Archive for April, 2010

“In Fed We Trust” Inspires No Trust

Sunday, April 25th, 2010

David Wessel is the Economics Editor of The Wall Street Journal. This is the most successful newspaper in the U.S. It is the leading financial publication in the world. Economics is to the Journal as algebra is to mathematics. And David Wessel is THE Economics Editor.
 That fact is at least as terrifying and depressing as his account of the financial crisis.
 AIG as “Casino”
Mr. Wessel has recently made the rounds of talk shows promoting his story of how the Federal Reserve and Chairman Ben Bernanke saved the world from the next Great Depression. In Fed We Trust is subtitled “Ben Bernanke’s [...]

The Best Possible Result, or the Best Result Possible?

Sunday, April 18th, 2010

The British bridge expert, S. J. Simon, drew a distinction that is just as valuable to investors as it is to bridge players. Simon criticized players who sought to achieve the “best possible result” on every hand. This was too unrealistic, he contended; they should strive instead for the “best result possible” under the circumstances. Now is the season for reviewing last year’s market results and looking ahead to this year. That makes it the ideal time to recall Simon’s dictum.
 Simon’s “best possible result” (BPR) corresponds to what economists would call a global optimum. It is analogous to the highest [...]

Managing Retirement Withdrawals

Friday, April 2nd, 2010

Retirement finance has an accumulation stage and a decumulation stage. Accumulation gestates, hatches, and cooks your retirement nest egg; decumulation allows you to eat it. Accumulation commands the lion’s share of attention in popular finance, but decumulation, or distribution, is equally important. Understanding how to disburse wealth is just as important as understanding how to build it.
 The Basic Problem
On retirement day, you possess a store of wealth built up throughout your working life. Stretched out before you is the rest of your life, of uncertain duration. You want to withdraw a sufficient quantity of wealth to finance a comfortable lifestyle, [...]