This post is not about the Ruling Classes (CEOs, government bureaucrats and politicians) who loot the public to get richer & more powerful while failing to deliver anything to the common man and woman. This post is about the beefers, aka big, evil funds, mostly private investment partnerships also known as hedge funds, who led the hoard of financial vikings who looted the nation before and during the Panic of 2008 and its aftermath. A new book shows that nearly the entire industry is a scam. The hedge fund managers make plenty of money, but the investors get nothing cumulatively. Remember that old book and adage about the financial industry during the Great Depression - "Where are the Customers' Yachts?". The hedge fund industry is a reprise writ large.
A review of "The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to be True" [Simon Lack, Wiley] in the weekend Financial Times contains all you need to know. "If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good."
More: "Never in the field of human finance has so much been charged for so little."
And: "The prime purpose of the sector is to provide jobs and wealth creation for the industry professionals: managers, consultants, allocators, prime brokers, and other service providers."
The total amount of money lost by hedge funds in the Panic of 2008 - "some $450bn-odd vaporised in a single year ... destroyed all the value that hedge funds ever created."
The managers made big money. "From 1998 to 2010, the cumulative split was just $9bn to investors versus $440bn to managers." That is a breathtaking vision of pure greed and fraud.
The author has the numbers and data to back up every conclusion ... and every smirk of disgust at the hogs at the trough. In the end, though, he blames the investors. They are the stupid cows being milked and leeched by the parasites in the hedge fund industry. They want to get ... more. And they get what they deserve - less.
Your author, the Bunkerman, has been saying and writing this for years, to the smirks and jibes of various pontificating (and well paid) pundits and some hedge fund managers themselves. It's nice to see Bunkerman proven right ... again.
Showing posts with label investing. Show all posts
Showing posts with label investing. Show all posts
Monday, February 20, 2012
Thursday, February 9, 2012
Woof! Woof!
This little rally in the morning has woken up Krypto from her nap. She has given me re-balancing sell orders in US stocks, Europe and Emerging Market stocks. All proceeds to cash. The larger orders are in Europe, next US, last Emerging Markets.
Friday, December 9, 2011
The Dumb Rich ...
... are also dangerous.
First, the stupidity.
From FT online today: "The average hedge fund manager has lost 4.37 per cent in the year to the end of November, according to data just released by Hedge Fund Research – losing money in six of the past seven months."
The Rich pay big fees for this non-performance. Trillions of their dollars go to support the lifestyles of southeast Connecticut (Greenwich, Stamford, etc.) and Manhattan and the tony suburbs of New Jersey. They are wasting their money.
Krypto is up almost 3% for the year as of a couple days ago. A dog, albeight a very sweet and noble dog, is outperforming the "best and brightest" of the Street by about 7%. Per trillion $ invested, that is $70,000,000,000, yes, $70 billion of value year to date has been squandered by the Dumb Rich.
Second, the danger.
Much of those trillions of the Dumb Rich are "invested" in trading strategies and trading funds and in collateral for derivative "bets". None of that money builds a factory or hires people for services or does anything productive. It's all being wasted and bled by the money manager leeches of Connecticut, Switzerland, London and the Cayman Islands.
Those billions of wealth are completely doing nothing productive .. they are a pool of mud around the legs of the world economy striving to climb to a better world. Those trillions might as well be on the Moon, or even gone, squandered in a stupid war. The world would be better if that money was spend hiring people to dig holes and fill them up. At least the laborer digging the hole would spend the money. The Dumb Rich neither spend it nor invest it.
The Dumb Rich are part of the problem. They seem too stupid and selfish to recognize it. Sure, they get a bit of applause when they appear in black tie at some gala in NYC or London or wherever. But does that philanthropic money really help anyone? Some does. Ted Forstmann really did help poor youths get a better education. I've written about others in the past, too. Mostly, no. The money goes to build a monument to themselves.
Hello Dumb Rich! Do something productive.
Here's an idea. Buy homes for some baby boomers facing homelessness, people who have worked hard all they lives and now face destitution. $1 billion can buy 10,000 homes @ $100,000 out of foreclosure. All you have to do is pay the taxes and let them live there, and keep the home up with sweat repairs. You will have made a real difference for at least 100,000 people, maybe as much as 400,000 people counting children and others who might now have a home.
Or make some real investments.
Listen to Linus Larrabie (played by Humphrey Bogart) from that great movie, Sabrina:
***Quote spoken by Linus Larrabie explaining to David Larrabie the reason for business. From the movie, Sabrina, 1954 with Humphrey Bogart & Audrey Hepburn & William Holden.***
Linus: Making money isn't the main point of business. Money is a by-product.
David: What's the main objective? Power?
Linus: Ah! That's become a dirty word.
David: What's the urge? You're going into plastics. What will that prove?
Linus: Prove? Nothing much. A new product has been found,something of use to the world.
A new industry moves into an undeveloped area. Factories go up, machines go in and you're in business.
It's coincidental that people who've never seen a dime now have a dollar and barefooted kids wear shoes and have their faces washed.
What's wrong with an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?
***End of Quote***
Hello Dumb Rich!
Do something productive. Don't just count your gold and work to get more.
Word of the Day
"Obsequious" - adjective [$10]
Obsequious means exhibiting a servile attentiveness.
Sentence: Obsequious hosts on Billionaire-vision (fka Bubblevision) make me puke as they kiss the butts of the innumerable billionaires whom that put on TV. We want to hear the common man & woman!!!
First, the stupidity.
From FT online today: "The average hedge fund manager has lost 4.37 per cent in the year to the end of November, according to data just released by Hedge Fund Research – losing money in six of the past seven months."
The Rich pay big fees for this non-performance. Trillions of their dollars go to support the lifestyles of southeast Connecticut (Greenwich, Stamford, etc.) and Manhattan and the tony suburbs of New Jersey. They are wasting their money.
Krypto is up almost 3% for the year as of a couple days ago. A dog, albeight a very sweet and noble dog, is outperforming the "best and brightest" of the Street by about 7%. Per trillion $ invested, that is $70,000,000,000, yes, $70 billion of value year to date has been squandered by the Dumb Rich.
Second, the danger.
Much of those trillions of the Dumb Rich are "invested" in trading strategies and trading funds and in collateral for derivative "bets". None of that money builds a factory or hires people for services or does anything productive. It's all being wasted and bled by the money manager leeches of Connecticut, Switzerland, London and the Cayman Islands.
Those billions of wealth are completely doing nothing productive .. they are a pool of mud around the legs of the world economy striving to climb to a better world. Those trillions might as well be on the Moon, or even gone, squandered in a stupid war. The world would be better if that money was spend hiring people to dig holes and fill them up. At least the laborer digging the hole would spend the money. The Dumb Rich neither spend it nor invest it.
The Dumb Rich are part of the problem. They seem too stupid and selfish to recognize it. Sure, they get a bit of applause when they appear in black tie at some gala in NYC or London or wherever. But does that philanthropic money really help anyone? Some does. Ted Forstmann really did help poor youths get a better education. I've written about others in the past, too. Mostly, no. The money goes to build a monument to themselves.
Hello Dumb Rich! Do something productive.
Here's an idea. Buy homes for some baby boomers facing homelessness, people who have worked hard all they lives and now face destitution. $1 billion can buy 10,000 homes @ $100,000 out of foreclosure. All you have to do is pay the taxes and let them live there, and keep the home up with sweat repairs. You will have made a real difference for at least 100,000 people, maybe as much as 400,000 people counting children and others who might now have a home.
Or make some real investments.
Listen to Linus Larrabie (played by Humphrey Bogart) from that great movie, Sabrina:
***Quote spoken by Linus Larrabie explaining to David Larrabie the reason for business. From the movie, Sabrina, 1954 with Humphrey Bogart & Audrey Hepburn & William Holden.***
Linus: Making money isn't the main point of business. Money is a by-product.
David: What's the main objective? Power?
Linus: Ah! That's become a dirty word.
David: What's the urge? You're going into plastics. What will that prove?
Linus: Prove? Nothing much. A new product has been found,something of use to the world.
A new industry moves into an undeveloped area. Factories go up, machines go in and you're in business.
It's coincidental that people who've never seen a dime now have a dollar and barefooted kids wear shoes and have their faces washed.
What's wrong with an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?
***End of Quote***
Hello Dumb Rich!
Do something productive. Don't just count your gold and work to get more.
Word of the Day
"Obsequious" - adjective [$10]
Obsequious means exhibiting a servile attentiveness.
Sentence: Obsequious hosts on Billionaire-vision (fka Bubblevision) make me puke as they kiss the butts of the innumerable billionaires whom that put on TV. We want to hear the common man & woman!!!
Friday, November 25, 2011
Black Friday
I've never liked that name, as it seems rather blasphemous compared to the various October "Black" days when investors were crushed. But today that name seems appropriate as Krypto got up early and gave me a strong buy order from her machine: Buy some European stocks. I will comply via VGK, the Vanguard European Stock Index ETF.
Word of the Day
None - had a plumbing problem here. Is there an immutable law of nature that the likely time for plumbing or electrical problems is a holiday weekend?]
Word of the Day
None - had a plumbing problem here. Is there an immutable law of nature that the likely time for plumbing or electrical problems is a holiday weekend?]
Tuesday, November 22, 2011
They came in the same old way ...
Describing the unchanging nature of French attacks, Wellington is reported to have said,
"They came on in the same old way and we defeated them in the same old way."
The hedge funds that have most of the excess capital of the rich seem to behave in that same old way: barge in, barge out. No true investing exists by them. They simply trade to try to extract a profit from ... who? Each other now. They are mindless. They brawl like drunken cowboys in a western saloon. Something happens and whoosh. They all move together.
What do we do? We practice judo-style investing, buying low, selling high and selling high and buying low, all done in smallish bits to grab slowly some extra percentage points of gain every year while maintaining large, long term investments with most of our capital. This is Krypto's style.
She got off the couch this morning, nudged me,and voilà, I find an order: buy some gold!
I will obey the machine, buying some GLD at the open to bring that asset class up to its level. If it drop further, we will buy silver next.
The machine also says to "get ready" to buy some European stocks - a small further relative drop will trigger a strong buy there.
Word of the Day
"Jussive" - adjective [$10] Grammatical
Jussive means expressing a command [e. g. the jussive subjunctive in Latin]
Sentence: Today Krypto was jussive, but usually she's a couch potato.
"They came on in the same old way and we defeated them in the same old way."
The hedge funds that have most of the excess capital of the rich seem to behave in that same old way: barge in, barge out. No true investing exists by them. They simply trade to try to extract a profit from ... who? Each other now. They are mindless. They brawl like drunken cowboys in a western saloon. Something happens and whoosh. They all move together.
What do we do? We practice judo-style investing, buying low, selling high and selling high and buying low, all done in smallish bits to grab slowly some extra percentage points of gain every year while maintaining large, long term investments with most of our capital. This is Krypto's style.
She got off the couch this morning, nudged me,and voilà, I find an order: buy some gold!
I will obey the machine, buying some GLD at the open to bring that asset class up to its level. If it drop further, we will buy silver next.
The machine also says to "get ready" to buy some European stocks - a small further relative drop will trigger a strong buy there.
Word of the Day
"Jussive" - adjective [$10] Grammatical
Jussive means expressing a command [e. g. the jussive subjunctive in Latin]
Sentence: Today Krypto was jussive, but usually she's a couch potato.
Wednesday, November 2, 2011
Whatnot Wednesday
Krypto's model showed a weak buy for European stocks and an "almost" strong buy for gold-silver. We wait for strong signals in this market.
It's too bad one can't buy some of those European bonds here - at least in retail quantities. At 7%, I'd buy Italy. Ireland is interesting, too. Lol, yes, those are nations I've recently visited & liked. But the broker we use for long term municipal bond purchases doesn't have them. Hmmm I wonder if Vanguard has them? Will check.
Also, I wonder about the tax treatment. One tax is OK, but not two.
Word of the Day
"Querulous" - adjective [$10]
Querulous means complaining, peevish.
Sentence: A querulous customer should be fired unless he/she is quite profitable.
It's too bad one can't buy some of those European bonds here - at least in retail quantities. At 7%, I'd buy Italy. Ireland is interesting, too. Lol, yes, those are nations I've recently visited & liked. But the broker we use for long term municipal bond purchases doesn't have them. Hmmm I wonder if Vanguard has them? Will check.
Also, I wonder about the tax treatment. One tax is OK, but not two.
Word of the Day
"Querulous" - adjective [$10]
Querulous means complaining, peevish.
Sentence: A querulous customer should be fired unless he/she is quite profitable.
Tuesday, November 1, 2011
Close, but ...
Krypto is sleeping in ... her model shows no action for today. Other asset classes fell enough to keep the gold+silver class from getting a clear buy signal. I see futures are down bigtime this morning. Oh well, maybe in a few weeks Krypto can re-buy what she sold on Friday.
Obey the machine ....
MF Global
$700 million is missing. The hedge fund industry gets another black eye. Corzine seems to have been a power hungry, greedy knave. First he did nothing to help the people of New jersey as both a Senator and Governor. Now he blows up a formerly fine firm and was captain of a ship while its hold was looted. He's certainly Knave of the Month.
Word of the Day
"Rococo" - adjective [$10]
Rococo means excessively ornate or intricate.
Sentence: Much art and decor from the era of Louis XV exhibits the rococo style; one can see this clearly in many rooms of the Frick Museum at the corner of Fifth Avenue and east 70th street in New York City.
Obey the machine ....
MF Global
$700 million is missing. The hedge fund industry gets another black eye. Corzine seems to have been a power hungry, greedy knave. First he did nothing to help the people of New jersey as both a Senator and Governor. Now he blows up a formerly fine firm and was captain of a ship while its hold was looted. He's certainly Knave of the Month.
Word of the Day
"Rococo" - adjective [$10]
Rococo means excessively ornate or intricate.
Sentence: Much art and decor from the era of Louis XV exhibits the rococo style; one can see this clearly in many rooms of the Frick Museum at the corner of Fifth Avenue and east 70th street in New York City.
Friday, October 28, 2011
Action
Yesterday's big move up triggered some action from Krypto. She nudged me to run the model, and, mirabile dictu, a strong buy signal appeared for the super class of cash+TIPs+fixed income. Since fixed income and TIPs are grossly overpriced, the move is to cash.
Moderate sell signals exist for US stocks, European stocks, emerging markets and real estate.
Thus, I sent in orders to sell some US stocks (via VTI), emerging market stocks (via VWO), and European stocks and Real estate (via respective Vanguard index funds).
Hmm ... buy low, sell high. That's what Krypto did over the past few months. She's far better that the average hedge fund manager.
Good doggie ... here's your fee - a tasty dog biscuit :)
Word of the Day
"Peripeteia" - noun [$10]
Peripeteia means a sudden change of fortune in drama or in life.
Sentence: Herman Cain's presidential campaign experienced peripeteia in positive public awareness as Rick Perry flamed out and Cain's simple 9-9-9 plan received attention. But Herman Cain needs to read my pamphlet and adopt my ideas to develop persistently strong poll numbers, otherwise his flame will puff out, too.
Moderate sell signals exist for US stocks, European stocks, emerging markets and real estate.
Thus, I sent in orders to sell some US stocks (via VTI), emerging market stocks (via VWO), and European stocks and Real estate (via respective Vanguard index funds).
Hmm ... buy low, sell high. That's what Krypto did over the past few months. She's far better that the average hedge fund manager.
Good doggie ... here's your fee - a tasty dog biscuit :)
Word of the Day
"Peripeteia" - noun [$10]
Peripeteia means a sudden change of fortune in drama or in life.
Sentence: Herman Cain's presidential campaign experienced peripeteia in positive public awareness as Rick Perry flamed out and Cain's simple 9-9-9 plan received attention. But Herman Cain needs to read my pamphlet and adopt my ideas to develop persistently strong poll numbers, otherwise his flame will puff out, too.
Tuesday, October 11, 2011
Hmmm
Krypto had remarkably good timing Friday with her stock purchases. Can a dog really outperform all those overpaid hedge fund managers?
I guess John Paulson is no longer the great genius - his funds are down big, the worst 47% for the year. To his credit, I read that a good bit of the money is his own or his employees. How well has he done? Bloomberg says, "clients who came in at the beginning of 2008 have made 4.3 percent, according to Bloomberg calculations". That sucks and is surely not worth a 2% annual fee and 20% of the ups.
All these beefers do is take big risks with OPM - Other People's Money. Some win, some lose. The winners take a big fee; the losers close down and start a new fund. On average, it's a scam. Krypto works for dog biscuits and outperforms them overall.
Word of the Day
"Pule" - verb, intransitive [$10] literary. Often used in its participial form, puling.
Pule means to cry querulously or weakly, whine, whimper.
Sentence: The dumb rich should stop their puling ways and simply make long term investments the Krypto way.
I guess John Paulson is no longer the great genius - his funds are down big, the worst 47% for the year. To his credit, I read that a good bit of the money is his own or his employees. How well has he done? Bloomberg says, "clients who came in at the beginning of 2008 have made 4.3 percent, according to Bloomberg calculations". That sucks and is surely not worth a 2% annual fee and 20% of the ups.
All these beefers do is take big risks with OPM - Other People's Money. Some win, some lose. The winners take a big fee; the losers close down and start a new fund. On average, it's a scam. Krypto works for dog biscuits and outperforms them overall.
Word of the Day
"Pule" - verb, intransitive [$10] literary. Often used in its participial form, puling.
Pule means to cry querulously or weakly, whine, whimper.
Sentence: The dumb rich should stop their puling ways and simply make long term investments the Krypto way.
Friday, October 7, 2011
TGIF and a move
Krypto nudged me to run the model, and she found a moderately strong buy signal for some emerging market stocks, which is intriguingly anomalous to other stock positions. I suppose the beefers were liquidating those in force as they faced margin calls. For whatever reason, that asset class needs topping up, which I will do at the close via a mutual fund exchange from money markets.
The relevant mutual fund is the Vanguard Emerging Markets (Admiral) Fund.
Word of the Day
[to come]
The relevant mutual fund is the Vanguard Emerging Markets (Admiral) Fund.
Word of the Day
[to come]
Tuesday, August 9, 2011
The Day After ... Some Moves
Krypto did a bit of work early this morning and found for orders from the machine. She wants to buy quite a bit of US stocks and some emerging market stocks and sell some gold. These moves are a bit larger than the ones a couple weeks ago. These are fairly strong signals and will bring the Krypto Fund back into balance.
Anecdotal talk has the baby boomers doing a bit of panic selling, not wanting to re-live the 2008-9 pain. We know that the Euro-beefers are doing much panic selling and the US beefers are, too. Their year's are now a shambles. For the sake of openness, Krypto Fund is down YTD by 1.89% after being up a bit over 7% not too long ago. Sigh ...
Volatile times. People just can't seem to calm down and get to work. Perhaps living in a bunker is good for the nerves. After all, when one is prepared for Armageddon and civil strife, why worry about the stock market?
Verizon landline workers go on strike. Hmmm ... that's a declining business. The company wants them to pay at least $100 per month towards health care. Uh ... hello? Are these people out of their minds? The union kool-aid must be rather intoxicating.
Word of the Day
"Enthymeme" - noun [$10] Logic
Enthymeme means a syllogism in which one premise is not explicitly stated. [e. g. an argument where a 'commonplace' is ijmplicitly assumed]
Sentence: Until this spring and summer, all debates over the US debt ceiling were rational enthymemes with a premise that neither side would permit a default on US debt obligations. The Tea Party's dishonorable willingness to use US debt holders are human shields in their fight has permanently hurt America's credit standing, and also changed the terms of the debate. Disaster looms if radical left Democrats adopt similar dishonorable stances.
Anecdotal talk has the baby boomers doing a bit of panic selling, not wanting to re-live the 2008-9 pain. We know that the Euro-beefers are doing much panic selling and the US beefers are, too. Their year's are now a shambles. For the sake of openness, Krypto Fund is down YTD by 1.89% after being up a bit over 7% not too long ago. Sigh ...
Volatile times. People just can't seem to calm down and get to work. Perhaps living in a bunker is good for the nerves. After all, when one is prepared for Armageddon and civil strife, why worry about the stock market?
Verizon landline workers go on strike. Hmmm ... that's a declining business. The company wants them to pay at least $100 per month towards health care. Uh ... hello? Are these people out of their minds? The union kool-aid must be rather intoxicating.
Word of the Day
"Enthymeme" - noun [$10] Logic
Enthymeme means a syllogism in which one premise is not explicitly stated. [e. g. an argument where a 'commonplace' is ijmplicitly assumed]
Sentence: Until this spring and summer, all debates over the US debt ceiling were rational enthymemes with a premise that neither side would permit a default on US debt obligations. The Tea Party's dishonorable willingness to use US debt holders are human shields in their fight has permanently hurt America's credit standing, and also changed the terms of the debate. Disaster looms if radical left Democrats adopt similar dishonorable stances.
Friday, August 5, 2011
TGIF
Yesterday we got another dose of the sloppy markets that the SEC and the Street have created. Everything is a "trade" and trillions are ensconced on hot money funds that simply trade: those trillion slosh around seeking profits without making any longer term commitment to an investment. The managers simply want to collect their management fees quarter to quarter and year to date. When something happens to put those fees at risk, they all panic at once and sell everything, and then sell short to jump on the trend.
The beef cattle metaphor works rather well. The beefers mill around, chewing cud and grazing on grass. When thunder rumbled, they stampede, destroying everything in their path. Eventually they tire and stop, and start to look for fresh grass and / or a waterhole.
Now they are sitting on negative years, for the most part, and that Ferrari they wanted to buy with this year's bonus is now a phantom. The world would be a better place if 90% of those hedge funds were simply liquidated, AND if the markets were returned to the early 1980s rules when human beings actually made decisions, not computers.
Then in that golden past, investors actually made investments that might run for 10, 20, or even 30 years. All trades ran through the human beings. Investment bankers actually found long term investors for corporations. All that theoretical "reform" turned out badly.
What is to be Done?
That's the age old question and for today, the Bunkerman turns to Krypto for analysis and guidance. The machine has no new orders. A further stock price drop would bring on orders to buy more US stocks.
Observations
1. Bunkerman's assessment that TIPs (Treasury Inflation Protected Securities) were grossly overvalued bought the dust. TIPs are now much more grossly overvalued. Sigh ... See what can happen when one tries to outthink Krypto & her machine. Usually I would not do that, but I was thinking about retirement income and the TIPs returns seemed foolish to lock in. But had I oberyed the machine, I could now be selling TIPs at higher prices and buying something cheap with the gains. TIPs really do move strongly in a counter-cyclically to stocks, so have great value as diversification tools. Ms. Market is a stern schoolmarm.
2. The decision to shift 2/3 of real estate investments to the TIAA Real Estate Fund from the Vanguard REIT Index Fund worked well. The TIAA RE Fund has held its value well, while the REIT Index Fund got carried along with the stock market panic.
3. The best place for gold & silver investments is ... gold and silver. If at all possible, use the ETFs - GLD and SLV - not a gold stock fund. I got lucky Tuesday, as the gold that I sold was in fact the Vanguard Precious Metals Fund, which I zeroed out. Gold mining stocks have been behaving much more like stocks in recent years. I think this is due to both the costs of mining and the stupid moves that management seem to always make. A gold mining company should pay a good dividend based on their net equity investment gold it is selling. Instead, they waste the money on acquisitions, so that the value of the company becomes less than the value of the gold they own in the ground.
Word of the Day
[ASIDE: I have about 50+ words in a stack of index cards that I have come across reading, but not yet used as a "Word of the Day". Intriguingly, leafing thru that stack I can usually find one appropriate for a day's observations or events. As I did today :) ]
"Puling" - adjective [$10] pronounced 'pyuling' with a softened p. From "Pule" that rhymes with "mule"
"Pule" - verb, intransitive [$10] literary. A Mencken word.
Pule means to cry querulously or weakly; whine, whimper.
Sentence: Undisciplined investors today are a puling lot, milling around wondering what to do. Obey the machine.
The beef cattle metaphor works rather well. The beefers mill around, chewing cud and grazing on grass. When thunder rumbled, they stampede, destroying everything in their path. Eventually they tire and stop, and start to look for fresh grass and / or a waterhole.
Now they are sitting on negative years, for the most part, and that Ferrari they wanted to buy with this year's bonus is now a phantom. The world would be a better place if 90% of those hedge funds were simply liquidated, AND if the markets were returned to the early 1980s rules when human beings actually made decisions, not computers.
Then in that golden past, investors actually made investments that might run for 10, 20, or even 30 years. All trades ran through the human beings. Investment bankers actually found long term investors for corporations. All that theoretical "reform" turned out badly.
What is to be Done?
That's the age old question and for today, the Bunkerman turns to Krypto for analysis and guidance. The machine has no new orders. A further stock price drop would bring on orders to buy more US stocks.
Observations
1. Bunkerman's assessment that TIPs (Treasury Inflation Protected Securities) were grossly overvalued bought the dust. TIPs are now much more grossly overvalued. Sigh ... See what can happen when one tries to outthink Krypto & her machine. Usually I would not do that, but I was thinking about retirement income and the TIPs returns seemed foolish to lock in. But had I oberyed the machine, I could now be selling TIPs at higher prices and buying something cheap with the gains. TIPs really do move strongly in a counter-cyclically to stocks, so have great value as diversification tools. Ms. Market is a stern schoolmarm.
2. The decision to shift 2/3 of real estate investments to the TIAA Real Estate Fund from the Vanguard REIT Index Fund worked well. The TIAA RE Fund has held its value well, while the REIT Index Fund got carried along with the stock market panic.
3. The best place for gold & silver investments is ... gold and silver. If at all possible, use the ETFs - GLD and SLV - not a gold stock fund. I got lucky Tuesday, as the gold that I sold was in fact the Vanguard Precious Metals Fund, which I zeroed out. Gold mining stocks have been behaving much more like stocks in recent years. I think this is due to both the costs of mining and the stupid moves that management seem to always make. A gold mining company should pay a good dividend based on their net equity investment gold it is selling. Instead, they waste the money on acquisitions, so that the value of the company becomes less than the value of the gold they own in the ground.
Word of the Day
[ASIDE: I have about 50+ words in a stack of index cards that I have come across reading, but not yet used as a "Word of the Day". Intriguingly, leafing thru that stack I can usually find one appropriate for a day's observations or events. As I did today :) ]
"Puling" - adjective [$10] pronounced 'pyuling' with a softened p. From "Pule" that rhymes with "mule"
"Pule" - verb, intransitive [$10] literary. A Mencken word.
Pule means to cry querulously or weakly; whine, whimper.
Sentence: Undisciplined investors today are a puling lot, milling around wondering what to do. Obey the machine.
Friday, July 1, 2011
TGIF, a Tidbit and a Word
Krypto's model shows no moves, yet. On a further rally to new highs, the June buys from the machine would likely be taken off by the machine. Obey the machine.
Word of the Day
"Prevaricate" - verb, intransitive [$10]
Prevaricate means 1. to speak or act evasively or misleadingly; 2. quibble, equivocate.
Sentence: "Leaders" in the Dark City mostly either prevaricate or lie blatantly; the truth is a rare occurrence, especially when they say they are talking the truth.
Word of the Day
"Prevaricate" - verb, intransitive [$10]
Prevaricate means 1. to speak or act evasively or misleadingly; 2. quibble, equivocate.
Sentence: "Leaders" in the Dark City mostly either prevaricate or lie blatantly; the truth is a rare occurrence, especially when they say they are talking the truth.
Thursday, June 9, 2011
Closer
Krypto tells me that she's getting interested in doing something, but not yet. She's a very patient dog. The cliche, "close only counts in horseshoes and hand grenades" helps one control emotions in investing. Just wait ... sit. Be calm. Obey the machine.
Word of the Day
"Eudemonic" - adjective [$10]
Eudemonic means conducive to happiness.
Sentence: (A) Free Fraternalism is the only philosophy of political economics that is eudemonic for the aggregate of the people, simply because its strictures are constructed to maximize that quantity. (B) Machine investing is eudemonic for almost all people by producing excellent returns at lower risk than almost all active methods over 10+ year time frames.
Word of the Day
"Eudemonic" - adjective [$10]
Eudemonic means conducive to happiness.
Sentence: (A) Free Fraternalism is the only philosophy of political economics that is eudemonic for the aggregate of the people, simply because its strictures are constructed to maximize that quantity. (B) Machine investing is eudemonic for almost all people by producing excellent returns at lower risk than almost all active methods over 10+ year time frames.
Wednesday, April 6, 2011
More Selling
Krypto wants me to sell some European stocks; I will obey via VGK, the Vanguard European stock ETF.
Word of the Day
"Unctuous" - adjective [$10] also "unctious"
Unctuous means 1. having the quality or characteristics of oil or ointment, greasy; 2. (of behavior, speech) unpleasantly flattering.
Sentence: I grimace when an unctuous guest on Babblevision or Blabberg says, "that's a great question": it's simply kissing the host's butt, kowtowing for favorable treatment.
Word of the Day
"Unctuous" - adjective [$10] also "unctious"
Unctuous means 1. having the quality or characteristics of oil or ointment, greasy; 2. (of behavior, speech) unpleasantly flattering.
Sentence: I grimace when an unctuous guest on Babblevision or Blabberg says, "that's a great question": it's simply kissing the host's butt, kowtowing for favorable treatment.
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.
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