tag:blogger.com,1999:blog-2986124651030959736.post7073595618017865166..comments2024-03-28T09:42:38.695-05:00Comments on Stocks, Bonds & Politics: Comments on Realty Income/BDCs and Index Funds/MOU and MBC/Bought Two Fidelity Sector ETFs: 100 FSTA at $25.42 and 50 FENY at $25.49/ Bought 100 GNEPRA at $8.05, 50 NABZY at $15.48/Sold 50 ARU at $25.44, 100 HUSIPRF at $20.44, 200 IRR at $10.06/Pared Intel Again: Sold 40 at $24.61TENNINDEPENDENThttp://www.blogger.com/profile/17444227958539559639noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2986124651030959736.post-45439043044806729742014-03-14T07:53:48.902-05:002014-03-14T07:53:48.902-05:00Peter: My asset allocations involve more than stoc...Peter: My asset allocations involve more than stocks and bonds. <br /><br />1. A key component is that I lack debt. I have no mortgage. I built my house in 1982 when it was advantageous to do so. If I was young and did not own a home, I would have bought one when home prices and long term mortgage rates collapsed to abnormally low levels. I would have jumped at that 3.5% thirty year mortgage loan. When I built my house, the 30 year was at 16% with 2 points. I paid cash. The opportunity at that time was that the prices of both labor and material were extremely depressed due to a recession. And the owner of the lot had not been able to sell any lots in my subdivision for over 2 years due to a sewer hookup moratorium and wanted somebody to start building a house after that moratorium was lifted so I received a superb price on a prime piece of land. <br /><br />2. Over the years, I have not tried to shoot the lights out by investing in unproven and/or excessively valued companies and then hope that I could sell the shares before the bottom fell out. Patience is part of the asset allocation process along with a focus on income generation and the compounding effect that naturally occurs over a long period of time. <br /><br />3. I have built up a cash allocation so that I will not have to sell my risk assets to pay living expenses. Unfortunately, that cash allocation is not earning anything now. Prior to the onset of the Fed's s Jihad Against the Saving Class, which started in late 2008, a 4% to 5% return on risk free assets was an average range. That number was closer to 13% to 15% back in 1981. Even if I had no cash allocation, I could easily live off the cash flow<br /><br />4. If owning risk free assets make more sense than owning risk assets, I would move more toward the risk free assets. I would have more in cash now with a 4% yield than a 0% yield. Between 1978-1982, most of my assets were invested in savings accounts and CDs earning a very high interest rate. I recall owning only 400 shares of Duke Energy (DUK) during that period. <br /><br />Both stocks and bonds appear to be filled with some danger now. So, if I was younger and in my formative asset building years, I would probably be more cautious than I am now, and I am cautious now. TENNINDEPENDENThttps://www.blogger.com/profile/17444227958539559639noreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-83955522672262610852014-03-13T23:10:03.102-05:002014-03-13T23:10:03.102-05:00Thanks so much for your insights. Since no one can...Thanks so much for your insights. Since no one can correctly predict the market in a consistent manner it would be better to have a balanced portfolio. <br /><br />On AA, you had mentioned "... The VIX Model is actually keeping me invested at a relatively high level for my age, ....." There are many studies on AA. For example, one guideline is equity allocation = 100 - age. A guru says in his book that you don't need to have fixed income. He suggests that keep 5 year living expenses in liquid asset and the rest in stocks. (5 year business cycle?)<br /><br />You said you don't need to be right about the allocations (in your situation), but how would you typically approach the AA issue? <br /><br />Best Regards,<br />PeterAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-63111502622251782472014-03-13T08:33:50.681-05:002014-03-13T08:33:50.681-05:00Peter: There are deflationary forces in Europe, Ja...Peter: There are deflationary forces in Europe, Japan and the U.S. that restrain inflation. Inflation remains a problem elsewhere. <br /><br />The deflationary pull is what I would expect in the aftermath of a financial crisis and a severe recession that required de-leveraging by consumers in developed consumers. There are surpluses of labor and underutilized plant. <br /><br />Over the next few years, I would expect the demand forces to pick up significantly and inflation concerns will become dominant once again. <br /><br />Since I have a balanced portfolio, I play different scenarios based on a current assessment of the big picture forces at play. <br /><br />In my 12/10/13 Post, I made the following observation: " Ultimately, risk free interest rates will depend on inflation and inflation expectations. While I am negative about intermediate and longer term bonds at the current time, except for short term trades, I recognize that I am not omnipotent, capable of predicting the future. I also recognize that there are powerful deflationary forces that are keeping a lid on inflation, even with extraordinarily easy central bank monetary policies as reflected in both ZIRP and QE.<br /><br />I am consequently playing, to some decree, a less likely scenario of prolonged low inflation/deflation by buying some longer term bonds. Recognizing the interest rate risk issue, I am chopping my orders into bits and pieces, spacing them out in time. The typical order is to buy 50 shares of a $25 par value security and then consider averaging down with another 50 share purchase when and if the yield exceeds 8%."TENNINDEPENDENThttps://www.blogger.com/profile/17444227958539559639noreply@blogger.comtag:blogger.com,1999:blog-2986124651030959736.post-895014957336952372014-03-13T00:03:50.227-05:002014-03-13T00:03:50.227-05:00Hi Southgent,
As you look at all sides and evalua...Hi Southgent,<br /><br />As you look at all sides and evaluate all relevant information do you have any view on the impact of Europe's deflation as outlined in this article, Europe’s hot new export is deflation? <br />http://www.marketwatch.com/story/europes-hot-new-export-is-deflation-2014-03-12?pagenumber=2 <br /><br />Regards,<br />PeterAnonymousnoreply@blogger.com