This is a Bob Brinker Fan Club and Critic Club. We join the Starship Moneytalk each Sunday on our way to Marketimer's Land of Critical Mass. We will post brief commentary about Bob Brinker's Moneytalk.
Sunday, September 2, 2018
September 2, 2018, Bob Brinker's Moneytalk Rerun Monologues and Calls
September 2, 2018....Bob Brinker's Moneytalk Rerun Monologues and Calls...…(comments welcome)
There's an interesting back-and-forth over at M* on the Brinker thread. "Gerry" vs. "Jerry".
"Gerry" sounds like a thoughtful guy who has some experience with copyright issues. He's a firm believer in "fair use", and has given several useful examples.
"Jerry" is a blowhard who continues to wonder if Honeybee has gotten Brinker's permission for the occasional quotation from Brinker. He's rude, obnoxious, and vaguely threatening.
. Stinky....If you should feel so inclined to say something for me over there to those Brinker's-and bots, please tell them that I suggested that they go do something anatomically impossible to themselves.
Oh, and leave me the heck alone before I decide to see if Morningstar allows threats and harassment of private citizens on their site.
. Please note: I do not publish - or even read - any comments that come without a fully recognizable-to-me name typed in the "name" link.
That means, if all I see is the word anonymous, or some Mickey Mouse creation that wouldn't fool my pet rat, don't waste your time. They go directly to my red-hot Trash Bin.
The Brinkster is yet again defrauding his audience as Honeybee says these calls are recycled with no mention of it to his loyal listeners. Brink keeps talking about “model 3” so can someone let us undeserving, unwashed non subscribing Market Timer folks know what is in this model? Thank you. Jack
. Jack....Any calls that happened today, have happened on prior live shows.
At the time of live shows, I cover whatever I feel is most interesting, educational and informative for listeners.
You are welcome to search back through my program summaries and see if you can find the info you want.
Since I don't sell my summaries like Brinker sells Moneytalk on demand or Marketimer, I do not try to make people think they are getting new information when they are being deceived.
Bob Brinker's Moneytalk Rerun Monologues and Calls"
And poor advice. I only listened for a few minutes in the parking lot at the grocery store, but I heard Brinker fail when it came to explaining what an etf index is, apparently it escapes him that many etfs are very narrowly focused. Once again a case where he dispenses generalized advice without qualifiers that could harm the uninitiated that apparently is the preponderance of people who listen to him.
Really appreciated Bob's opening commentary -- rerun or not -- regarding average P/E ratios of the S&P. This is the type of education the average DIY investor needs.
I think I saw him!! He was driving the Prius south on Interstate 15 toward the heli-pads at Maverick Tours near Jean. Just guessing he intended to take an elevated tour of the great Grand Canyon as so many Vegas visitors do.
Or maybe he was chasing his golf ball. Heard a rumor he was playing the Henderson International Championship Par-3 Invitationals. The first fairway has a wicked dog leg to the right so if you don't choke-up a ton and drag your right hip alot, "You're on the freeway."
But that's just play, so let's talk business. If I was him, I'd do the same thing and here's why. With him being the primary sponsor of the show, which means he's keeping it on the air by forking over whatever it takes, then he is paying himself to work.
So, you can probably see the opportunity to malinger. Like I tell my wife, when he wants to call in sick he just calls himself and makes up a dramatic flu story, cough cough.
But really, if he's paying the radio freight and doesn't care about the listener ratings, then he can broadcast 3 hours of dog whistles if he wants to. Follow the money.
You're right that a discussion of P/E ratios is interesting information.
But the pregnant question that every listener to the 9/2 show should have been asking is "What are the P/E ratios today? How do they compare to the historic averages?"
And Bob couldn't answer the question about today's P/E ratios because HE WASN'T LIVE. He wasn't in the studio to take any calls, answer any questions, or give any current commentary.
Really appreciated Bob's opening commentary -- rerun or not -- regarding average P/E ratios of the S&P. This is the type of education the average DIY investor needs. Why is it relevant?
I pay zero attention to PEs, but then, I make no effort to time the market so they're pretty meaningless to me.
Exactly why I asked the relevance. Market timing amounts to a failed theory that Brinker has shown no ability to be able to do, nor has anyone else demonstrated the ability publicly. It amazes me that this myth persists, especially by anyone reading this forum. There is far more support for the existence of Bigfoot than support for market timing. Seriously.
Brinker has a horrendous track record and he is at the top of the heap (of _ _ _ _) in terms of market timers. He simply is another one hit wonder like Elaine Garzarelli, only he has held the limelight longer via his duplicity.
Why anyone believes this clown can time the market is beyond me. Just look at his recent history, how did his bond market timing work out for folks? How about his exit from the NASDAQ? Ho about that poor lady who use to post here earlier this year who wanted and need to invest in the stockmarket but was scared out of it by Brinker's looking for a retest nonsense? No one knows what will happen and anyone who tells you they do is lying.
I get why people believe in ghosts, fairies, that government is here to help you, and other assorted nonsense, but cripes there is not shred of evidence anyone can successfully time the stock market except through random chance.
I didn't find Bob's P/E helpful. Just enough info to muddy up investment thinking.
After half a dozen interesting financial articles this morning, I started to think this stock market gamble is all about avoiding emotions. This emotion thing is very similar to Los Vegas gambling. Greed to fear. Interesting that fear is the greater emotion for most. We follow trends with investments then decide to analyze data in some attempt to minimize risk, then jump to emotions. Experts say to develop a safe harbor plan with investments. Then follow the plan during the eventual downturn. Our returns happen to quick and unpredictable to time. Double that with drawdowns. We fear loss more than enjoy gain. To avoid emotional damage to portfolio management, financial experts suggest investors to place more capital in safe investments. The advantage of such is to merely keep us out of emotional decision making. It's not to maximise our return. Meaning over a century of data, stock market investments have handily beat income returns. However, if we invest totally in stocks as Buffet suggest we run the risk of loss and time to recover to previous worth. Couldn't we jump back and forth per market timing. High P/E ratio, investor newsletters, listening to financial news or news in general? That doesn't work as we slowly increase investor competence and come to understand the danger of such action. Notice that many are making a living on investor money attempting to persuade you differently.
Well, how on earth could or should one invest? My guess after all the analysis, for the common investor, given the need to avoid being exploited by experts, is to simply invest in the whole market. Best if you cut back on spending (retired) on a downturn.
Simply holding investments for example, VTI and never looking back would accomplish more over time than most all strategies. It's can't be that easy? If so, the best financial advice may be out of the portfolio management and within personal finance. Meaning the support structure of finance is to have created a cost of living that would allow one to flex ones expenditures during stock market downturns. Could this be more important than bonds?
The current P/E of the S&P is 16.8. This is above the past 5 and 10 year averages but not extremely high. Brinker has said the market can trade well above historical P/E's during bull runs. Nowhere close to year 2000 P/E's.
tfb: Agree with all your points about market timing.
Trees: Standard boiler-plate stuff for long-term investing: Get an AA that fits your goals, fits your risk tolerance, and is appropriate for your age. Buy a total stock index; don't get caught up buying and attempting to market time the latest "hot" sectors. As you get older, reduce stocks and increase bonds/cash. Don't overthink it.
When you are at retirement age, you should have enough cash and short-term bonds/funds or CDs to last you several years. There is tons of info on this in books or online.
If (when) stocks tank, let them run. Even in a crisis you won't need them for several years. You will still own all the assets, (same amount of shares) but of course the asset price will drop in a bear. It's easy to say, but you have to ignore the red numbers you see.
If (when) stocks tank, let them run. Even in a crisis you won't need them for several years. You will still own all the assets, (same amount of shares) but of course the asset price will drop in a bear. It's easy to say, but you have to ignore the red numbers you see.
My comment:
This is a excellent point, 5 stars, accolades, naming of my first child etc, etc.
One point, what Bluce did not say in that paragraph but did state in one of the preceding ones is that by stocks he means stock index funds. The difference being a stock or group small group of stock may tank and not recover or go out of business in a recession or bear market but a broad based index will not. There is always the potential for a broad based index to recover, with one or more stocks they can go to and stay at zero.
So then, the wisdom of his approach becomes apparent, your mission is to either have enough non-equity assets to weather any probable downturns or you have to have a large enough portfolio, such that, even a 50% cut in dividends will be able to service your income needs. They both work to the same end, which is, not having to sell your equities in a downturn in the equity markets to fund your day to day expenses.
Do this and there is no need to engage in the hazardous risk that is the Tom-foolery known as market timing.
tfb: You are humbling! But it's just stuff I gleaned from years of reading the right material. That means: NOT reading books written by fortune-tellers, forecasters, market timers, and other assorted "get rich quick" gurus.
Last week Warren Buffett had his 88th birthday, and he said: "....OVER TIME, A BUNCH OF BUSINESSES THAT ARE EARNING HIGH RETURNS ON CAPITAL ARE GOING TO BEAT A BOND THAT'S FIXED AT ROUGHLY 3% FOR 30 YEARS"
Basically saying that over long periods of time, stocks are going to beat bonds...
and in May 2018 at his annual Berkshire Hathaway shareholders meeting, he said:
"Bonds are a terrible investment at anywhere near current yields.” He continued, “The only time bonds were interesting was in the early to mid-1980’s"
Bluce, just curious why you have chosen such a low percentage allocation to stocks.
If you'd rather answer privately, my email is rjb112@gmail.com
Bluce agree with advice. Here is an interesting comparison. VFIAX as we know a good comparison for general stock market and has a long history. VWELX albeit a mutual fund has a long history, too. Comparing the two from '85, and '95 to present day shows Wellington bested the S&P 500. Only when cutting the duration to '05 to present does the S&P 500 finally beat Wellington and only the last few years.
I'm thinking the historical bull market we have just experienced has screwed up our evaluation of funds since most only go out ten years. We need to review historical returns and truncate a good portion of this current bull market to get a realistic evaluation of how a fund did over time. Maybe stop in 2016.
Here is the kicker. VWELX is a balanced fund with 70:30 holdings. It experienced less volatility. Bogleheads are amazed that the fund has performance of a 80:20 fund but stability of 60:40 or something close to those numbers. Bogleheads always advise to go with index funds low load and general market. They especially like the three fund portfolio of U.S. stock market, Bond, and foreign stock market. BHs have a group effort on spreadsheet that attempts to put thirty year history to most popular funds and portfolios. You know the 60:40 and over a dozen more. It's interesting as they have a bunch of measures of performance. Also, since some of these investments weren't available back then they attempt use like kind to keep it real as possible and yet get some sort of performance data. Gold for example. Interesting the calcs do formulate perpetual withdrawal rate and safe withdrawal rate for retirees. Their calcs quite a bit different than what we read from financial advisors. I believe the spreadsheet data. Wellington was a top performer. Wellesley was one half percentage less. I've read Vanguard Target date funds will become very popular, but the funds haven't proven themselves IMHO. Funny, I read investment advice for retirees. Some claim just put your money in VWELX and forget it. Job done.
byw- what tfb was commenting. Can you imagine a more potent investment strategy then to go 50% bond upon some timing event such as high p/e ratio time periods. We all have read these periods will produce lower than expected returns at higher risk. This is not the BB or normal timing advice we hear to stay away from, but stock allocation changes that I do read as good advice to weather a possible drawdown. So, what's the catch per tfb? If you set yourself up to not need investment in a downturn. To have the ability to change lifestyle. Meaning go for walks instead of international travel. Cook interesting meals at home instead of fine dining. Maybe grow a garden and utilize more firewood for heat. Camping instead of expensive rentals. If that is the case, you could or should flip the bond funds to stocks at some predetermined point. Haven't you read that the real money is earned upon a down turn? We are advised to buy bonds to have money during a downturn, a good thing, but it does lower the rate of return if having a perpetual bond fund. I'm thinking the best aspect of non correlated to stock investment is to utilise it as a store of wealth. Sure rebalancing magic has some of this, but what if you had rebalancing on steroids? Don't be greedy and attempt to hold all stocks in high p/e time periods nor to wait until establishing the bottom. That would be impossible timing were all advised to avoid like the plague. Instead buy stock on drawdown. Best to have a game plan such as spend 25% of bonds upon 10% stock drop. Maybe spend 50% of what is left on 20% drop and all in over 30%. Maybe go 50% bonds at 20 p/e ratio with ability to change that with growing concern of business environment.
Actually, since quality stocks are safer it may be o.k to invest in broad spectrum of sector leaders with this approach. Apple has so much money people rate it safe. Goggle and Amazon will have such leadership roles and head start advantage it will take a long time of screwups (GE) to lose faith within the investment world. Meaning the community would jump at chance if these companies had a downturn. Not so much GE. You see how having a safe harbor low cost of living, if SHTF, empowers the value to take risk and make better decisions. I don't read any financial advisors offering this advice. This advise would hurt their business that relies on investor and retiree fear. Their ads only show beautiful people sailing and looking lustfully at each other.
Robert asked:Bluce, just curious why you have chosen such a low percentage allocation to stocks.
1) I don't think I said what my AA was, however it is around 40/60. Reason: I'm 68 and that is appropriate for my age and circumstance.
2) I have the asset base I need to retire on, so I don't need any more growth except to keep up with inflation -- which the 40% stock allocation should provide.
There are long term, boiler-plate universal recommendations, from numerous scholars who have picked the subject apart and wrote about the results. There is no magic, no arcane formulas, no miracles, EXCEPT for the power of long-term compounding.
From memory: When young and in the accumulation phase, have 80-90+% in stocks, tailored to your personal risk level. That means ALL stocks (a total index) not a selected few -- or even a few sectors -- that you "think" should do well. If you do the latter, the odds are that you will often find yourself being in the wrong spot at the wrong time. Trying to hit a moving target, as it were.
As you grow older, starting maybe 10 years from expected retirement age (depending on your risk tolerance) shift gradually from equities into more bond holdings for stabilization and capital preservation.
Having to start retirement, which may be forced for health or other reasons, at the beginning of a stock bear with most of your holdings in stock could wipe you out because you would be forced to sell assets at greatly reduced prices. That would be "buying high and selling low," hardly a great formula for success.
Bluce- The three fund is a good all purpose/weather fund. Taylor Larimore is referred to in this preferred portfolio as the founder. The portfolio has a range of percentages in each fund. The diversification will improve returns and lower volatility. I do have 30 year history of his 50% total market, 30% international market, and 20% total bond portfolio. Not that the portfolio was active or the funds available for this time period, but data that is a good replica. This is not my work, but Bogleheads. CAGR 7.21%. Wellington did beat the three fund 7.84%. It was interesting that Wellington had less volatility with ensuing better withdrawal rate. The three fund did better on cash out. This is because you can take money not on a schedule but when stocks or bonds doing best.
Notice, that within the three fund there is a range of percentages. What's to say you could juice up your returns by playing within these percentages? Again, this is not exactly stock market timing as BB Market Timer is spoofing. Investor advice often will go to increasing percentage of bonds in risky times as a rational decision to minimise drawdown loss. They do adjust allocations.
Everyone is advising bond owners to reset their expectations of return. The 1981-2016 time period was a bull market for bonds. Long term bonds did better than stocks. Go back to 1951 to 1981 with the long bond bear market. Not a good time for bonds. Most don't expect this to happen in future given the high national debt. Interest rates will probably be bouncing around like in Japan for the last 30 years. Sometimes up or down. Just sideways overall. Bonds are good no matter what for diversification and minimizing loss of market drawdown. They're not expected to be a substantial money maker. At Least above inflation. Currently, they are not beating inflation as I remember.
Actually, I read a piece on bonds vs stocks. A chart overlaying the returns of both with inflation adjusted returns. Bond fund almost never beat stocks and the few times they did it was minimal. However, stocks (market) have beat bonds most of the time and sometimes by huge margins.
Like you post bonds will temper losses a good thing. They are store of wealth when needed most. Maybe we should exploit that store of wealth beyond just personal consumption, but to invest in stocks within correction or recessions? Not all in or all out, but let's say a percentage. Go to 50% bonds during high p/e stock time. Go to 20% bond minimum as a safeguard during correction or recession. These percentages still in the three fund port. It is a tilt. Some advise this is o.k. others no. I don't understand why a three fund has a range of percentages then? There is no magic percentage. The percentages are always a decision point and personal.
and think why be in anything, but securities? I'm thinking financial investment, basically, is gambling. So, go with the odds when making your bet. Sometimes you lose, but it does make sense to go with the best odds. Wouldn't it be better to lower ones cost of living and adjust lifestyle during stock downturns? This might be better than holding on to bonds for lifetime of investment. The difference should be huge for retiree that expects to be in the market for twenty or so years. As Bluce said the magic of compound interest is your friend. You look at the gains from just achieving one half of one percent interest gain for some decades is amazing. This is why lowering investment cost to the minimum is so important. Remember Buffet's advice to surviving spouse, "just put the money in S&P index fund and forget it".
I read the article on Boglehead's three fund all weather portfolio. On the issue of how much of your portfolio should be international vs domestic stocks, (something that comes up often on this blog) this comment caught my eye:
U.S. and international stocks have similar risk profiles and have similar long-term returns. In 2010, Vanguard increased the international allocation of its Target Retirement and LifeStrategy funds from 20% of the stock allocation to 30%, and increased it again to 40% in 2015.
It seems to me that international always lags domestic so the 'similar long-term returns' comment seemed odd. I dug up some historical data on the S&P500 and EAFE Index and decided to check it out. The answer depends on how long you go back and whether the Japan bubble of the mid 1980s is included. In 1985 and 1986, the EAFE returned an out-of-this-world 56% and 69% respectively and followed that up the next two years with 25% and 28% returns. So during the time period 1970-2017, I found that EAFE returned a compounded 9% and S&P500 returned a similar 10.5%. The devil is in the details, though. If we start the clock with year 1989 and go through 2017 (29 year period), the EAFE return significantly drops to 4.5% while the S&P500 returned 9.4%
It seems then that the EAFE figures then are bloated due to the Japan bubble. For this reason I've never understood why Vanguard (LifeStrategy and Target Retirement funds) allocates such a large percentage to international.
Lone Star: Whether to hold foreign equities or not is a never-ending debate, which doesn't really have a correct answer. Bogle says no, other equally-credible people say yes. The argument is based on the idea that foreign stock movements may be somewhat uncorrelated to US stock movements, making it a diversifier in your portfolio.
The Bogle side says: Many US companies have overseas operations, so just stick with US stocks and you will automatically have foreign diversification. The other side says local events, wars, political events, etc. may move foreign markets differently. Then you can get into the debate over whether to hold any commodity funds or not, and if so, how much. From what I've seen, they can be great in a bear market but otherwise are a waste, so I hold none. YMMV.
You can go crazy trying to find a grounding point in all this, so you just have to make up your own mind. I have about 1/4 of my equity holdings in a VG foreign ETF index, VXUS.
Taking the long view: Going back centuries, global equities have returned around 5-7% above inflation, bonds a point or two less (as I recall). So you can't really base anything on a few decades. Some historians suggest that for the past 100 years or so, US equities have returned a point or so above the long-term global average (10% including inflation) and may not do that going forward.
So, IMO, make a plan using your best judgement and stick to it. It's worked for me (so far).
The Wall Street Journal reported that the US trade deficit posted its biggest monthly increase in about three and a half years. The first seven months of this year show the largest deficit in a decade. Tariffs don't work, though Trump may be playing from a strong hand the US won't get by unscathed.
The 60/40, Vanguard date funds, and the Boglehead three fund all have less return than what is desired by myself. It is a trade off of volatility vs return.
Bonds do reduce volatility and drawdowns and that's always an attractive option. Brinker suggests retirees go higher in bonds, often he will say 50%. The 4% rule also is often quoted. We need to understand that these metrics are based on a steady outflow of investments. So, for guaranteed income stream the metrics will prove a high investment base with low volatility investments are preferred. All of the investment advice will go to conservative. Not as much as good advice, but advice that works for the financial industry. Know that advice is always tainted by self interests and not always yours.
Funny how their advice will short social security per the value of maximum lifetime payout, when we should be concerned of maximizing financial future safety and steady return as we grow older. These guys will always fear monger the safety of Social Security then want to sell an annuity. There is a natural conflict of interest.
What is the most reliable investment for returns? Stocks. This will never change and within the entire history of financials, bonds will pull your returns down as compared. Bonds have their place as we all know, but IMHO your investments should be heavily in stocks. Utilize a small portion of bonds for store of wealth and emergency funds in downturns. If you absolutely need a paycheck every month from your funds (even in a downturn) well, this is not your path and you will just need to suck it up and live with low returns. The question is how much risk?
First, the annual rebalance does appear to improve returns, more so than semi annual or quarterly. Total market investment does appear to be a wee bit better than S&P 500. The long history of Wellington fund does appear to provide a bump in return vs volatility risk and does so given the slightly higher expense.
Retiree withdrawal strategy is to always spend from fund winners. A balanced fund does not have this option. Note that since annual rebalance appears to be the best time period for financial return, it will flow that annual payout the same and do that at year end. Probably, even better to adjust time period for winning or losing streak of market. Always sell on an up day to minimize spread.
My risk tolerance is o.k. with volatility of solely utilizing Wellington (70/30 fund) for investment. I plan to minimize spending in down turns. Lots of different ways to have as fun and will invest in high ticket items during good times (auto, remodel, more expensive vacations). Within the basics, this is my safe fund. Being so, the other 50% of investments would go to VTI. A characteristic of total stock market funds would be a wide margin of gains and losses. Plan on spending and rebalancing the high gainer. Utilize the safe fund during not so good times. This strategy looks attractive to me and I already have most of the parts.
Bob Brinker always recommends 50% in fixed income for retirees, so they never lose their "critical mass."
Isn't it odd that Bob Brinker has a junk bond fund making up 20% of the fixed income in Model Portfolio III?
Model Portfolio III is supposed to be a balanced portfolio for capital preservation and modest growth. It is designed for those nearing or in retirement.
The fund in question is a short term (duration 1.73 years), junk bond fund.
Nike says it does 60% of its sales outside the US. And people over 40 dont buy their junk. Hence they give a protester a big contract for kneeling intead of playing. While Nick Foles a super bowl winning QB fights for his money. Thats the America we live in.
Robert, You're right that Brinker should not have junk in a 50/50 balanced portfolio because of the strong correlation to stocks. He thinks however that he can time everything and get out before the economy turns sour. A case can be made that such a portfolio shouldn't even have Investment Grade Corporate bonds. If we go back to 2008 we know junk bonds got crushed but Investment Grade Corporate bonds did poorly as well. The Vanguard Intermediate Term Investment Grade Fund (VFICX) returned (-6.16%)in 2008 while the Vanguard Intermediate Term Treasury Fund(VFITX) returned +13.32%. So if a person wants safety in bonds during a recession they should go with Treasury bonds and totally avoid Corporate bonds.
He thinks however that he can time everything and get out before the economy turns sour.
I really do not think that is even slightly true. IMO, I think Brinker long ago realized he could not time a damn thing successfully. As evidence I'll remind you ever time he furry-kittened in the past he claimed to make adjustments to his timing model and backtested it so it would not occur again. He gave up even any pretense of making adjustments for major mistakes and just started talking about exogenous events, how no one could predict etc, etc.
In essence he threw in the towel and now is just milking the rubes. I am sure he hope she will see an obvious top and call it to go out on high note,that is likely his dream, but he knows his next call will simply be a crapshoot, simply luck.
So far he missed the best buying opportunity for the year with his mumbo-jumbo, he may yet get it, but those who bought the dip are sitting well, those who are still waiting for his buy signal, not so much.
As I said, my opinion only, but that is my observation.
Notice the last couple of graphics that show a 100% stock allocation is just about as good and notice the last graphic showing wealth after 30 years. So, I don't understand the common advice for bonds? Look at this
I look at spreadsheets with real data for last thirty years for actual historical calc for safe withdrawal rate, safemax. All of the common portfolios mixing up diversified investments. You know Wellington did the best. Safe withdrawal 7.8%.
Know that retirees should and do spend more money in early retirement, given more jest for life. So, for retirement it makes more sense for early high withdrawal rates such as 8%, yet go for higher wealth for old age. A time when health costs may peak. So, is Brinker's 50% advice terrible?
The NYU charts is impressive. It basically shows that once stock reaches what I call "critical mass" bonds never catch up. Meaning the differential base is so large that even in a large downturn, bonds don't have a chance to maintain or generate more wealth. During a bad 50% drawdown you still have more wealth as compared.
You needn't go any farther than Wellington balanced fund for retirement as the fund beats the general market for a large percentage of time. Only during sustained Bull markets does the Total Market win. A good portfolio may be Wellington and Total Market, but you would need to actively tilt investment. VTI for example does gain more on Bull Market run, but Wellington will come out ahead over all with steady returns. So, push 50% of your funds into VTI if you like to time the market. Be conservative in doing so and you can as the Wellington fund is an excellent base. This seems to be prudent stock timing above what Brinker's advice.
I do read many an article that claims active funds at best can only pay for their expense load. But the load are usually above 1%.
. TFB....Your last comments about Bob Brinker thinking he can actually get followers out of the market at the top are exactly right.
Brinker took advantage of a no-brainer in year-2000 and got 65% out (and put 50% of that back into QQQ and lost most of that, but never accounted for it in his portfolios).
It has now been 18 years and he has never again raised a dime of cash reserves to take advantage of all of his silly "Secondary Buy Signals." Anyone waiting for him to do it in the future is dreaming.
The most he will do is wait for a market correction and send out a new Secondary Buy Signal so he can brag if the market recovers shortly thereafter.
But remember, if the market does not recover after his Secondary Buy Signals, he will never again mention it on air or in Marketimer - they are all gone, baby - GONE, except for this blog.
"Brinker took advantage of a no-brainer in year-2000 and got 65% out (and put 50% of that back into QQQ and lost most of that, but never accounted for it in his portfolios)." ++++++++++++++++++++++++++++++++++++
How did he get away with "put 50% of that back into QQQ and lost most of that BUT NEVER ACCOUNTED FOR IT IN HIS PORTFOLIOS"?
How did he get away with not accounting for that in his total return calculations for the Marketimer portfolios?
Anonymous Rasputin said... Where are my 3 amigos, Gabe, JC, and mad as hell? September 5, 2018 at 1:45 PM
--------------
Reply:
Gabe's FANG stocks took quite a belly-flop into the "ugly pool" over the last seven days. No bragging rights, so, we might not hear from him for awhile.
FB -7.22% AMZN -3.01& NFLX -5.17% GOOGL -4.40%
Not sure about JC. Maybe he is checking with police and his attorney to bring charges against the dumb-ass that kept impersonating and stalking him here.
Mad as Hell ! Hey, I don't have anything to be mad about currently. But thanks for reminding me - I'm sure I can find some stuff (maybe a lot of stuff) if I just put my mind to it!
Just to add to the clamor about retiree asset allocations, I had a gold nugget but now it might be a dud.
The Vanguard Managed Payout Fund has some esteemed managers, and pays out a steady monthly nut for at least a year before the next tweak, and these days most of the payout is return of capital, so therefore most of the monthly "allowance" isn't taxable interest or cap. gains, it's your own money given back to you.
I know those are dirty words in Finkerland but it helps to hold down the taxable income.
Of course, every retiree worries about "the balance" of the account, or the NAV, because it's a gas gage for the number of life vests still on the bow until, well, things could get ugly.
The fund has guys like Mr. Americs at the helm, who's a post-doctoral profit over there at Vanguard Central near Valley Forge but actually closer to the old Philly Main Line where BB used to hang.
The fund appears to be highly diversified (what do I know?) with a ton of mathematically-correct overseas and international and global and emerging takes that make my head swim, encompassing foreign bonds and stocks alike.
The problem is, they've all retreated this year compared to the good ol' US of A bets driven by investor euphoria, i.e. AMZN, It's amazing!!!
Certainly, nobody knows what the "hot sector" will be next year. But aren't the high-paid wonks at Vanguard supposed to study the economic tea leaves alot and guess-timate something like, "Hey, all these overseas positions have weakening prospects going forward" as they love to say?
Anyway, the S&P is up 5% this year and the Managed Payment megapalooza is down 1/2 percent with all of its vaunted "diversification", so I guess that correlates to a risk factor of near nil, but probably not.
Oh well, the return of capital isn't that bad when it's not taxed.
48 comments:
There's an interesting back-and-forth over at M* on the Brinker thread. "Gerry" vs. "Jerry".
"Gerry" sounds like a thoughtful guy who has some experience with copyright issues. He's a firm believer in "fair use", and has given several useful examples.
"Jerry" is a blowhard who continues to wonder if Honeybee has gotten Brinker's permission for the occasional quotation from Brinker. He's rude, obnoxious, and vaguely threatening.
I'm with Gerry.
.
Stinky... I think it's hilarious that "Jerry" has the cahones to suggest that I would ever answer his ridiculous question.
He's making himself look like a blathering baboon. I wouldn't ask Bob Brinker for a glass of water if I was stranded in the desert for a month.
.
Stinky....If you should feel so inclined to say something for me over there to those Brinker's-and bots, please tell them that I suggested that they go do something anatomically impossible to themselves.
Oh, and leave me the heck alone before I decide to see if Morningstar allows threats and harassment of private citizens on their site.
.
Please note: I do not publish - or even read - any comments that come without a fully recognizable-to-me name typed in the "name" link.
That means, if all I see is the word anonymous, or some Mickey Mouse creation that wouldn't fool my pet rat, don't waste your time. They go directly to my red-hot Trash Bin.
The Brinkster is yet again defrauding his audience as Honeybee says these calls are recycled with no mention of it to his loyal listeners. Brink keeps talking about “model 3” so can someone let us undeserving, unwashed non subscribing Market Timer folks know what is in this model? Thank you. Jack
Honeybee,
I hope you are having a very pleasant day. :-)
Stinky,
Excellent comments regarding "Gerry" vs. "Jerry" at M*.
All,
Interesting article + 2 charts:
2 Relative Performance Trends You Should Be Paying Attention To
https://goo.gl/ymNFqh
.
Jack....Any calls that happened today, have happened on prior live shows.
At the time of live shows, I cover whatever I feel is most interesting, educational and informative for listeners.
You are welcome to search back through my program summaries and see if you can find the info you want.
Since I don't sell my summaries like Brinker sells Moneytalk on demand or Marketimer, I do not try to make people think they are getting new information when they are being deceived.
Bob Brinker's Moneytalk Rerun Monologues and Calls"
And poor advice. I only listened for a few minutes in the parking lot at the grocery store, but I heard Brinker fail when it came to explaining what an etf index is, apparently it escapes him that many etfs are very narrowly focused. Once again a case where he dispenses generalized advice without qualifiers that could harm the uninitiated that apparently is the preponderance of people who listen to him.
tfb
What a second, you have cats and a pet rat? Expand please on their relationship.
Really appreciated Bob's opening commentary -- rerun or not -- regarding average P/E ratios of the S&P. This is the type of education the average DIY investor needs.
Radio DJ on the lam again is definitely not news.
I think I saw him!! He was driving the Prius south on Interstate 15 toward the heli-pads at Maverick Tours near Jean. Just guessing he intended to take an elevated tour of the great Grand Canyon as so many Vegas visitors do.
Or maybe he was chasing his golf ball. Heard a rumor he was playing the Henderson International Championship Par-3 Invitationals. The first fairway has a wicked dog leg to the right so if you don't choke-up a ton and drag your right hip alot, "You're on the freeway."
But that's just play, so let's talk business. If I was him, I'd do the same thing and here's why. With him being the primary sponsor of the show, which means he's keeping it on the air by forking over whatever it takes, then he is paying himself to work.
So, you can probably see the opportunity to malinger. Like I tell my wife, when he wants to call in sick he just calls himself and makes up a dramatic flu story, cough cough.
But really, if he's paying the radio freight and doesn't care about the listener ratings, then he can broadcast 3 hours of dog whistles if he wants to. Follow the money.
Village Dweller -
You're right that a discussion of P/E ratios is interesting information.
But the pregnant question that every listener to the 9/2 show should have been asking is "What are the P/E ratios today? How do they compare to the historic averages?"
And Bob couldn't answer the question about today's P/E ratios because HE WASN'T LIVE. He wasn't in the studio to take any calls, answer any questions, or give any current commentary.
A real disservice to listeners.
Really appreciated Bob's opening commentary -- rerun or not -- regarding average P/E ratios of the S&P. This is the type of education the average DIY investor needs.
Why is it relevant?
I pay zero attention to PEs, but then, I make no effort to time the market so they're pretty meaningless to me.
Bluce writes:
I pay zero attention to PEs, but then, I make no effort to time the market so they're pretty meaningless to me.
Exactly why I asked the relevance. Market timing amounts to a failed theory that Brinker has shown no ability to be able to do, nor has anyone else demonstrated the ability publicly. It amazes me that this myth persists, especially by anyone reading this forum. There is far more support for the existence of Bigfoot than support for market timing. Seriously.
Brinker has a horrendous track record and he is at the top of the heap (of _ _ _ _) in terms of market timers. He simply is another one hit wonder like Elaine Garzarelli, only he has held the limelight longer via his duplicity.
Why anyone believes this clown can time the market is beyond me. Just look at his recent history, how did his bond market timing work out for folks? How about his exit from the NASDAQ? Ho about that poor lady who use to post here earlier this year who wanted and need to invest in the stockmarket but was scared out of it by Brinker's looking for a retest nonsense? No one knows what will happen and anyone who tells you they do is lying.
I get why people believe in ghosts, fairies, that government is here to help you, and other assorted nonsense, but cripes there is not shred of evidence anyone can successfully time the stock market except through random chance.
tfb
I didn't find Bob's P/E helpful. Just enough info to muddy up investment thinking.
After half a dozen interesting financial articles this morning, I started to think this stock market gamble is all about avoiding emotions. This emotion thing is very similar to Los Vegas gambling. Greed to fear. Interesting that fear is the greater emotion for most. We follow trends with investments then decide to analyze data in some attempt to minimize risk, then jump to emotions. Experts say to develop a safe harbor plan with investments. Then follow the plan during the eventual downturn. Our returns happen to quick and unpredictable to time. Double that with drawdowns. We fear loss more than enjoy gain. To avoid emotional damage to portfolio management, financial experts suggest investors to place more capital in safe investments. The advantage of such is to merely keep us out of emotional decision making. It's not to maximise our return. Meaning over a century of data, stock market investments have handily beat income returns. However, if we invest totally in stocks as Buffet suggest we run the risk of loss and time to recover to previous worth. Couldn't we jump back and forth per market timing. High P/E ratio, investor newsletters, listening to financial news or news in general? That doesn't work as we slowly increase investor competence and come to understand the danger of such action. Notice that many are making a living on investor money attempting to persuade you differently.
Well, how on earth could or should one invest? My guess after all the analysis, for the common investor, given the need to avoid being exploited by experts, is to simply invest in the whole market. Best if you cut back on spending (retired) on a downturn.
Simply holding investments for example, VTI and never looking back would accomplish more over time than most all strategies. It's can't be that easy? If so, the best financial advice may be out of the portfolio management and within personal finance. Meaning the support structure of finance is to have created a cost of living that would allow one to flex ones expenditures during stock market downturns. Could this be more important than bonds?
Bluce I buy when it's low, sell when it's high, is that timing the market or being smart?
The current P/E of the S&P is 16.8. This is above the past 5 and 10 year averages but not extremely high. Brinker has said the market can trade well above historical P/E's during bull runs. Nowhere close to year 2000 P/E's.
tfb: Agree with all your points about market timing.
Trees: Standard boiler-plate stuff for long-term investing: Get an AA that fits your goals, fits your risk tolerance, and is appropriate for your age. Buy a total stock index; don't get caught up buying and attempting to market time the latest "hot" sectors. As you get older, reduce stocks and increase bonds/cash. Don't overthink it.
When you are at retirement age, you should have enough cash and short-term bonds/funds or CDs to last you several years. There is tons of info on this in books or online.
If (when) stocks tank, let them run. Even in a crisis you won't need them for several years. You will still own all the assets, (same amount of shares) but of course the asset price will drop in a bear. It's easy to say, but you have to ignore the red numbers you see.
Burt: It's timing the market.
.
Bluce...that was not JC, so won't publish your note on that.
It was a mistake on my part. I now have it worked out so it won't happen again.
Kaepernick now a Nike spokesman, time to sell Nike and buy UA???
Honey: What happened to JC? I do (now) remember something with him a few weeks ago and the alias thing or whatever.
Is he gone forever?
Bluce writes:
If (when) stocks tank, let them run. Even in a crisis you won't need them for several years. You will still own all the assets, (same amount of shares) but of course the asset price will drop in a bear. It's easy to say, but you have to ignore the red numbers you see.
My comment:
This is a excellent point, 5 stars, accolades, naming of my first child etc, etc.
One point, what Bluce did not say in that paragraph but did state in one of the preceding ones is that by stocks he means stock index funds. The difference being a stock or group small group of stock may tank and not recover or go out of business in a recession or bear market but a broad based index will not. There is always the potential for a broad based index to recover, with one or more stocks they can go to and stay at zero.
So then, the wisdom of his approach becomes apparent, your mission is to either have enough non-equity assets to weather any probable downturns or you have to have a large enough portfolio, such that, even a 50% cut in dividends will be able to service your income needs. They both work to the same end, which is, not having to sell your equities in a downturn in the equity markets to fund your day to day expenses.
Do this and there is no need to engage in the hazardous risk that is the Tom-foolery known as market timing.
tfb
tfb: You are humbling! But it's just stuff I gleaned from years of reading the right material. That means: NOT reading books written by fortune-tellers, forecasters, market timers, and other assorted "get rich quick" gurus.
At any rate, thank you for your comments.
Bluce,
Last week Warren Buffett had his 88th birthday, and he said: "....OVER TIME, A BUNCH OF BUSINESSES THAT ARE EARNING HIGH RETURNS ON CAPITAL ARE GOING TO BEAT A BOND THAT'S FIXED AT ROUGHLY 3% FOR 30 YEARS"
Basically saying that over long periods of time, stocks are going to beat bonds...
and in May 2018 at his annual Berkshire Hathaway shareholders meeting, he said:
"Bonds are a terrible investment at anywhere near current yields.” He continued, “The only time bonds were interesting was in the early to mid-1980’s"
Bluce, just curious why you have chosen such a low percentage allocation to stocks.
If you'd rather answer privately, my email is rjb112@gmail.com
thanks a million!
Robert
Bluce agree with advice. Here is an interesting comparison. VFIAX as we know a good comparison for general stock market and has a long history. VWELX albeit a mutual fund has a long history, too. Comparing the two from '85, and '95 to present day shows Wellington bested the S&P 500. Only when cutting the duration to '05 to present does the S&P 500 finally beat Wellington and only the last few years.
I'm thinking the historical bull market we have just experienced has screwed up our evaluation of funds since most only go out ten years. We need to review historical returns and truncate a good portion of this current bull market to get a realistic evaluation of how a fund did over time. Maybe stop in 2016.
Here is the kicker. VWELX is a balanced fund with 70:30 holdings. It experienced less volatility. Bogleheads are amazed that the fund has performance of a 80:20 fund but stability of 60:40 or something close to those numbers. Bogleheads always advise to go with index funds low load and general market. They especially like the three fund portfolio of U.S. stock market, Bond, and foreign stock market. BHs have a group effort on spreadsheet that attempts to put thirty year history to most popular funds and portfolios. You know the 60:40 and over a dozen more. It's interesting as they have a bunch of measures of performance. Also, since some of these investments weren't available back then they attempt use like kind to keep it real as possible and yet get some sort of performance data. Gold for example. Interesting the calcs do formulate perpetual withdrawal rate and safe withdrawal rate for retirees. Their calcs quite a bit different than what we read from financial advisors. I believe the spreadsheet data. Wellington was a top performer. Wellesley was one half percentage less. I've read Vanguard Target date funds will become very popular, but the funds haven't proven themselves IMHO. Funny, I read investment advice for retirees. Some claim just put your money in VWELX and forget it. Job done.
byw- what tfb was commenting. Can you imagine a more potent investment strategy then to go 50% bond upon some timing event such as high p/e ratio time periods. We all have read these periods will produce lower than expected returns at higher risk. This is not the BB or normal timing advice we hear to stay away from, but stock allocation changes that I do read as good advice to weather a possible drawdown. So, what's the catch per tfb? If you set yourself up to not need investment in a downturn. To have the ability to change lifestyle. Meaning go for walks instead of international travel. Cook interesting meals at home instead of fine dining. Maybe grow a garden and utilize more firewood for heat. Camping instead of expensive rentals. If that is the case, you could or should flip the bond funds to stocks at some predetermined point. Haven't you read that the real money is earned upon a down turn? We are advised to buy bonds to have money during a downturn, a good thing, but it does lower the rate of return if having a perpetual bond fund. I'm thinking the best aspect of non correlated to stock investment is to utilise it as a store of wealth. Sure rebalancing magic has some of this, but what if you had rebalancing on steroids? Don't be greedy and attempt to hold all stocks in high p/e time periods nor to wait until establishing the bottom. That would be impossible timing were all advised to avoid like the plague. Instead buy stock on drawdown. Best to have a game plan such as spend 25% of bonds upon 10% stock drop. Maybe spend 50% of what is left on 20% drop and all in over 30%. Maybe go 50% bonds at 20 p/e ratio with ability to change that with growing concern of business environment.
Actually, since quality stocks are safer it may be o.k to invest in broad spectrum of sector leaders with this approach. Apple has so much money people rate it safe. Goggle and Amazon will have such leadership roles and head start advantage it will take a long time of screwups (GE) to lose faith within the investment world. Meaning the community would jump at chance if these companies had a downturn. Not so much GE. You see how having a safe harbor low cost of living, if SHTF, empowers the value to take risk and make better decisions. I don't read any financial advisors offering this advice. This advise would hurt their business that relies on investor and retiree fear. Their ads only show beautiful people sailing and looking lustfully at each other.
Robert asked: Bluce, just curious why you have chosen such a low percentage allocation to stocks.
1) I don't think I said what my AA was, however it is around 40/60. Reason: I'm 68 and that is appropriate for my age and circumstance.
2) I have the asset base I need to retire on, so I don't need any more growth except to keep up with inflation -- which the 40% stock allocation should provide.
Thanks Bluce!
Much appreciated.
Robert
Trees: IMO, you're over-thinking all of this.
There are long term, boiler-plate universal recommendations, from numerous scholars who have picked the subject apart and wrote about the results. There is no magic, no arcane formulas, no miracles, EXCEPT for the power of long-term compounding.
From memory: When young and in the accumulation phase, have 80-90+% in stocks, tailored to your personal risk level. That means ALL stocks (a total index) not a selected few -- or even a few sectors -- that you "think" should do well. If you do the latter, the odds are that you will often find yourself being in the wrong spot at the wrong time. Trying to hit a moving target, as it were.
As you grow older, starting maybe 10 years from expected retirement age (depending on your risk tolerance) shift gradually from equities into more bond holdings for stabilization and capital preservation.
Having to start retirement, which may be forced for health or other reasons, at the beginning of a stock bear with most of your holdings in stock could wipe you out because you would be forced to sell assets at greatly reduced prices. That would be "buying high and selling low," hardly a great formula for success.
It doesn't have to be any more complicated than that. For the ultimate in simplicity, look up the Boglehead's three-fund all-weather portfolio.
Bluce- The three fund is a good all purpose/weather fund. Taylor Larimore is referred to in this preferred portfolio as the founder. The portfolio has a range of percentages in each fund. The diversification will improve returns and lower volatility. I do have 30 year history of his 50% total market, 30% international market, and 20% total bond portfolio. Not that the portfolio was active or the funds available for this time period, but data that is a good replica. This is not my work, but Bogleheads. CAGR 7.21%. Wellington did beat the three fund 7.84%. It was interesting that Wellington had less volatility with ensuing better withdrawal rate. The three fund did better on cash out. This is because you can take money not on a schedule but when stocks or bonds doing best.
Notice, that within the three fund there is a range of percentages. What's to say you could juice up your returns by playing within these percentages? Again, this is not exactly stock market timing as BB Market Timer is spoofing. Investor advice often will go to increasing percentage of bonds in risky times as a rational decision to minimise drawdown loss. They do adjust allocations.
Everyone is advising bond owners to reset their expectations of return. The 1981-2016 time period was a bull market for bonds. Long term bonds did better than stocks. Go back to 1951 to 1981 with the long bond bear market. Not a good time for bonds. Most don't expect this to happen in future given the high national debt. Interest rates will probably be bouncing around like in Japan for the last 30 years. Sometimes up or down. Just sideways overall. Bonds are good no matter what for diversification and minimizing loss of market drawdown. They're not expected to be a substantial money maker. At Least above inflation. Currently, they are not beating inflation as I remember.
Actually, I read a piece on bonds vs stocks. A chart overlaying the returns of both with inflation adjusted returns. Bond fund almost never beat stocks and the few times they did it was minimal. However, stocks (market) have beat bonds most of the time and sometimes by huge margins.
Like you post bonds will temper losses a good thing. They are store of wealth when needed most. Maybe we should exploit that store of wealth beyond just personal consumption, but to invest in stocks within correction or recessions? Not all in or all out, but let's say a percentage. Go to 50% bonds during high p/e stock time. Go to 20% bond minimum as a safeguard during correction or recession. These percentages still in the three fund port. It is a tilt. Some advise this is o.k. others no. I don't understand why a three fund has a range of percentages then? There is no magic percentage. The percentages are always a decision point and personal.
I look at data such as this
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
and think why be in anything, but securities? I'm thinking financial investment, basically, is gambling. So, go with the odds when making your bet. Sometimes you lose, but it does make sense to go with the best odds. Wouldn't it be better to lower ones cost of living and adjust lifestyle during stock downturns? This might be better than holding on to bonds for lifetime of investment. The difference should be huge for retiree that expects to be in the market for twenty or so years. As Bluce said the magic of compound interest is your friend. You look at the gains from just achieving one half of one percent interest gain for some decades is amazing. This is why lowering investment cost to the minimum is so important. Remember Buffet's advice to surviving spouse, "just put the money in S&P index fund and forget it".
I read the article on Boglehead's three fund all weather portfolio. On the issue of how much of your portfolio should be international vs domestic stocks, (something that comes up often on this blog) this comment caught my eye:
U.S. and international stocks have similar risk profiles and have similar long-term returns. In 2010, Vanguard increased the international allocation of its Target Retirement and LifeStrategy funds from 20% of the stock allocation to 30%, and increased it again to 40% in 2015.
It seems to me that international always lags domestic so the 'similar long-term returns' comment seemed odd. I dug up some historical data on the S&P500 and EAFE Index and decided to check it out. The answer depends on how long you go back and whether the Japan bubble of the mid 1980s is included. In 1985 and 1986, the EAFE returned an out-of-this-world 56% and 69% respectively and followed that up the next two years with 25% and 28% returns. So during the time period 1970-2017, I found that EAFE returned a compounded 9% and S&P500 returned a similar 10.5%. The devil is in the details, though. If we start the clock with year 1989 and go through 2017 (29 year period), the EAFE return significantly drops to 4.5% while the S&P500 returned 9.4%
It seems then that the EAFE figures then are bloated due to the Japan bubble. For this reason I've never understood why Vanguard (LifeStrategy and Target Retirement funds) allocates such a large percentage to international.
Where are my 3 amigos, Gabe, JC, and mad as hell?
Lone Star: Whether to hold foreign equities or not is a never-ending debate, which doesn't really have a correct answer. Bogle says no, other equally-credible people say yes. The argument is based on the idea that foreign stock movements may be somewhat uncorrelated to US stock movements, making it a diversifier in your portfolio.
The Bogle side says: Many US companies have overseas operations, so just stick with US stocks and you will automatically have foreign diversification. The other side says local events, wars, political events, etc. may move foreign markets differently. Then you can get into the debate over whether to hold any commodity funds or not, and if so, how much. From what I've seen, they can be great in a bear market but otherwise are a waste, so I hold none. YMMV.
You can go crazy trying to find a grounding point in all this, so you just have to make up your own mind. I have about 1/4 of my equity holdings in a VG foreign ETF index, VXUS.
Taking the long view: Going back centuries, global equities have returned around 5-7% above inflation, bonds a point or two less (as I recall). So you can't really base anything on a few decades. Some historians suggest that for the past 100 years or so, US equities have returned a point or so above the long-term global average (10% including inflation) and may not do that going forward.
So, IMO, make a plan using your best judgement and stick to it. It's worked for me (so far).
The Wall Street Journal reported that the US trade deficit posted its biggest monthly increase in about three and a half years. The first seven months of this year show the largest deficit in a decade. Tariffs don't work, though Trump may be playing from a strong hand the US won't get by unscathed.
liked hearing my call replayed..."how about convertible bonds?".. most specialized funds that hold them are way up since 2017
The 60/40, Vanguard date funds, and the Boglehead three fund all have less return than what is desired by myself. It is a trade off of volatility vs return.
Bonds do reduce volatility and drawdowns and that's always an attractive option. Brinker suggests retirees go higher in bonds, often he will say 50%. The 4% rule also is often quoted. We need to understand that these metrics are based on a steady outflow of investments. So, for guaranteed income stream the metrics will prove a high investment base with low volatility investments are preferred. All of the investment advice will go to conservative. Not as much as good advice, but advice that works for the financial industry. Know that advice is always tainted by self interests and not always yours.
Funny how their advice will short social security per the value of maximum lifetime payout, when we should be concerned of maximizing financial future safety and steady return as we grow older. These guys will always fear monger the safety of Social Security then want to sell an annuity. There is a natural conflict of interest.
What is the most reliable investment for returns? Stocks. This will never change and within the entire history of financials, bonds will pull your returns down as compared. Bonds have their place as we all know, but IMHO your investments should be heavily in stocks. Utilize a small portion of bonds for store of wealth and emergency funds in downturns. If you absolutely need a paycheck every month from your funds (even in a downturn) well, this is not your path and you will just need to suck it up and live with low returns. The question is how much risk?
First, the annual rebalance does appear to improve returns, more so than semi annual or quarterly. Total market investment does appear to be a wee bit better than S&P 500. The long history of Wellington fund does appear to provide a bump in return vs volatility risk and does so given the slightly higher expense.
Retiree withdrawal strategy is to always spend from fund winners. A balanced fund does not have this option. Note that since annual rebalance appears to be the best time period for financial return, it will flow that annual payout the same and do that at year end. Probably, even better to adjust time period for winning or losing streak of market. Always sell on an up day to minimize spread.
My risk tolerance is o.k. with volatility of solely utilizing Wellington (70/30 fund) for investment. I plan to minimize spending in down turns. Lots of different ways to have as fun and will invest in high ticket items during good times (auto, remodel, more expensive vacations). Within the basics, this is my safe fund. Being so, the other 50% of investments would go to VTI. A characteristic of total stock market funds would be a wide margin of gains and losses. Plan on spending and rebalancing the high gainer. Utilize the safe fund during not so good times. This strategy looks attractive to me and I already have most of the parts.
Bob Brinker always recommends 50% in fixed income for retirees, so they never lose their "critical mass."
Isn't it odd that Bob Brinker has a junk bond fund making up 20% of the fixed income in Model Portfolio III?
Model Portfolio III is supposed to be a balanced portfolio for capital preservation and modest growth. It is designed for those nearing or in retirement.
The fund in question is a short term (duration 1.73 years), junk bond fund.
Robert
Nike says it does 60% of its sales outside the US. And people over 40 dont buy their junk. Hence they give a protester a big contract for kneeling intead of playing. While Nick Foles a super bowl winning QB fights for his money. Thats the America we live in.
Robert,
You're right that Brinker should not have junk in a 50/50 balanced portfolio because of the strong correlation to stocks. He thinks however that he can time everything and get out before the economy turns sour. A case can be made that such a portfolio shouldn't even have Investment Grade Corporate bonds. If we go back to 2008 we know junk bonds got crushed but Investment Grade Corporate bonds did poorly as well. The Vanguard Intermediate Term Investment Grade Fund (VFICX) returned (-6.16%)in 2008 while the Vanguard Intermediate Term Treasury Fund(VFITX) returned +13.32%. So if a person wants safety in bonds during a recession they should go with Treasury bonds and totally avoid Corporate bonds.
He thinks however that he can time everything and get out before the economy turns sour.
I really do not think that is even slightly true. IMO, I think Brinker long ago realized he could not time a damn thing successfully. As evidence I'll remind you ever time he furry-kittened in the past he claimed to make adjustments to his timing model and backtested it so it would not occur again. He gave up even any pretense of making adjustments for major mistakes and just started talking about exogenous events, how no one could predict etc, etc.
In essence he threw in the towel and now is just milking the rubes. I am sure he hope she will see an obvious top and call it to go out on high note,that is likely his dream, but he knows his next call will simply be a crapshoot, simply luck.
So far he missed the best buying opportunity for the year with his mumbo-jumbo, he may yet get it, but those who bought the dip are sitting well, those who are still waiting for his buy signal, not so much.
As I said, my opinion only, but that is my observation.
The 50/50 advice is terrible in my opinion. First read this article on the how the 4% rule was established.
https://www.forbes.com/sites/wadepfau/2018/01/10/william-bengens-safemax-updated-to-2018/#712799296be4
Notice the last couple of graphics that show a 100% stock allocation is just about as good and notice the last graphic showing wealth after 30 years. So, I don't understand the common advice for bonds? Look at this
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
I look at spreadsheets with real data for last thirty years for actual historical calc for safe withdrawal rate, safemax. All of the common portfolios mixing up diversified investments. You know Wellington did the best. Safe withdrawal 7.8%.
Know that retirees should and do spend more money in early retirement, given more jest for life. So, for retirement it makes more sense for early high withdrawal rates such as 8%, yet go for higher wealth for old age. A time when health costs may peak. So, is Brinker's 50% advice terrible?
The NYU charts is impressive. It basically shows that once stock reaches what I call "critical mass" bonds never catch up. Meaning the differential base is so large that even in a large downturn, bonds don't have a chance to maintain or generate more wealth. During a bad 50% drawdown you still have more wealth as compared.
You needn't go any farther than Wellington balanced fund for retirement as the fund beats the general market for a large percentage of time. Only during sustained Bull markets does the Total Market win. A good portfolio may be Wellington and Total Market, but you would need to actively tilt investment. VTI for example does gain more on Bull Market run, but Wellington will come out ahead over all with steady returns. So, push 50% of your funds into VTI if you like to time the market. Be conservative in doing so and you can as the Wellington fund is an excellent base. This seems to be prudent stock timing above what Brinker's advice.
I do read many an article that claims active funds at best can only pay for their expense load. But the load are usually above 1%.
.
TFB....Your last comments about Bob Brinker thinking he can actually get followers out of the market at the top are exactly right.
Brinker took advantage of a no-brainer in year-2000 and got 65% out (and put 50% of that back into QQQ and lost most of that, but never accounted for it in his portfolios).
It has now been 18 years and he has never again raised a dime of cash reserves to take advantage of all of his silly "Secondary Buy Signals." Anyone waiting for him to do it in the future is dreaming.
The most he will do is wait for a market correction and send out a new Secondary Buy Signal so he can brag if the market recovers shortly thereafter.
But remember, if the market does not recover after his Secondary Buy Signals, he will never again mention it on air or in Marketimer - they are all gone, baby - GONE, except for this blog.
"Brinker took advantage of a no-brainer in year-2000 and got 65% out (and put 50% of that back into QQQ and lost most of that, but never accounted for it in his portfolios)."
++++++++++++++++++++++++++++++++++++
How did he get away with "put 50% of that back into QQQ and lost most of that BUT NEVER ACCOUNTED FOR IT IN HIS PORTFOLIOS"?
How did he get away with not accounting for that in his total return calculations for the Marketimer portfolios?
Robert
Anonymous Rasputin said...
Where are my 3 amigos, Gabe, JC, and mad as hell?
September 5, 2018 at 1:45 PM
--------------
Reply:
Gabe's FANG stocks took quite a belly-flop into the "ugly pool" over the last seven days. No bragging rights, so, we might not hear from him for awhile.
FB -7.22%
AMZN -3.01&
NFLX -5.17%
GOOGL -4.40%
Not sure about JC. Maybe he is checking with police and his attorney to bring charges against the dumb-ass that kept impersonating and stalking him here.
Mad as Hell ! Hey, I don't have anything to be mad about currently. But thanks for reminding me - I'm sure I can find some stuff (maybe a lot of stuff) if I just put my mind to it!
Just to add to the clamor about retiree asset allocations, I had a gold nugget but now it might be a dud.
The Vanguard Managed Payout Fund has some esteemed managers, and pays out a steady monthly nut for at least a year before the next tweak, and these days most of the payout is return of capital, so therefore most of the monthly "allowance" isn't taxable interest or cap. gains, it's your own money given back to you.
I know those are dirty words in Finkerland but it helps to hold down the taxable income.
Of course, every retiree worries about "the balance" of the account, or the NAV, because it's a gas gage for the number of life vests still on the bow until, well, things could get ugly.
The fund has guys like Mr. Americs at the helm, who's a post-doctoral profit over there at Vanguard Central near Valley Forge but actually closer to the old Philly Main Line where BB used to hang.
The fund appears to be highly diversified (what do I know?) with a ton of mathematically-correct overseas and international and global and emerging takes that make my head swim, encompassing foreign bonds and stocks alike.
The problem is, they've all retreated this year compared to the good ol' US of A bets driven by investor euphoria, i.e. AMZN, It's amazing!!!
Certainly, nobody knows what the "hot sector" will be next year. But aren't the high-paid wonks at Vanguard supposed to study the economic tea leaves alot and guess-timate something like, "Hey, all these overseas positions have weakening prospects going forward" as they love to say?
Anyway, the S&P is up 5% this year and the Managed Payment megapalooza is down 1/2 percent with all of its vaunted "diversification", so I guess that correlates to a risk factor of near nil, but probably not.
Oh well, the return of capital isn't that bad when it's not taxed.
Post a Comment