Getting to Know the Future You

A writer named Doug Carey had a post at Seeking Alpha called 3 Pitfalls To Avoid When Retirement Planning. He says don’t wait to start saving, don’t count on Social Security and make sure you beat inflation. Obviously all three important but as I read through I stumbled across what I think could a huge dilemma. In talking about starting early he starts out with something like let’s say a 25 year old wants to retire at 65 and then he crunches some numbers showing the importance of starting early and he is right but there is a problem here that I have thought of often but could never figure out how to articulate (and maybe I still can’t). Think back to when you were 25. Could you have possibly had any understanding or what it meant to be 65? When I was 25, even 40 seemed to be so far into the future that it would never come (not that I wouldn’t make it to 40, but more like it would never come for being so far off in the future). As I got close to 40 I realized that when I was in my 20s I had no concept of what 40 would feel like. At 45 now, from a self-awareness point of view I am quite certain that I don’t really know what it will feel like to be 65, it is possible I don’t understand 50. If I am even articulating this in a way that makes any sense it creates a lot of unknowns in trying to plan for retirement. I think it is...

It’s The End of the World and Paul Farrell Knows It

Paul Farrell had a column up yesterday that detailed ten reasons why 2012 will be a doomsday. Included in the list are failings of US democracy, class warfare and some disturbing prognostications about global warfare. If you read the paragraphs that Farrell wrote on those points, it is hard to disagree with the nature of the problems he cites. However these are not new issues and Farrell offers no reason as to why 2012 must be a tipping point for any of them. While I apologize for not taking the time to look I would venture to say that these points or similar ones were predicted by him to be tipping points in previous years. Expectations of torn social fabric, or the breaking down of society were made at the beginning of the crisis and have not panned out and are unlikely to. Some things have gotten worse and will continue to get worse but we collectively can adapt better than most, probably not all, countries. To repeat an idea I have mentioned frequently, the US is the world’s most important customer and so other countries have a vested stake in our remaining functional. Remaining functional is not a Jim-Paulsenian argument to be bullish but does argue for the US’ ongoing ability to slog through as we have been. Some of the other reasons cited by Farrell seem totally disconnected from the thesis of doomsday. His number 7 was about market technology whose consequence is that “average investors are no match for Wall Street’s ‘high-frequency traders.’ ” He’s probably right here for average investors who actually try to hit...

It’s The End of the World and Paul Farrell Knows It

Paul Farrell had a column up yesterday that detailed ten reasons why 2012 will be a doomsday. Included in the list are failings of US democracy, class warfare and some disturbing prognostications about global warfare. If you read the paragraphs that Farrell wrote on those points, it is hard to disagree with the nature of the problems he cites. However these are not new issues and Farrell offers no reason as to why 2012 must be a tipping point for any of them. While I apologize for not taking the time to look I would venture to say that these points or similar ones were predicted by him to be tipping points in previous years. Expectations of torn social fabric, or the breaking down of society were made at the beginning of the crisis and have not panned out and are unlikely to. Some things have gotten worse and will continue to get worse but we collectively can adapt better than most, probably not all, countries. To repeat an idea I have mentioned frequently, the US is the world’s most important customer and so other countries have a vested stake in our remaining functional. Remaining functional is not a Jim-Paulsenian argument to be bullish but does argue for the US’ ongoing ability to slog through as we have been. Some of the other reasons cited by Farrell seem totally disconnected from the thesis of doomsday. His number 7 was about market technology whose consequence is that “average investors are no match for Wall Street’s ‘high-frequency traders.’ ” He’s probably right here for average investors who actually try to hit...

What Do You Think?

From Larry Swedroe’s 2012 outlook piece for Seeking Alpha (similar to what I did with them a week or so ago. The following is offered without comment from me (this time), only a question. What do you think of the approach outlined in his answer? Seeking Alpha: So under specific circumstances such as the current situation in the Eurozone, you don’t lighten up on particular problem areas at all in client portfolios? Larry Swedroe: That would not make sense. The reason is simple. If we know there are problems, the market surely also knows and that means the problems are already incorporated into prices. And why would you buy when things look safe, and thus valuations are high and thus expected returns are low, only to sell when risks show up, and thus valuations are low and expected returns are now high? That doesn’t seem like a rational strategy, yet it is exactly what most investors do, and it explains why they do so poorly, underperforming the very funds in which they...

What Do You Think?

From Larry Swedroe’s 2012 outlook piece for Seeking Alpha (similar to what I did with them a week or so ago. The following is offered without comment from me (this time), only a question. What do you think of the approach outlined in his answer? Seeking Alpha: So under specific circumstances such as the current situation in the Eurozone, you don’t lighten up on particular problem areas at all in client portfolios? Larry Swedroe: That would not make sense. The reason is simple. If we know there are problems, the market surely also knows and that means the problems are already incorporated into prices. And why would you buy when things look safe, and thus valuations are high and thus expected returns are low, only to sell when risks show up, and thus valuations are low and expected returns are now high? That doesn’t seem like a rational strategy, yet it is exactly what most investors do, and it explains why they do so poorly, underperforming the very funds in which they...