Archive for January, 2010

Where Is the Market Headed?

Friday, January 29th, 2010

The exact date and location of America’s first cocktail party is lost in the mists of time, but we know what the main topic of conversation was. “Where is the market headed?” ranks with weather and sports as one of the three conversational mainstays. Notwithstanding all the effort and attention paid to it, the level of forecasting expertise is no higher for the stock market than for the other two.
You Can’t Beat the Market
The world’s leading portfolio managers are unable to consistently forecast the prices of individual stocks well enough to “beat the market” – that is, compile a rate [...]

Practical Tips for Retirement

Sunday, January 24th, 2010

The operative word in the title is “practical.” This discussion won’t try to prophesy how much you’ll need to save in order to live comfortably in retirement. (Who knows?) It won’t be an essay on which investment vehicles you should or shouldn’t select when saving for retirement.
It will dispense some casual but sound advice
Take charge of the things you can control…
Nobody is going to provide for your retirement if you don’t do it. You control your budget and your spending pattern. You preside over your investments, and have the power to adjust the allocation of assets as needed. (Studies suggest [...]

Home Ownership: Retirement Nest Egg?

Friday, January 15th, 2010

For years, conventional wisdom – no, let’s call it conventional thinking – held that owning your own home was the best investment you could make. As it happens, that belief was partly based on misunderstanding.
Now the market for residential real estate is in shambles throughout large sections of the country. Commercial real estate is not much better off. We are continually assured that prosperity is just around the corner, but every time we reach the corner we find that the data on prices or new construction have worsened. This must mean that home ownership is a lousy investment for retirement [...]

How Is a Variable Annuity Like a Bumblebee?

Monday, January 11th, 2010

The answer is: Both are not optimally designed for their primary activity.
Bumblebees fly, but their aerodynamic characteristics make aviation engineers shudder. Variable annuities are investment vehicles, but their packaging and operation – what we might call their investment-design characteristics – make radio and Internet commentators shudder with horror.
We aren’t called upon to vote on the existence of the bumblebee. We are, however, expected to vote with our portfolio allocations on the desirability of variable annuities. How should their ungainly structure and visible imperfections affect our vote?
“I Think That I Shall Never See… Fair Variable Annuity”
A variable annuity is an investment [...]

Are Consumers Rational?

Wednesday, January 6th, 2010

The financial crisis of 2008 had numerous repercussions, many of which are still percussing. Perhaps the most profound was the shaken faith in the efficacy of markets.
This complaint is not new. It origin goes at least as far back as the 19th century. How much of it is true?
What Happened to the Irrational Housing Consumers?
As a preface to the answer, consider this bit of news. Bloomberg Financial News Service reports that home mortgage applications fell during the first week in November to their lowest level in nearly 9 years. Why? Because Congress was considering a bill that would extend a [...]