There is Nothing New About Conflicts of Interest

Earlier this week TheStreet.com announced layoffs. I’ve been an outside contributor there since 2005. My experience with them has been fantastic and I hope to write for them for a long time. I only found one news story about this from Business Insider and far more interesting than the article was the tone of some of the comments in terms of immense and intense hatred for all things Wall Street; any type of firm and the media covering it. The comment thread was not contained to dislike for the Street.com, it was directed at everyone. Occasionally I see similar comments on posts at Seeking Alpha as well. Clearly the lousy long term returns of the last 12 years and the news about how various brokerage firms treat clients’ interests is a very discouraging combination so I can’t fault anyone for wanting to chuck the stock market altogether. I won’t defend brokerage firms and the domestic equity returns for the decade were lousy and many of us will see another lousy decade in our lifetimes. I don’t think the brokerage firm behavior is much different than it has ever been (my direct experience goes back to the 1980s) but it is more noticeable when returns stink and investment products malfunction one way or another. We all know that equity returns were lousy in the 1930s and 1970s as well as the 2000s so this has been happening about every three or four decades (the 1870s were also bad and there was a terrible bank crisis in 1907). The potential benefit to investing in stocks is getting a rate of growth for your...

Debunking Myths

A contributor at Seeking Alpha who goes by the handle Regarded Solutions wrote a post about a month ago that sets out to debunk 10 retirement lies. Per the bio page Regarded Solutions is retired, there is no mention of gender and because of the liberal use of the word we in the bio I’m not sure if this is husband and wife but to keep things simple I will just use the word he when a pronoun is called for. Before getting into the retirement lies he provides very transparent information on a dividend based portfolio. Lie number 1 was “You will need multi-millions of dollars to retire ‘comfortably'” which of course is good timing after I tried to explore a reader’s comment about needing $2 million. His point here seems to be you can’t spend more than what comes in. This is true of course so then what is comfortable? One person’s idea of comfortable could easily require millions. He goes on to say “it’s more about how much you spend” so if that is true (and I agree it is) then I am not sure any lie was debunked. This is good reminder about living within your means and again, I agree. Lie number 2 was “Social Security will not be around for those over 50 when you retire.” I don’t see this one very often. I don’t believe it will be around for people under 50 at least not the way we now know it. I have said many times that I, in my mid 40s, expect nothing which is the more conservative planning approach....

Debunking Myths

A contributor at Seeking Alpha who goes by the handle Regarded Solutions wrote a post about a month ago that sets out to debunk 10 retirement lies. Per the bio page Regarded Solutions is retired, there is no mention of gender and because of the liberal use of the word we in the bio I’m not sure if this is husband and wife but to keep things simple I will just use the word he when a pronoun is called for. Before getting into the retirement lies he provides very transparent information on a dividend based portfolio. Lie number 1 was “You will need multi-millions of dollars to retire ‘comfortably'” which of course is good timing after I tried to explore a reader’s comment about needing $2 million. His point here seems to be you can’t spend more than what comes in. This is true of course so then what is comfortable? One person’s idea of comfortable could easily require millions. He goes on to say “it’s more about how much you spend” so if that is true (and I agree it is) then I am not sure any lie was debunked. This is good reminder about living within your means and again, I agree. Lie number 2 was “Social Security will not be around for those over 50 when you retire.” I don’t see this one very often. I don’t believe it will be around for people under 50 at least not the way we now know it. I have said many times that I, in my mid 40s, expect nothing which is the more conservative planning approach....

“Volatility is Not an Asset Class”

The WSJ had a blog post further detailing the peculiar odyssey of the Velocity Shares Daily 2x VIX Short Term ETN (TVIX). A lengthy part of the post was devoted to the thoughts of one portfolio manager who among other things said that volatility is an indicator not an asset class. The chart shows a spectacular implosion in the price of the shares. As mentioned last week the crazy action is mostly about a disruption in the normal creation/redemption process. There are several types of glitches/malfunctions that can create serious problems but this event seems to be especially remarkable for the number of buzzwords this fund takes in; ETN, leveraged, futures, VIX. There is probably no way to know what portion of the volume or AUM in TVIX is for speculation and what portion is from hedging with the hedge idea being as stocks go down the VIX will go up and a 2x VIX will go up more. The idea with speculating on VIX in one form or another is that the VIX moves around a lot in both directions which makes for good action for speculative trading. The idea of volatility being an asset class would seem to be in the context of building a portfolio that includes alternative asset classes that have low correlations to equities. This could be thought of along the lines of market neutral funds, absolute return funds, merger arbitrage funds and any other number of so called hedge fund-like products. TVIX is not the only VIX product with questionable benefit. The troubles with VXX have been widely written about so you can...

"Volatility is Not an Asset Class"

The WSJ had a blog post further detailing the peculiar odyssey of the Velocity Shares Daily 2x VIX Short Term ETN (TVIX). A lengthy part of the post was devoted to the thoughts of one portfolio manager who among other things said that volatility is an indicator not an asset class. The chart shows a spectacular implosion in the price of the shares. As mentioned last week the crazy action is mostly about a disruption in the normal creation/redemption process. There are several types of glitches/malfunctions that can create serious problems but this event seems to be especially remarkable for the number of buzzwords this fund takes in; ETN, leveraged, futures, VIX. There is probably no way to know what portion of the volume or AUM in TVIX is for speculation and what portion is from hedging with the hedge idea being as stocks go down the VIX will go up and a 2x VIX will go up more. The idea with speculating on VIX in one form or another is that the VIX moves around a lot in both directions which makes for good action for speculative trading. The idea of volatility being an asset class would seem to be in the context of building a portfolio that includes alternative asset classes that have low correlations to equities. This could be thought of along the lines of market neutral funds, absolute return funds, merger arbitrage funds and any other number of so called hedge fund-like products. TVIX is not the only VIX product with questionable benefit. The troubles with VXX have been widely written about so you can...