Are We A Nation Of Wusses?

Yesterday CNBC had a segment about ETFs during its show Power Lunch that started with a snippet from Jack Bogle saying “they’ve corrupted it (ETFs) into a trading business. You can trade all day long in real time, that’s the tag line Tyler (Mathisen), to which I would ask what kind of a nut would want to do that?” Um, what kind of nut when able to choose, would prefer the more restrictive wrapper, that being traditional mutual funds? Bogle likes VTI and SPY to buy and hold forever but the assertion that ETFs are bad because they can be traded is ludicrous. As mentioned before he is really attacking human behavior not the product. A couple of years ago Dylan Ratigan was going to interview Bogle and of course this same line of thought was coming so I emailed Dylan before the interview and pointed out that this is really about human nature, by coincidence or not Ratigan asked Bogle about this on the air and Bogle sort of conceded the point. ETFs are just a tool. I promise you that people in the past have misused every single tool in existence and will do so in the future. The rest of yesterday’s CNBC segment focused on elementary discussions about potential adverse complexities with commodity based products, funds where the components are thinly traded and so on. It became a reminder (for people somewhat familiar with ETFs) or an introductory point that you need to do homework, look under the hood and understand the dynamics relevant to the fund. So telling people they had to do work. On...

Predictions Gone Awry? So What?

A few days ago Seeking Alpha ran a Q&A about 2011 that I participated in. There were really a lot of negative comments which surprised me in that after six years of doing this I’ve observed that comments get nastier when the market is doing poorly but then lighten up as the market does better. As 2010 was a pretty good year for the stock market the vitriol was indeed surprising. Please don’t take this as a boo hoo comment about me but as more of an anecdotal observation about sentiment–when you write a lot about the stock market you are going to piss people off and six years is enough time to have done that in spades. One reader seemed to vaguely take me to task about my 2010 predictions, it turns out I was wrong about some unspecified prediction about commodities–not sure if he meant 2010 or some other period. It would be reasonable to expect that anyone who makes market predictions will get some right and some wrong, this is pretty obvious and speaks to the folly of forecasting as I believe Barry Ritholtz has referred to it. As a more practical matter the notion of a given forecast fitting neatly into a calendar year is also difficult. As an example a reader pointed out that I predicted a 10% decline for the S&P 500 for 2010. Clearly this turned out to be incorrect, 180 degrees so in a manner of speaking. Although at mid year the S&P 500 was down 9% at one point so would it be right to say my timing was off?...

Predictions Gone Awry? So What?

A few days ago Seeking Alpha ran a Q&A about 2011 that I participated in. There were really a lot of negative comments which surprised me in that after six years of doing this I’ve observed that comments get nastier when the market is doing poorly but then lighten up as the market does better. As 2010 was a pretty good year for the stock market the vitriol was indeed surprising. Please don’t take this as a boo hoo comment about me but as more of an anecdotal observation about sentiment–when you write a lot about the stock market you are going to piss people off and six years is enough time to have done that in spades. One reader seemed to vaguely take me to task about my 2010 predictions, it turns out I was wrong about some unspecified prediction about commodities–not sure if he meant 2010 or some other period. It would be reasonable to expect that anyone who makes market predictions will get some right and some wrong, this is pretty obvious and speaks to the folly of forecasting as I believe Barry Ritholtz has referred to it. As a more practical matter the notion of a given forecast fitting neatly into a calendar year is also difficult. As an example a reader pointed out that I predicted a 10% decline for the S&P 500 for 2010. Clearly this turned out to be incorrect, 180 degrees so in a manner of speaking. Although at mid year the S&P 500 was down 9% at one point so would it be right to say my timing was off?...

Self Imposed Means Testing?

Yesterday on our Sunday hike (pictured to the left) I had an epiphany about social security and medicare that I think can be part of the solution. The idea has a couple of building blocks of understanding that if agreed upon make the idea more plausible. The first building block is that financially, the country has a a lot of problems that must be addressed and second that no solution can be “fair” everyone or give everyone everything they want. An equitable solution should involve everyone giving up something. You may not like that but it is my starting point. As we hiked a thought popped into my head; why are there caps on how much money we can put into IRAs, 401ks and the like? I know the answer on a day to day level but conceptually, should there be caps on how much we can put into qualified retirement plans? My idea is to do away with limits on qualified contributions–sort of. In 2010 we put $5000 into a contributory IRA for Joellyn as a non working spouse (she volunteers more than full time in dog rescue), $6150 into our HSA and 25% of my income (simplified explanation) into my SEP. We also let a fair bit (relative to our circumstances) accumulate in our taxable account. We can write off the first three but obviously not that last one. The idea then would be that we could put much as possible into Joellyn’s account and the SEP (HSAs work a little differently) such that anything above the limits is deducted from our future social security and medicare...

Self Imposed Means Testing?

Yesterday on our Sunday hike (pictured to the left) I had an epiphany about social security and medicare that I think can be part of the solution. The idea has a couple of building blocks of understanding that if agreed upon make the idea more plausible. The first building block is that financially, the country has a a lot of problems that must be addressed and second that no solution can be “fair” everyone or give everyone everything they want. An equitable solution should involve everyone giving up something. You may not like that but it is my starting point. As we hiked a thought popped into my head; why are there caps on how much money we can put into IRAs, 401ks and the like? I know the answer on a day to day level but conceptually, should there be caps on how much we can put into qualified retirement plans? My idea is to do away with limits on qualified contributions–sort of. In 2010 we put $5000 into a contributory IRA for Joellyn as a non working spouse (she volunteers more than full time in dog rescue), $6150 into our HSA and 25% of my income (simplified explanation) into my SEP. We also let a fair bit (relative to our circumstances) accumulate in our taxable account. We can write off the first three but obviously not that last one. The idea then would be that we could put much as possible into Joellyn’s account and the SEP (HSAs work a little differently) such that anything above the limits is deducted from our future social security and medicare...