities or anything. I've done that and it's a lot of work - very, very difficult work. I can make good money in that line of WORK, but unless one needs to, why do it? Life is too short.
Now about YOU. Most of you have a job and a family and plenty of responsibilities. Do you want to spend all your free time investigating investments? I think not. Besides, it's very, very hard to find winners. Here's why: There are about 7,000 stocks; even more bonds. There are about 7,000 mutual funds. And for the rich, there are about 7,000 hedge funds. If YOU want to pick your own investments, you have to find the few winners in that huge pool. Tough job. Your competition is lots of very smart, driven, informed, experience investment managers. You haven't got a chance. They will eat you alive.
Can you find a good advisor to help you? Maybe. Or maybe not. Again, you face a crap shot. And you'll pay plenty.
BUT the modern investment world has given you marvelous tools, a way to virtually guarantee a good - nay, excellent - long term investment perfomance. Those tools are index funds and diversification. ALL studies of investment performance show that almost all investment managers and mutual funds underperform the AVERAGE over a 20 year time horizon. How can that be? Fees. Consider a 1% annual fee. After 20 years, you've paid 20% of your money to the manager. That's a huge amount. Analogy: 1% is about the house take on even good bets on the crap table in Vegas and is about the house take on good play at blackjack. But the house always wins.
You can win in long term investing. You can avoid almost all the fees and ride long term growth in the world economy; it's virtually a free ride.
You can reduce risks even more. The world is a big place. Some places do well when others are stagnant. Sometimes there is inflation, sometimes not. The returns on investments vary over time and place. The tool of cheap diversification gives you an edge. Careful studies of investment markets over decades have PROVEN that diversification gives superior returns for any given risk level. There are two types of diversification: asset type and time. You can use these tools of the modern investment to give yourself SUPERIOR returns for long term investments for FREE.
Be a smart investor - it's easy. My dog, Krypto, can do it.
Here's what to do.
Don't worry about those thousands of stocks or mutual funds. Just pay attention to SEVEN asset classes (really NINE as one has three parts). NINE asset classes are easy to follow; you can do it once a week on Saturday morning. A baseball team has as many players. Don't pay attention to all the details and the blather of the pundits. Watch those NINE.
Invest in them in the lowest cost manner possible: index funds. The cheapest index funds are from The Vanguard Group. You don't even pay a management fee, since the management company is owned by the funds themselves. Those funds are huge, some of the largest in the world. Your economies of scale are fabulous. You can get the free ride.
And you have to construct your investments so you can maintain your diversification cheaply. You must be able to cheaply allocate your money among those important asset classes. You can do that at The Vanguard Group. I've used them for 30 years now. They provide excellent service and quality and cater to the common man and woman.
This post is #0 on my list given Friday, explaining why I do what what I do. Krypto Fund has beaten almost all big mouth investment advisors for years at low risk. Krypto Fund has ridden the 2000 tech bubble and the Panic of 2008. Even though the stock market is about 20% off its all-time highs of 2007, Krypto Fund is well over its all time high.
Krypto Fund follows the rules I listed in Friday's post. On Friday I listed the seven / nine important asset classes. Tomorrow I will tell you how to invest in them with specificity. All for free.
Ride the elephant, don't get trampled or stomped.
PS: Use this method for most of your long term investment money. If you want to make a small investment in some stock or company or whatever, go ahead (after good research). But keep it small at first. Maybe you'll get lucky. But if you keep it small at first, you won't be hurt if it craters.
Word of the Day
"Apotropaic" - adjective [$10]
Apotropaic means supposedly having the power to avert an evil influence or bad luck.
Sentence: The Krypto Fund method of long term investing needs no apotropaic charms. The free tools of the modern investment world give it all the edge it needs: diversification and cheap index funds.
I'm talking to myself here, not you. This is why I invest long term according to the Krypto Fund methods. I don't want to spend my life looking for stocks, commodities or anything. I've done that and it's a lot of work - very, very difficult work. I can make good money in that line of WORK, but unless one needs to, why do it? Life is too short.
Now about YOU. Most of you have a job and a family and plenty of responsibilities. Do you want to spend all your free time investigating investments? I think not. Besides, it's very, very hard to find winners. Here's why: There are about 7,000 stocks; even more bonds. There are about 7,000 mutual funds. And for the rich, there are about 7,000 hedge funds. If YOU want to pick your own investments, you have to find the few winners in that huge pool. Tough job. Your competition is lots of very smart, driven, informed, experience investment managers. You haven't got a chance. They will eat you alive.
Can you find a good advisor to help you? Maybe. Or maybe not. Again, you face a crap shot. And you'll pay plenty.
BUT the modern investment world has given you marvelous tools, a way to virtually guarantee a good - nay, excellent - long term investment perfomance. Those tools are index funds and diversification. ALL studies of investment performance show that almost all investment managers and mutual funds underperform the AVERAGE over a 20 year time horizon. How can that be? Fees. Consider a 1% annual fee. After 20 years, you've paid 20% of your money to the manager. That's a huge amount. Analogy: 1% is about the house take on even good bets on the crap table in Vegas and is about the house take on good play at blackjack. But the house always wins.
You can win in long term investing. You can avoid almost all the fees and ride long term growth in the world economy; it's virtually a free ride.
You can reduce risks even more. The world is a big place. Some places do well when others are stagnant. Sometimes there is inflation, sometimes not. The returns on investments vary over time and place. The tool of cheap diversification gives you an edge. Careful studies of investment markets over decades have PROVEN that diversification gives superior returns for any given risk level. There are two types of diversification: asset type and time. You can use these tools of the modern investment to give yourself SUPERIOR returns for long term investments for FREE.
Be a smart investor - it's easy. My dog, Krypto, can do it.
Here's what to do.
Don't worry about those thousands of stocks or mutual funds. Just pay attention to SEVEN asset classes (really NINE as one has three parts). NINE asset classes are easy to follow; you can do it once a week on Saturday morning. A baseball team has as many players. Don't pay attention to all the details and the blather of the pundits. Watch those NINE.
Invest in them in the lowest cost manner possible: index funds. The cheapest index funds are from The Vanguard Group. You don't even pay a management fee, since the management company is owned by the funds themselves. Those funds are huge, some of the largest in the world. Your economies of scale are fabulous. You can get the free ride.
And you have to construct your investments so you can maintain your diversification cheaply. You must be able to cheaply allocate your money among those important asset classes. You can do that at The Vanguard Group. I've used them for 30 years now. They provide excellent service and quality and cater to the common man and woman.
This post is #0 on my list given Friday, explaining why I do what what I do. Krypto Fund has beaten almost all big mouth investment advisors for years at low risk. Krypto Fund has ridden the 2000 tech bubble and the Panic of 2008. Even though the stock market is about 20% off its all-time highs of 2007, Krypto Fund is well over its all time high.
Krypto Fund follows the rules I listed in Friday's post. On Friday I listed the seven / nine important asset classes. Tomorrow I will tell you how to invest in them with specificity. All for free.
Ride the elephant, don't get trampled or stomped.
PS: Use this method for most of your long term investment money. If you want to make a small investment in some stock or company or whatever, go ahead (after good research). But keep it small at first. Maybe you'll get lucky. But if you keep it small at first, you won't be hurt if it craters.
Word of the Day
"Apotropaic" - adjective [$10]
Apotropaic means supposedly having the power to avert an evil influence or bad luck.
Sentence: The Krypto Fund method of long term investing needs no apotropaic charms. The free tools of the modern investment world give it all the edge it needs: diversification and cheap index funds.
Friday, March 4, 2011
The Friday Fade
I'm tired. It's cold. Nothing is happening.
Ms. Market is dancing on the table again after a brief rest. Krypto has no new orders, but she seems to be getting ready to sell some European stocks (which are up a bit as the Euro rallies). She's also getting ready to sell some RE stocks. Taken together, the sell signals are strong enough, but that's not how the Krypto Fund works. She buys and / or sells on an individual asset class basis. We wait for higher prices and will monitor the numbers more often.
The unemployment claims numbers showed strong improvement. Let's see the jobs numbers today. Despite the inflation screechers who want to crucify the American worker on a cross of green (or gold), Battleship Ben's quantitative easing program has and is producing good results since it was announced last August. Job losses had fallen, job growth is better (but still lousy), and fear of a double dip recession vaporized under his heavy shelling. Keep it up, Ben. Fire away!!!
Investment Lessons
First, notice that headline is Investment lessons, not trading lessons. The time horizon is years, not months or days or minutes.
Second, this is what I DO, not just what I SAY. Krypto Fund contains the majority of my net worth and these writings explain how I manage it - my own money. The Krypto Fund produced good long term results over the decades, including riding out the tidal waves of the Panic of 2008 and the 2000 Tech bubble. I have learned over the years not to second guess Krypto - the personification of my fund computer model that embodies my investment rules. Or is that dogification? Krypto is one of my dogs; she will lief* work for dog biscuits. [*Word of the Day]
Third, the objective is to do a wee bit better than average for the long term. Average is really very, very good. Most people's investment returns are way below average. They are the fodder for the Wall Street and Hedge Fund hogs. Be a winner, not a loser.
Principles
1. Manage a portfolio of the seven major asset classes.
2. Diversify across the asset classes.
3. Add / remove funds using time diversification.
4. Buy low, sell high; sell high, buy low.
5. Minimize fees.
6. Minimize taxes.
7. Obey the machine.
Rule #1 - Implementation.
There are seven major asset classes for the individual to use; one asset class has three parts.
1. Cash (aka money market funds or savings accounts)
2. TIPs aka Treasury Inflation Protected securities
3. Fixed income - bonds of various types.
4. US Stocks
5. Foreign stocks (three parts: Europe, Pacific and Emerging Markets)
6. Real estate
7, Gold & silver and precious metal stock funds
That's enough for now. More next week.
Word of the Day
"Lief" - adverb [$10] archaic; appears often in Shakespeare, but also was common in the Irish dialect of the common people in the 1907 play of J. M. Synge, Playboy of the Western World .
Lief means gladly, willingly (usu. had lief, would lief)
Sentence: To paraphase Wimpy of the Popeye cartoons, Krypto would lief manage the fund next neek for a dog biscuit today.
Shakespeare, As You Like It, Act IV, scene I, Rosalind to Orlando:
Nay, an you be so tardy, come no more
in my sight: I had as lief be wooed
of a snail.
Ms. Market is dancing on the table again after a brief rest. Krypto has no new orders, but she seems to be getting ready to sell some European stocks (which are up a bit as the Euro rallies). She's also getting ready to sell some RE stocks. Taken together, the sell signals are strong enough, but that's not how the Krypto Fund works. She buys and / or sells on an individual asset class basis. We wait for higher prices and will monitor the numbers more often.
The unemployment claims numbers showed strong improvement. Let's see the jobs numbers today. Despite the inflation screechers who want to crucify the American worker on a cross of green (or gold), Battleship Ben's quantitative easing program has and is producing good results since it was announced last August. Job losses had fallen, job growth is better (but still lousy), and fear of a double dip recession vaporized under his heavy shelling. Keep it up, Ben. Fire away!!!
Investment Lessons
First, notice that headline is Investment lessons, not trading lessons. The time horizon is years, not months or days or minutes.
Second, this is what I DO, not just what I SAY. Krypto Fund contains the majority of my net worth and these writings explain how I manage it - my own money. The Krypto Fund produced good long term results over the decades, including riding out the tidal waves of the Panic of 2008 and the 2000 Tech bubble. I have learned over the years not to second guess Krypto - the personification of my fund computer model that embodies my investment rules. Or is that dogification? Krypto is one of my dogs; she will lief* work for dog biscuits. [*Word of the Day]
Third, the objective is to do a wee bit better than average for the long term. Average is really very, very good. Most people's investment returns are way below average. They are the fodder for the Wall Street and Hedge Fund hogs. Be a winner, not a loser.
Principles
1. Manage a portfolio of the seven major asset classes.
2. Diversify across the asset classes.
3. Add / remove funds using time diversification.
4. Buy low, sell high; sell high, buy low.
5. Minimize fees.
6. Minimize taxes.
7. Obey the machine.
Rule #1 - Implementation.
There are seven major asset classes for the individual to use; one asset class has three parts.
1. Cash (aka money market funds or savings accounts)
2. TIPs aka Treasury Inflation Protected securities
3. Fixed income - bonds of various types.
4. US Stocks
5. Foreign stocks (three parts: Europe, Pacific and Emerging Markets)
6. Real estate
7, Gold & silver and precious metal stock funds
That's enough for now. More next week.
Word of the Day
"Lief" - adverb [$10] archaic; appears often in Shakespeare, but also was common in the Irish dialect of the common people in the 1907 play of J. M. Synge, Playboy of the Western World .
Lief means gladly, willingly (usu. had lief, would lief)
Sentence: To paraphase Wimpy of the Popeye cartoons, Krypto would lief manage the fund next neek for a dog biscuit today.
Shakespeare, As You Like It, Act IV, scene I, Rosalind to Orlando:
Nay, an you be so tardy, come no more
in my sight: I had as lief be wooed
of a snail.
Thursday, March 3, 2011
Tidbits on a Thursday
Hot Air
Global warming disappeared in January and February 2011. The global temperature anomaly was negative for two straight months. "Anomaly" means the difference of (A) the month's global average minus (B) the global average for the benchmark 1980-2010 period. IF global warming computer models were correct, such a consecutive monthly negative anomaly would not happen with a very high degree of probability. The existence of these two negative anomalies in 2011 - after a trend up for 30 years - proves the models simply are wrong and do not contain correct physics.
The "scientists" pushing those claims should be fired for either incompetence or knavery; eviscerate those grants. That's one big glob of fat in the federal government that needs to be cut now.
Just Say No
That applies to call for US intervention in Libya. First, it's the Libyans' fight; let them do it. Second, Libya is in Europe's backyard; let them do it. Just Say No. US: stay out of it.
Consolidation
News Corp. received U. K. government approval to buy satellite news service, BSkyB, leading to more consolidation in the news industry. Why this is in the public interest is beyond my feeble mental powers.
Unions
I am fiercely pro-union except when basic principles of liberty are violated. The Ohio Senate passed a bill to eliminate union powers to extract money from voters without legislative votes (aka Taxation without Representation):
"The bargaining rights of public workers in Ohio would be dramatically reduced and strikes would be banned under a bill narrowly passed by the Ohio Senate on Wednesday. ... A GOP-backed measure that would restrict the collective bargaining rights of roughly 350,000 teachers, firefighters, police officers and other public employees squeaked through the state Senate on a 17-16 vote. Six Republicans sided with Democrats against the measure.
"The bill would ban strikes by public workers and establish penalties for those who do participate in walkouts. Unionized workers could negotiate wages, hours and certain work conditions — but not health care, sick time or pension benefits.The legislation would also set up a new process to settle worker disputes, giving elected officials the final say in contract disagreements. "
That's how it MUST be. Elected officials have the final say. That's what a republican form of government requires and that is mandated by the U. S. Constitution. Let's hope Ohio leads the way.
Word of the Day
"Poteen" - noun [$10] Irish, also potheen. [from Irish poitin, the diminutive of pota, meaning 'pot'.
Poteen means alcohol made illicitly, usu. from potatoes.
Sentence: My great, great, great grandfather opened a saloon in central Ohio when it was first being settled circa 1805, but I suppose he made and sold moonshine made from grain, not poteen from potatoes.
PS: I saw that word in reading Playboy of the Western World, a play by J. M. Synge written in 1907 and first performed in Dublin in the Abbey Theatre.
Global warming disappeared in January and February 2011. The global temperature anomaly was negative for two straight months. "Anomaly" means the difference of (A) the month's global average minus (B) the global average for the benchmark 1980-2010 period. IF global warming computer models were correct, such a consecutive monthly negative anomaly would not happen with a very high degree of probability. The existence of these two negative anomalies in 2011 - after a trend up for 30 years - proves the models simply are wrong and do not contain correct physics.
The "scientists" pushing those claims should be fired for either incompetence or knavery; eviscerate those grants. That's one big glob of fat in the federal government that needs to be cut now.
Just Say No
That applies to call for US intervention in Libya. First, it's the Libyans' fight; let them do it. Second, Libya is in Europe's backyard; let them do it. Just Say No. US: stay out of it.
Consolidation
News Corp. received U. K. government approval to buy satellite news service, BSkyB, leading to more consolidation in the news industry. Why this is in the public interest is beyond my feeble mental powers.
Unions
I am fiercely pro-union except when basic principles of liberty are violated. The Ohio Senate passed a bill to eliminate union powers to extract money from voters without legislative votes (aka Taxation without Representation):
"The bargaining rights of public workers in Ohio would be dramatically reduced and strikes would be banned under a bill narrowly passed by the Ohio Senate on Wednesday. ... A GOP-backed measure that would restrict the collective bargaining rights of roughly 350,000 teachers, firefighters, police officers and other public employees squeaked through the state Senate on a 17-16 vote. Six Republicans sided with Democrats against the measure.
"The bill would ban strikes by public workers and establish penalties for those who do participate in walkouts. Unionized workers could negotiate wages, hours and certain work conditions — but not health care, sick time or pension benefits.The legislation would also set up a new process to settle worker disputes, giving elected officials the final say in contract disagreements. "
That's how it MUST be. Elected officials have the final say. That's what a republican form of government requires and that is mandated by the U. S. Constitution. Let's hope Ohio leads the way.
Word of the Day
"Poteen" - noun [$10] Irish, also potheen. [from Irish poitin, the diminutive of pota, meaning 'pot'.
Poteen means alcohol made illicitly, usu. from potatoes.
Sentence: My great, great, great grandfather opened a saloon in central Ohio when it was first being settled circa 1805, but I suppose he made and sold moonshine made from grain, not poteen from potatoes.
PS: I saw that word in reading Playboy of the Western World, a play by J. M. Synge written in 1907 and first performed in Dublin in the Abbey Theatre.
Wednesday, March 2, 2011
Cutting the Fat
The bloviation about cutting the fat in government spending seems mindless. The Republicans always seems to want to cut Social Security, which provides income support for the elderly and which pays its own way. The Democrats always seem to want to cut defense and so-called tax loopholes (i. e., raise taxes). They blather about sacrifice. But whose sacrifice? Do they volunteer to sacrifice anything? Nope. Does one cut fat from those truly FAT, or cut "fat" from those with almost none, people with no reserves at all on starvation diets?
Obviously, we cut from the FAT first.
Where should we start - what type of cuts should be made first and would have broad public support?
Waste & bloat in the federal government would likely get an 80%+ vote in any fair poll.
Let's start with some true sacrifice from the "leaders", viz. a pay cut for the government itself and for government senior executives.
Yesterday's Wall Street Journal have an article about an in-depth study by the General Accounting Office showing that the Federal government had overlapping, duplicative, inefficient and / or ineffective programs. Here are some snippets:
"The report says there are 18 federal programs that spent a combined $62.5 billion in 2008 on food and nutrition assistance, but little is known about the effectiveness of 11 of these programs because they haven't been well studied. "
"The agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances, according to a draft of the report reviewed by The Wall Street Journal."
"The U.S. government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development."
"Sen. Tom Coburn (R., Okla.), who pushed for the report, estimated it identifies between $100 billion and $200 billion in duplicative spending. The GAO didn't put a specific figure on the spending overlap."
We start cutting there.
Next, what about federal executive pay and benefits? The line of those seeking those cushy positions is out the door and around the block. The Dark City in the Swamp is one of the highest income areas in the United States, virtually recession proof. That GAO reports shows that federal senior executives have failed in their jobs to provide effective management. They are fat and bloated.
More: they are mostly overpaid now. See the following:
"Federal employees earn higher average salaries than private-sector workers in more than eight out of 10 occupations, a USA TODAY analysis of federal data finds ... Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available. ...
"These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis."
In other articles, one can find that Federal workers pay only about 28% of their health care cost. A sole proprietor at most gets a tax deduction worth about 28%. that means the private workers pay 72% while the government pays 72% for Federal workers. That's upside down.
This is grossly obese FAT: Federal workers are apparently overpaid in the range of 12% in salary and by 300% in benefits. Combining these numbers, it's certain that Federal compensation is well over 20% above the private sector, likely 30%.
Cut the pay of government senior executives by 20%, the pay of the rest by 10% and make them pay 72% of the cost of their benefits. AND APPLY THIS TO CONGRESS FIRST!!!
Sacrifice must start at those responsible and at the top. Cut Federal pay and benefits! Cut wasteful, duplicatative, inefficient and ineffective programs NOW!
CUT FEDERAL FAT FIRST!
Word of the Day
"Enounce" - verb, transitive [$100]
Enounce means 1. to utter or pronounce as words, enunciate; 2. to announce, decalre or proclaim.
Sentence: Bunkerman enounces this following principle that all budget deficit efforts should follow: CUT FEDERAL FAT FIRST!
Obviously, we cut from the FAT first.
Where should we start - what type of cuts should be made first and would have broad public support?
Waste & bloat in the federal government would likely get an 80%+ vote in any fair poll.
Let's start with some true sacrifice from the "leaders", viz. a pay cut for the government itself and for government senior executives.
Yesterday's Wall Street Journal have an article about an in-depth study by the General Accounting Office showing that the Federal government had overlapping, duplicative, inefficient and / or ineffective programs. Here are some snippets:
"The report says there are 18 federal programs that spent a combined $62.5 billion in 2008 on food and nutrition assistance, but little is known about the effectiveness of 11 of these programs because they haven't been well studied. "
"The agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances, according to a draft of the report reviewed by The Wall Street Journal."
"The U.S. government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development."
"Sen. Tom Coburn (R., Okla.), who pushed for the report, estimated it identifies between $100 billion and $200 billion in duplicative spending. The GAO didn't put a specific figure on the spending overlap."
We start cutting there.
Next, what about federal executive pay and benefits? The line of those seeking those cushy positions is out the door and around the block. The Dark City in the Swamp is one of the highest income areas in the United States, virtually recession proof. That GAO reports shows that federal senior executives have failed in their jobs to provide effective management. They are fat and bloated.
More: they are mostly overpaid now. See the following:
"Federal employees earn higher average salaries than private-sector workers in more than eight out of 10 occupations, a USA TODAY analysis of federal data finds ... Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available. ...
"These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis."
In other articles, one can find that Federal workers pay only about 28% of their health care cost. A sole proprietor at most gets a tax deduction worth about 28%. that means the private workers pay 72% while the government pays 72% for Federal workers. That's upside down.
This is grossly obese FAT: Federal workers are apparently overpaid in the range of 12% in salary and by 300% in benefits. Combining these numbers, it's certain that Federal compensation is well over 20% above the private sector, likely 30%.
Cut the pay of government senior executives by 20%, the pay of the rest by 10% and make them pay 72% of the cost of their benefits. AND APPLY THIS TO CONGRESS FIRST!!!
Sacrifice must start at those responsible and at the top. Cut Federal pay and benefits! Cut wasteful, duplicatative, inefficient and ineffective programs NOW!
CUT FEDERAL FAT FIRST!
Word of the Day
"Enounce" - verb, transitive [$100]
Enounce means 1. to utter or pronounce as words, enunciate; 2. to announce, decalre or proclaim.
Sentence: Bunkerman enounces this following principle that all budget deficit efforts should follow: CUT FEDERAL FAT FIRST!
Tuesday, March 1, 2011
Something Changed
The famous quote by Virginia Woolf nags in my mind: "...on or about December 1910, human character changed ... The change was not sudden or definite ... but a change there was, nonetheless"
Looking back on the 20th century, we have much evidence that she was correct. The 20th century followed the 19th century - that gilded age and the era of Romanticism in art, literature and music. Relative peace existed worldwide: the principal post-Napoleonic conflict was the U. S. Civil war, but it brought forth freedom for millions of human beings from slavery.
The 20th century brought forth mass murder on an industrial scale by Nazi Germany, the Soviet Union, Mao's China, Pol Pot's Cambodia, and militarist Japan, and in the bloodlands in Eastern Europe. Human beings ceased to be seen as individual people, but as a number, a part of a class, and a bit of a nation. The passport system imposed regulations on free travel. "Your papers, please" became the stock bureaucratic and police greeting nearly worldwide. Even supposedly free America, a government ID is now required for much previously free activity.
In a now famous literary critical essay on the Metaphysical Poets of the 17th century, T. S. Eliot wrote: "In the seventeenth century a dissociation of sensibility set in, from which we never recovered ..." [Note 1; today's word of the day is "sensibility"]. He was postulating that sometime in the mid 17th century, "life [was] no longer felt to be a moral struggle and morality itself became abstract." [Note 2]
This seems to have happened again. Beyond the historical facts of the 20th century, consider today. Commonplace dialog now examines almost every public statement as that of the rich or the poor, or the blacks or whites, or Hispanics or whatever class. People are viewed as numbers or members of a class. Jobs and school admissions are assigned by racial/ethnic groups. Public debate has degraded to sloganeering and propaganda sound bites. Realpolitik is pervasive. Simple efforts for human rights receive snickers. Efforts to bring some moral (or religious) feelings into arguments are met with screeches about "inclusiveness", when such actions are meant to exclude morality from legitimate debate.
We need to have a debate on where we want to go as a nation and a world; morality and human (meaning individual) happiness must again become part of the debate. We cannot fix our short and long term problems without knowing the end point - the eschaton - of our efforts. The path must be chosen to go to the right place. Paraphrasing Ronald Reagan said, we want to go to the Shining City on the Hill where cumulative individual happiness is optimal, not to the Dark City in the Swamp where we all are numbered parts of a cruel machine.
Note 1: Selected Prose of T. S. Eliot, The Metaphysical Poets, page 64.
Note 2: Cambridge Companion to T. S. Eliot, page 54 mid.
Word of the Day
"Sensibility" - noun [$10]
Sensibility means 1. a. openness to emotional impressions, susceptibility, sensitiveness (sensibility to kindness); 1. b. (archaic) an exceptional or excessive degree of this (sense and sensibility); 2. a. (in plural) emotional capacities or feelings (was limited in his sensibilities); 2. b. (in sing. or pl.) a person's moral, emotional, or aesthetic ideas or standards; 3. sensitivity to sensory stimuli [USAGE: Sensibility should not be used in standard English as a noun corresponding to "sense" or "sensible"; it does not mean possession of common sense. Use sensibleness for that meaning.]
Sentence: On or about December 1910, much of humanity underwent a dissociation of sensibility, as it began to lose its moral compass for seeing each person as an individual person. Can we regain our sensibility?
Looking back on the 20th century, we have much evidence that she was correct. The 20th century followed the 19th century - that gilded age and the era of Romanticism in art, literature and music. Relative peace existed worldwide: the principal post-Napoleonic conflict was the U. S. Civil war, but it brought forth freedom for millions of human beings from slavery.
The 20th century brought forth mass murder on an industrial scale by Nazi Germany, the Soviet Union, Mao's China, Pol Pot's Cambodia, and militarist Japan, and in the bloodlands in Eastern Europe. Human beings ceased to be seen as individual people, but as a number, a part of a class, and a bit of a nation. The passport system imposed regulations on free travel. "Your papers, please" became the stock bureaucratic and police greeting nearly worldwide. Even supposedly free America, a government ID is now required for much previously free activity.
In a now famous literary critical essay on the Metaphysical Poets of the 17th century, T. S. Eliot wrote: "In the seventeenth century a dissociation of sensibility set in, from which we never recovered ..." [Note 1; today's word of the day is "sensibility"]. He was postulating that sometime in the mid 17th century, "life [was] no longer felt to be a moral struggle and morality itself became abstract." [Note 2]
This seems to have happened again. Beyond the historical facts of the 20th century, consider today. Commonplace dialog now examines almost every public statement as that of the rich or the poor, or the blacks or whites, or Hispanics or whatever class. People are viewed as numbers or members of a class. Jobs and school admissions are assigned by racial/ethnic groups. Public debate has degraded to sloganeering and propaganda sound bites. Realpolitik is pervasive. Simple efforts for human rights receive snickers. Efforts to bring some moral (or religious) feelings into arguments are met with screeches about "inclusiveness", when such actions are meant to exclude morality from legitimate debate.
We need to have a debate on where we want to go as a nation and a world; morality and human (meaning individual) happiness must again become part of the debate. We cannot fix our short and long term problems without knowing the end point - the eschaton - of our efforts. The path must be chosen to go to the right place. Paraphrasing Ronald Reagan said, we want to go to the Shining City on the Hill where cumulative individual happiness is optimal, not to the Dark City in the Swamp where we all are numbered parts of a cruel machine.
Note 1: Selected Prose of T. S. Eliot, The Metaphysical Poets, page 64.
Note 2: Cambridge Companion to T. S. Eliot, page 54 mid.
Word of the Day
"Sensibility" - noun [$10]
Sensibility means 1. a. openness to emotional impressions, susceptibility, sensitiveness (sensibility to kindness); 1. b. (archaic) an exceptional or excessive degree of this (sense and sensibility); 2. a. (in plural) emotional capacities or feelings (was limited in his sensibilities); 2. b. (in sing. or pl.) a person's moral, emotional, or aesthetic ideas or standards; 3. sensitivity to sensory stimuli [USAGE: Sensibility should not be used in standard English as a noun corresponding to "sense" or "sensible"; it does not mean possession of common sense. Use sensibleness for that meaning.]
Sentence: On or about December 1910, much of humanity underwent a dissociation of sensibility, as it began to lose its moral compass for seeing each person as an individual person. Can we regain our sensibility?
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