Friday, July 10, 2009
Palin's Resignation
It's no mystery to me why Palin resigned. She was right to resign. It was a no brainer. Had she not resigned, she would be doing irreparable financial harm to her family.
Here's why.
Sarah Palin and her husband have five children and one grandchild. All of them, with the possible exception of Track, who's in the Army, are going to need a lot of help. Bristol's a teenage mom who's baby-daddy is useless. Levi's parents aren't going to be much help. The burden of bringing up that child is going to fall mostly on the Palin family, and Bristol herself has exremely limited means. Piper is six or seven. Just starting school. her expensive teenage years ahead pf her, and she'll need a college fund. Bristol may need some help finishing her education.
Retirement? Palin will have a modest pension, but she hasn't spent THAT long as a State of Alaska employee. Todd? He's done ok, but with five children? He's gonna have to scramble to fund his own retirement on top of everything else.
But get this the minute they found out that Trig had Down Syndrome, the financial planning picture changes. Why? Because the Palins insurance needs changed radically.
Trig will likely never be able to work or live independently, and will be dependent upon assistance his whole life. The Palins are confronted with a number of simultaneous financial challenges:
1.) Meet the college/education needs of at least three children and one grandchild. (Track will have the GI Bill, and possibly an ROTC scholarship if he wants it, so he's less of a worry, though still may need some help when he gets out of the Army.
2.) Help Bristol with her own day-to-day expenses and those of her baby.
3.) Provide for the day-to-day needs of Trig, who's going to have some pretty serious special needs and will require more and more time and attention as he gets older and becomes self-propelled.
3.) Provide enough life insurance protection to provide for her family's substantial needs if she got on the wrong airplane or got shot by a rabid libtard.
And here's the rub: Many middle class families opt for cheap term insurance, on the theory that their need for life insurance goes down substantially when the kids are out of school and no longer dependent.
That is not the case here. In the Palin's case, Trig's need for life insurance protection doesn't end when he gets a college diploma and moves out on his own. His need is permanent. The Palins must, on their limited incomes, provide for everything above, AND provide enough money for an endowment to support Trig Palin... probably for decades.
Financial planning for children with special needs is a little different than planning for most families. And it takes quite a bit more cash flow to provide for them. Cash flow the Palin's don't have on a Governor's salary and Todd's pay.
If Palin didn't quit, they could get through the next couple of years in decent shape. But then their options would deteriorate sharply if Palin's star faded. At 48/49 years old, it would be extremely difficult to recover.
The Palins very likely need a substantial amount of permanent life insurance. Not term. Set aside for Trig. If they wanted to be equitable to all their children, they would need a lot more permanent insurance, as opposed to term.
It's a lot more expensive, in terms of cash flow and monthly required premium, to buy that insurance in her late 40s than it would have been if she were in her 20s or 30s. And there's not as much time to build it up, either. Had Palin tried to stick it out on the Governor's salary, it would have been almost impossible.
But quitting, and getting a book out there, and hitting the lecture/fundraiser circuit in the next few years, would allow her to do all that. She can take care of her family, provide a legacy for her other children, spend some time with the kids, create something that creates residual income (book royalties), and STILL have a shot at running for president or senator.
Most importantly, if she doesn't provide for Trig, her critics sure as hell won't. No one else can do it but her.
Maybe she didn't explain it too well. And maybe it's none of our business anyway. But in my view, she did the right thing.
Best of luck, Governor Palin and family.
Splash, out
Jason
Here's why.
Sarah Palin and her husband have five children and one grandchild. All of them, with the possible exception of Track, who's in the Army, are going to need a lot of help. Bristol's a teenage mom who's baby-daddy is useless. Levi's parents aren't going to be much help. The burden of bringing up that child is going to fall mostly on the Palin family, and Bristol herself has exremely limited means. Piper is six or seven. Just starting school. her expensive teenage years ahead pf her, and she'll need a college fund. Bristol may need some help finishing her education.
Retirement? Palin will have a modest pension, but she hasn't spent THAT long as a State of Alaska employee. Todd? He's done ok, but with five children? He's gonna have to scramble to fund his own retirement on top of everything else.
But get this the minute they found out that Trig had Down Syndrome, the financial planning picture changes. Why? Because the Palins insurance needs changed radically.
Trig will likely never be able to work or live independently, and will be dependent upon assistance his whole life. The Palins are confronted with a number of simultaneous financial challenges:
1.) Meet the college/education needs of at least three children and one grandchild. (Track will have the GI Bill, and possibly an ROTC scholarship if he wants it, so he's less of a worry, though still may need some help when he gets out of the Army.
2.) Help Bristol with her own day-to-day expenses and those of her baby.
3.) Provide for the day-to-day needs of Trig, who's going to have some pretty serious special needs and will require more and more time and attention as he gets older and becomes self-propelled.
3.) Provide enough life insurance protection to provide for her family's substantial needs if she got on the wrong airplane or got shot by a rabid libtard.
And here's the rub: Many middle class families opt for cheap term insurance, on the theory that their need for life insurance goes down substantially when the kids are out of school and no longer dependent.
That is not the case here. In the Palin's case, Trig's need for life insurance protection doesn't end when he gets a college diploma and moves out on his own. His need is permanent. The Palins must, on their limited incomes, provide for everything above, AND provide enough money for an endowment to support Trig Palin... probably for decades.
Financial planning for children with special needs is a little different than planning for most families. And it takes quite a bit more cash flow to provide for them. Cash flow the Palin's don't have on a Governor's salary and Todd's pay.
If Palin didn't quit, they could get through the next couple of years in decent shape. But then their options would deteriorate sharply if Palin's star faded. At 48/49 years old, it would be extremely difficult to recover.
The Palins very likely need a substantial amount of permanent life insurance. Not term. Set aside for Trig. If they wanted to be equitable to all their children, they would need a lot more permanent insurance, as opposed to term.
It's a lot more expensive, in terms of cash flow and monthly required premium, to buy that insurance in her late 40s than it would have been if she were in her 20s or 30s. And there's not as much time to build it up, either. Had Palin tried to stick it out on the Governor's salary, it would have been almost impossible.
But quitting, and getting a book out there, and hitting the lecture/fundraiser circuit in the next few years, would allow her to do all that. She can take care of her family, provide a legacy for her other children, spend some time with the kids, create something that creates residual income (book royalties), and STILL have a shot at running for president or senator.
Most importantly, if she doesn't provide for Trig, her critics sure as hell won't. No one else can do it but her.
Maybe she didn't explain it too well. And maybe it's none of our business anyway. But in my view, she did the right thing.
Best of luck, Governor Palin and family.
Splash, out
Jason
Labels: Alsaska, Bristol, finance, money, Palin, special needs, The Left, Track, Trig
Monday, June 16, 2008
Investment and Finance Books
From time to time, I get a request for my favorite investment and finance books, which I usually answer via email.
I'm always afraid to post this list publicly, because as my own understanding evolves, my list of favorites changes, and some books that were my early favorites would not make the list now.
Nevertheless, here goes. It will be interesting to me to look back at this list some years hence and compare and contrast it.
For mass consumers
The Millionaire Next Door - I give this as a gift to young people just starting out. Essentially, the authors interviewed thousands of wealthy people to find out how they got that way. The results aren't what many would think.
Eric Tyson's Financial Planning for Dummies. Nothing fancy, and I haven't read it in years. But well-presented, basic stuff to get you started.
For investing enthusiasts
The Intelligent Investor, by Benjamin Graham. Written in the 1970s. Get the updated version, edited by Jason Zweig, who illustrates Graham's timeless principles with recent examples.
Common Sense on Mutual Funds, by John C. Bogle. The founder of the Vanguard group, and the guy who brought index funds to the world, fills you in on why mutual funds, in the aggregate, must fail to beat their indexes over time by the amount of their costs. The solution: Cut expenses, using index funds! For years I was a dedicated Boglehead. Not so much now... I can see a place for active management and active manager selection, and I've written as much here on this blog from time to time. But I think before playing the active game, I think everyone should first have a firm grasp of the beauty and logic of passive management.
A Random Walk Down Wall Street - by Burton Malkiel. An efficient markets guy, Malkiel continues Bogle's thesis and introduces you to the math and logic behind it.
The Superinvestors of Graham and Doddsville. Not a book, but a speech by Warren Buffett.
The Warren Buffett Way - by Robert C. Hagstrom. There are a lot of books on Buffett, and I've actually read most of them. Short of plowing your way through Security Analysis (see below) and the Chairman's Letters from Berkshire Hathaway themselves, this one is the best I've seen at actually cracking open the fundamentals of the companies that Buffett has chosen in the past (note: in the past), and exploring why Buffett may have selected them. The others are much better at portraying Buffett's character. But for the individual who's asking himself "well, how do I actually apply these ideas?" Hagstrom does a pretty good job, I'd say.
For advanced readers and people with a serious interest in finance and economics (but not serious enough to read the trade journals)
Security Analysis, by Benjamin Graham and Chris Dodd. 1934 edition. It takes discipline to read, but it's pure gold. A great next step after reading The Intelligent Investor. Learn about the investing approach that made Warren Buffett famous and many others wealthy. The Internet bubble, technology, the mortgage crisis, junk bonds...Graham and Dodd forsaw everything in 1934 and described it to a T. Brilliant. Drop the cash and keep it on your book shelf. The Intelligent Investor also belongs in this list. Just because it's relatively accessible doesn't mean it isn't brilliant!
The Intelligent Asset Allocator. William Bernstein. Explores the math behind diversification! Surf the efficient frontier by mixing asset classes with low correlation coefficients. Is there a such thing as a "free lunch" after all?
The New Financial Order, by Robert Shiller. Rather than investing, Shiller places his focus on risk management - and completely turned around my thinking from an investment/mutual funds focused writer to an insurance and risk management focus. Shiller explores ways that the individual and family and small business, with next to no capacity to absorb financial and economic shocks without disaster, can transfer risk to the capital markets, which can absorb those risks.
People I would NOT recommend: Kiyosaki. Dave Ramsey for anything other than people on a debt reduction plan and budgeting advice. Suze Ormond, for serious thinkers, though I have gifted her book to young women just starting out, on the theory that the mediocre book that gets read is better than the perfect book that doesn't.
My favorite columnists:
Jason Zweig, Jean Chatsky, Eric Joffe, and Sandra Block. Mark Hulbert. Alan Ableson. Stanley Bing is very good. Greg Carlson at Morningstar (a good friend, former colleague, and straight up guy - and a devoted mutual fund analyst.) And Nancy Opiela at the Journal of Financial Planning.
Hope this helps get you started!
Splash, out
Jason
I'm always afraid to post this list publicly, because as my own understanding evolves, my list of favorites changes, and some books that were my early favorites would not make the list now.
Nevertheless, here goes. It will be interesting to me to look back at this list some years hence and compare and contrast it.
For mass consumers
The Millionaire Next Door - I give this as a gift to young people just starting out. Essentially, the authors interviewed thousands of wealthy people to find out how they got that way. The results aren't what many would think.
Eric Tyson's Financial Planning for Dummies. Nothing fancy, and I haven't read it in years. But well-presented, basic stuff to get you started.
For investing enthusiasts
The Intelligent Investor, by Benjamin Graham. Written in the 1970s. Get the updated version, edited by Jason Zweig, who illustrates Graham's timeless principles with recent examples.
Common Sense on Mutual Funds, by John C. Bogle. The founder of the Vanguard group, and the guy who brought index funds to the world, fills you in on why mutual funds, in the aggregate, must fail to beat their indexes over time by the amount of their costs. The solution: Cut expenses, using index funds! For years I was a dedicated Boglehead. Not so much now... I can see a place for active management and active manager selection, and I've written as much here on this blog from time to time. But I think before playing the active game, I think everyone should first have a firm grasp of the beauty and logic of passive management.
A Random Walk Down Wall Street - by Burton Malkiel. An efficient markets guy, Malkiel continues Bogle's thesis and introduces you to the math and logic behind it.
The Superinvestors of Graham and Doddsville. Not a book, but a speech by Warren Buffett.
The Warren Buffett Way - by Robert C. Hagstrom. There are a lot of books on Buffett, and I've actually read most of them. Short of plowing your way through Security Analysis (see below) and the Chairman's Letters from Berkshire Hathaway themselves, this one is the best I've seen at actually cracking open the fundamentals of the companies that Buffett has chosen in the past (note: in the past), and exploring why Buffett may have selected them. The others are much better at portraying Buffett's character. But for the individual who's asking himself "well, how do I actually apply these ideas?" Hagstrom does a pretty good job, I'd say.
For advanced readers and people with a serious interest in finance and economics (but not serious enough to read the trade journals)
Security Analysis, by Benjamin Graham and Chris Dodd. 1934 edition. It takes discipline to read, but it's pure gold. A great next step after reading The Intelligent Investor. Learn about the investing approach that made Warren Buffett famous and many others wealthy. The Internet bubble, technology, the mortgage crisis, junk bonds...Graham and Dodd forsaw everything in 1934 and described it to a T. Brilliant. Drop the cash and keep it on your book shelf. The Intelligent Investor also belongs in this list. Just because it's relatively accessible doesn't mean it isn't brilliant!
The Intelligent Asset Allocator. William Bernstein. Explores the math behind diversification! Surf the efficient frontier by mixing asset classes with low correlation coefficients. Is there a such thing as a "free lunch" after all?
The New Financial Order, by Robert Shiller. Rather than investing, Shiller places his focus on risk management - and completely turned around my thinking from an investment/mutual funds focused writer to an insurance and risk management focus. Shiller explores ways that the individual and family and small business, with next to no capacity to absorb financial and economic shocks without disaster, can transfer risk to the capital markets, which can absorb those risks.
People I would NOT recommend: Kiyosaki. Dave Ramsey for anything other than people on a debt reduction plan and budgeting advice. Suze Ormond, for serious thinkers, though I have gifted her book to young women just starting out, on the theory that the mediocre book that gets read is better than the perfect book that doesn't.
My favorite columnists:
Jason Zweig, Jean Chatsky, Eric Joffe, and Sandra Block. Mark Hulbert. Alan Ableson. Stanley Bing is very good. Greg Carlson at Morningstar (a good friend, former colleague, and straight up guy - and a devoted mutual fund analyst.) And Nancy Opiela at the Journal of Financial Planning.
Hope this helps get you started!
Splash, out
Jason
Labels: Books, investing, money
Tuesday, June 03, 2008
So I quit my job last week.
Ha ha ha ha ha. HA HA HA HA HA HA.
No, seriously... it's time for a change. I was doing marketing writing, business development, media planning, and wearing a bunch of hats in a small agency.
I find myself hurtling headlong however toward the financial services industry once again. (Longtime readers will recall that Edward Jones, a national brokerage firm and I were playing serious footsie a while ago).
Well, after a brief 2 year detour back in the marketing/PR industry I'm very pleased to be the newest as-yet-unlicensed garden variety door-knocker for New York Life.
Why?
Well, let's boil that question down some:
Why financial services?
Well, thinking ahead a few years, I expect to become, by default, the primary support for my mother, who has already had a broken hip, and has no savings of her own. Looking ahead a decade or two (and hopefully longer than that!) her retirement and elderly care is very much on my mind. Meanwhile, I need to be able to get ahead. But in South Florida, it is very difficult to do on one income. Single family home prices are still out of reach of anything I'll be able to do working for someone else as a writer/PR account manager/media buyer or anything else I'm likely to do. I enjoy writing and I'm good at it, but in the long run, that is not going to accomplish my goals. I also realized last spring I wasn't going to be able to grow that particular business.
Furthermore, although I max out a Roth IRA each year and contribute 15% to a SIMPLE or 401(k) depending on where I am, it's not going to be enough to fund a retirement. Remember...interest rates are low, and outside of certain sectors, stocks are not a screaming bargain, either. Dividends are still a fraction of their historical averages. Long term trends are inflationary, I believe. And while there are still mutual fund hawkers out there telling people to expect 10% on their equities (I even heard a Primarica representative project 12% last month, I think they are on crack. I need to up my game, and so do a lot of other people.
Boiled down: People who WRITE about financial services make $X. People who actually DO it, successfully, over a career, make $Y.
Why insurance?
Because I can make a decent living and build a good practice as an insurance agent with regular working stiffs, and work my natural market of musicians (who need health and disability insurance, anyway.... Tendonitis and arthritis can be career enders!). On the investment side, the broker winds up making just a few cents for each dollar he brings in house (or even less), which forces them all to target the same richest 5% of the population.
Further, residual income is significant - and insurance compensation rewards long-term relationships. Further, because life insurance becomes more expensive with age, as time goes by, there is a substantial competitive moat built around your clients, as your insurance becomes impossible to replace for the same premium or less.
Moreover, I don't want to have to apologize to clients and friends for losing their money - which happens to every advisor, sooner or later. You wind up having to pull them out of investments at precisely the wrong time, or you lose them to some other idiot advisor who will put them in the HOT STOCK of the day or some other stupidity.
I can also work where my family is...in Hawai'i, California and/or Oregon, plus my own home here in Florida. I'd have the freedom to spend more time with my family. I HATE having to count vacation days. But I can build a business anywhere I'm licensed.
Lastly, because I honestly believe that most families are terribly underinsured, for a variety of risks, including disability and life. I am a huge fan of transferring risks which would be devastating to a family to the financial markets which can price them efficiently and take them as a matter of course. Reading Robert Shiller's The New Financial Order a few years ago convinced me of that.
So why New York Life?
A combination of things... I knew I wanted to represent a mutually-owned company, rather than a stock company, and I wanted nothing less than a AAA rating. That narrows the field substantially to just a few carriers.
I also wanted a company that I could grow with, with access to a lot of expert help. I didn't want to become an independent, because I don't want to reinvent the business wheel (even though short term commission payouts can be better). I also wanted a company that invests in a first-class training program. There's no end to the stuff you need to know, once you start wading into business succession and estate planning issues.
And finally, I wanted a strong office local to me where I could find some very solid people to learn the trade from. Put them all together, and it turns out New York Life and I were looking for each other.
Next stop: Seeing my family for a bit, and getting my license!
Splash, out
Jason
No, seriously... it's time for a change. I was doing marketing writing, business development, media planning, and wearing a bunch of hats in a small agency.
I find myself hurtling headlong however toward the financial services industry once again. (Longtime readers will recall that Edward Jones, a national brokerage firm and I were playing serious footsie a while ago).
Well, after a brief 2 year detour back in the marketing/PR industry I'm very pleased to be the newest as-yet-unlicensed garden variety door-knocker for New York Life.
Why?
Well, let's boil that question down some:
Why financial services?
Well, thinking ahead a few years, I expect to become, by default, the primary support for my mother, who has already had a broken hip, and has no savings of her own. Looking ahead a decade or two (and hopefully longer than that!) her retirement and elderly care is very much on my mind. Meanwhile, I need to be able to get ahead. But in South Florida, it is very difficult to do on one income. Single family home prices are still out of reach of anything I'll be able to do working for someone else as a writer/PR account manager/media buyer or anything else I'm likely to do. I enjoy writing and I'm good at it, but in the long run, that is not going to accomplish my goals. I also realized last spring I wasn't going to be able to grow that particular business.
Furthermore, although I max out a Roth IRA each year and contribute 15% to a SIMPLE or 401(k) depending on where I am, it's not going to be enough to fund a retirement. Remember...interest rates are low, and outside of certain sectors, stocks are not a screaming bargain, either. Dividends are still a fraction of their historical averages. Long term trends are inflationary, I believe. And while there are still mutual fund hawkers out there telling people to expect 10% on their equities (I even heard a Primarica representative project 12% last month, I think they are on crack. I need to up my game, and so do a lot of other people.
Boiled down: People who WRITE about financial services make $X. People who actually DO it, successfully, over a career, make $Y.
Why insurance?
Because I can make a decent living and build a good practice as an insurance agent with regular working stiffs, and work my natural market of musicians (who need health and disability insurance, anyway.... Tendonitis and arthritis can be career enders!). On the investment side, the broker winds up making just a few cents for each dollar he brings in house (or even less), which forces them all to target the same richest 5% of the population.
Further, residual income is significant - and insurance compensation rewards long-term relationships. Further, because life insurance becomes more expensive with age, as time goes by, there is a substantial competitive moat built around your clients, as your insurance becomes impossible to replace for the same premium or less.
Moreover, I don't want to have to apologize to clients and friends for losing their money - which happens to every advisor, sooner or later. You wind up having to pull them out of investments at precisely the wrong time, or you lose them to some other idiot advisor who will put them in the HOT STOCK of the day or some other stupidity.
I can also work where my family is...in Hawai'i, California and/or Oregon, plus my own home here in Florida. I'd have the freedom to spend more time with my family. I HATE having to count vacation days. But I can build a business anywhere I'm licensed.
Lastly, because I honestly believe that most families are terribly underinsured, for a variety of risks, including disability and life. I am a huge fan of transferring risks which would be devastating to a family to the financial markets which can price them efficiently and take them as a matter of course. Reading Robert Shiller's The New Financial Order a few years ago convinced me of that.
So why New York Life?
A combination of things... I knew I wanted to represent a mutually-owned company, rather than a stock company, and I wanted nothing less than a AAA rating. That narrows the field substantially to just a few carriers.
I also wanted a company that I could grow with, with access to a lot of expert help. I didn't want to become an independent, because I don't want to reinvent the business wheel (even though short term commission payouts can be better). I also wanted a company that invests in a first-class training program. There's no end to the stuff you need to know, once you start wading into business succession and estate planning issues.
And finally, I wanted a strong office local to me where I could find some very solid people to learn the trade from. Put them all together, and it turns out New York Life and I were looking for each other.
Next stop: Seeing my family for a bit, and getting my license!
Splash, out
Jason
Labels: investing, money, personal
Sunday, March 04, 2007
Mario Gabelli
Someone asked in a comment last week what I thought of investing with Mario Gabelli in a fund that pays a cash dividend of 10% per year in cash dividends, regardless of the performance of the underlying investment.
I don't like it. Let me count the ways.
1.) It's gimmicky. I don't like that right off the bat.
2.) If asset prices fall, but Gabelli hasn't sold them off, then they'd better be buying opportunities. If Gabelli still believes in his assets, then why would he promise a cash dividend of 10%? Wouldn't investors be better off taking that dividend and buying more? Of course, investors can do that themselves in this fund. But not before getting bitch-slapped with capital gains taxes on that portion of the check that represents return of capital. It's a tax efficiency nightmare. If you're gonna do it, you'd better do it in an IRA.
3.) Gabelli's expense ratios are too high.
4.) As a fund manager, Gabelli has a ton of conflicts. Mutual fund managers should not be allowed to run hedge funds. What will happen is that the more lucrative hedge fund accounts will front-run the mutual fund transactions, harming mutual fund investors while the hedge fund investors get a free ride -- and Mario gets 20% of that gain.
5.) Gabelli, last I checked, runs a public company, Lynch Interactive, for which he takes a salary of over a million bucks a year. I assume if he's taking in that kind of cash, he's got to show up for work once in a while. That's time NOT spent looking after his mutual funds. I don't care how good a stock picker he is - he's not so good he can compensate for moonlighting AND Mario-type expense ratios.
6.) He's been involved in some ethics flaps lately. I don't send money to people I don't trust. I trust Buffett. I trust Bogle and the firm he created, Vanguard. I trust TIAA-CREF. I trust American Funds (mostly) and Longleaf Partners. I trust DFA and Bob Rodriguez at First Pacific Advisors. I trust Peter Lynch, but he doesn't run money anymore, to my knowledge. I trust Bill Gross at PIMCO but not PIMCO. I trust Harbor Bond, though. For expensive active managers I trust Bill Miller at Legg Mason. I trust the gang at T. Rowe Price.
There are lots of good companies out there. There are too many other good options for me to look too closely at Gabelli.
7.) The only way to reliably ensure that this fund can continue to generate a 10% per annum div is to grow the fund. I don't expect 10% out of any asset classes out there today. Too pyramid-like.
That's my take.
If income is important, how about a nice bond ladder, juiced with a couple of income properties - starter homes in decent neighborhoods in low-priced areas (away from the coasts!) I'm not a big fan of preferred stocks, generally, but if you believe the Fed will ease interest rates later this year, they might make some sense.
Splash, out
Jason
I don't like it. Let me count the ways.
1.) It's gimmicky. I don't like that right off the bat.
2.) If asset prices fall, but Gabelli hasn't sold them off, then they'd better be buying opportunities. If Gabelli still believes in his assets, then why would he promise a cash dividend of 10%? Wouldn't investors be better off taking that dividend and buying more? Of course, investors can do that themselves in this fund. But not before getting bitch-slapped with capital gains taxes on that portion of the check that represents return of capital. It's a tax efficiency nightmare. If you're gonna do it, you'd better do it in an IRA.
3.) Gabelli's expense ratios are too high.
4.) As a fund manager, Gabelli has a ton of conflicts. Mutual fund managers should not be allowed to run hedge funds. What will happen is that the more lucrative hedge fund accounts will front-run the mutual fund transactions, harming mutual fund investors while the hedge fund investors get a free ride -- and Mario gets 20% of that gain.
5.) Gabelli, last I checked, runs a public company, Lynch Interactive, for which he takes a salary of over a million bucks a year. I assume if he's taking in that kind of cash, he's got to show up for work once in a while. That's time NOT spent looking after his mutual funds. I don't care how good a stock picker he is - he's not so good he can compensate for moonlighting AND Mario-type expense ratios.
6.) He's been involved in some ethics flaps lately. I don't send money to people I don't trust. I trust Buffett. I trust Bogle and the firm he created, Vanguard. I trust TIAA-CREF. I trust American Funds (mostly) and Longleaf Partners. I trust DFA and Bob Rodriguez at First Pacific Advisors. I trust Peter Lynch, but he doesn't run money anymore, to my knowledge. I trust Bill Gross at PIMCO but not PIMCO. I trust Harbor Bond, though. For expensive active managers I trust Bill Miller at Legg Mason. I trust the gang at T. Rowe Price.
There are lots of good companies out there. There are too many other good options for me to look too closely at Gabelli.
7.) The only way to reliably ensure that this fund can continue to generate a 10% per annum div is to grow the fund. I don't expect 10% out of any asset classes out there today. Too pyramid-like.
That's my take.
If income is important, how about a nice bond ladder, juiced with a couple of income properties - starter homes in decent neighborhoods in low-priced areas (away from the coasts!) I'm not a big fan of preferred stocks, generally, but if you believe the Fed will ease interest rates later this year, they might make some sense.
Splash, out
Jason
Saturday, March 03, 2007
The stock market
This week's correction didn't come as a huge surprise for me. Over the past few months, I had been thinking that equities had gotten ahead of themselves. Yes, I think the economy's on pretty good footing. The problem is that when the whole universe of investors thinks the economy's on pretty good footing, they bid stocks up to prices that can only be sustained when the economy's on GREAT footing.
So here's what I wrote on December 22nd:
No, I did not buy bonds. Indeed, I had redeemed some short-term bonds I had bought through a Vanguard fund at the end of the year in order to harvest some tax losses (which I can write off against ordinary income, so long as I didn't buy the same thing back within 30 days).
Actually, I didn't have any brilliant ideas on where to go with new investment money. Bond yields are not terribly attractive to me right now, although short-term yields are improving (which was why I could redeem some of them at a loss, alas).
Oil and gas seems awash in dumb money. Still some dumb money running around in real estate, though it's better than it was.
My own money is still mostly indexed, all long equities (I will be snapping up some bonds very soon just a bit, because I don't want to be THIS long on equities), and with a substantial tilt towards value approaches.
I had managed to sidestep the most severe pummelings, but still lost a few points overall - just less than the S&P 500 lost, and certainly less than I would have lost had I stayed as long in international stocks as I had been.
In other news, I've been reading Benjamin Graham's "The Intelligent Investor" lately.
I am suspicious of investing guru books, because the vast majority of them suck ass. But if you do read one, read the updated edition, with the commentary by Jason Zweig.
The prose is a bit dry and understated, but the ideas are incisive and brilliant.
I like general personal finance books a little bit better - they provide useful information on tax vehicles and retirement planning and college planning, that's a separate issue from security and fund selection.
In my opinion, most lay investors should confine themselves to just a few books on investing:
The Intelligent Investor, by Benjamin Graham
Intelligent Asset Allocation, by William Bernstein
Common Sense on Mutual Funds, by John C. Bogle (whom I've actually met. Good man.)
A Random Walk Down Wall Street, by Burton Malkiel.
ONLY THEN would I consider someone in a position to reasonably assess the spate of investment books written by people like Jim Cramer (whom I like but wouldn't invest with), Laura Langemeier, Robert Kiyosaki, etc.
Indeed, I think Langemeier's a twit who's confused brains with a bull market in Oil and Gas and real estate.
Case in point -- I flipped open her book the other day and read a passage on how Roth IRAs let you invest money tax deferred. No they don't. Money in a Roth IRA has already been taxed!!!!
(Not true for deployed servicemen and women. If you get the chance to invest in an IRA with tax-free combat zone money, you have reached the acme of investing. Nirvana, baby!!!)
By the way, if anyone has any tales of investment advisors putting deployed servicemen into traditional IRAs rather than Roths, I'd love to hear the specifics!
Splash, out
Jason
So here's what I wrote on December 22nd:
...The expansion seems to be getting a little long in the tooth. I'm not bearish, but I think the economy will not continue to expand at the pace it has. I have moved some money from the Vanguard Total Stock Market index into a large-cap growth and income fund -- effectively selling a modest number of small- and mid-caps, which are more sensitive to slowing economies, as well as selling a few no-dividend large-cap growth stocks.
The bet I'm effectively making is that if the economy slows, dividends will play a comparatively greater role in future returns - as compared to earnings growth - than they had previously.
I'm also building a small margin of safety, as I see potential short-term losses in equities as greater than my expectations for economic growth this year.
P/E's seem fairly reasonable to me, still. Not cheap, but not psycho crazy, either.
Fair weather ahead, with a few scattered squalls.
Unloaded some REIT ballast, with foreclosures peaking up in key markets.
Trimming sails slightly.
I'd enjoy hearing your best guesses.
My track record, like most, is mixed. I called the boom in emerging stocks accurately and rode it with real money in 2003 and 2004. But I left emerging markets too soon, and left a lot of gains on the table.
Lightened up on small-caps a year too soon as well, and counting. But I'd rather be too cautious than too crazy.
No, I did not buy bonds. Indeed, I had redeemed some short-term bonds I had bought through a Vanguard fund at the end of the year in order to harvest some tax losses (which I can write off against ordinary income, so long as I didn't buy the same thing back within 30 days).
Actually, I didn't have any brilliant ideas on where to go with new investment money. Bond yields are not terribly attractive to me right now, although short-term yields are improving (which was why I could redeem some of them at a loss, alas).
Oil and gas seems awash in dumb money. Still some dumb money running around in real estate, though it's better than it was.
My own money is still mostly indexed, all long equities (I will be snapping up some bonds very soon just a bit, because I don't want to be THIS long on equities), and with a substantial tilt towards value approaches.
I had managed to sidestep the most severe pummelings, but still lost a few points overall - just less than the S&P 500 lost, and certainly less than I would have lost had I stayed as long in international stocks as I had been.
In other news, I've been reading Benjamin Graham's "The Intelligent Investor" lately.
I am suspicious of investing guru books, because the vast majority of them suck ass. But if you do read one, read the updated edition, with the commentary by Jason Zweig.
The prose is a bit dry and understated, but the ideas are incisive and brilliant.
I like general personal finance books a little bit better - they provide useful information on tax vehicles and retirement planning and college planning, that's a separate issue from security and fund selection.
In my opinion, most lay investors should confine themselves to just a few books on investing:
The Intelligent Investor, by Benjamin Graham
Intelligent Asset Allocation, by William Bernstein
Common Sense on Mutual Funds, by John C. Bogle (whom I've actually met. Good man.)
A Random Walk Down Wall Street, by Burton Malkiel.
ONLY THEN would I consider someone in a position to reasonably assess the spate of investment books written by people like Jim Cramer (whom I like but wouldn't invest with), Laura Langemeier, Robert Kiyosaki, etc.
Indeed, I think Langemeier's a twit who's confused brains with a bull market in Oil and Gas and real estate.
Case in point -- I flipped open her book the other day and read a passage on how Roth IRAs let you invest money tax deferred. No they don't. Money in a Roth IRA has already been taxed!!!!
(Not true for deployed servicemen and women. If you get the chance to invest in an IRA with tax-free combat zone money, you have reached the acme of investing. Nirvana, baby!!!)
By the way, if anyone has any tales of investment advisors putting deployed servicemen into traditional IRAs rather than Roths, I'd love to hear the specifics!
Splash, out
Jason
Labels: investing, money, personal
