The Big Picture For The Week Of March 25. 2012

A few brief items this morning. First up is the meltdown of the Velocity Shares Daily 2x VIX Short Term ETN which is more commonly referred to by its symbol which is TVIX. This is a levered ETN that tracks the futures market for the VIX index. Futures oriented products seem to have the greatest potential for “malfunctioning” one way or another. The issue with TVIX is that issuer Credit Suisse had to stop creations due to internal size limits which caused a massive variance between the market price and IIV (the ETP equivalent of NAV)–it just blew up. Any exchange traded product can have some sort of problem like trading at a discount or premium to its IIV but this is rarer with plain vanilla stock and bond ETFs and when it has happened with plain vanilla ETFs it has lasted only a short time. The next time there is a flash crash or other problem like with bond ETFs in late 2008 I will again assume short lived blip and not sell. I would think issues like this with exchange traded notes would also be short lived but something like TVIX has a lot more going on under the hood than something like the iShares Global Nuclear Index Fund (NUCL). For more in depth coverage of TVIX you can also read this from Barron’s and also the Kid Dynamite blog as several blog posts about it. The BATS IPO came off as probably the strangest debut of all time. BATS is a stock exchange and shares in its own IPO malfunctioned. As CNBC reported it there was...

The Big Picture For The Week Of March 25. 2012

A few brief items this morning. First up is the meltdown of the Velocity Shares Daily 2x VIX Short Term ETN which is more commonly referred to by its symbol which is TVIX. This is a levered ETN that tracks the futures market for the VIX index. Futures oriented products seem to have the greatest potential for “malfunctioning” one way or another. The issue with TVIX is that issuer Credit Suisse had to stop creations due to internal size limits which caused a massive variance between the market price and IIV (the ETP equivalent of NAV)–it just blew up. Any exchange traded product can have some sort of problem like trading at a discount or premium to its IIV but this is rarer with plain vanilla stock and bond ETFs and when it has happened with plain vanilla ETFs it has lasted only a short time. The next time there is a flash crash or other problem like with bond ETFs in late 2008 I will again assume short lived blip and not sell. I would think issues like this with exchange traded notes would also be short lived but something like TVIX has a lot more going on under the hood than something like the iShares Global Nuclear Index Fund (NUCL). For more in depth coverage of TVIX you can also read this from Barron’s and also the Kid Dynamite blog as several blog posts about it. The BATS IPO came off as probably the strangest debut of all time. BATS is a stock exchange and shares in its own IPO malfunctioned. As CNBC reported it there was...

$2 Million?

The other day a reader left the following comment; I read a lot and figure someone needs $2M to really have a good shot at living well and retiring with few worries. Roger your thoughts? The reader also shared that he is 58 with the implication that he is close to retirement age. Another reader left a comment on a Seeking Alpha post of mine agreeing that $2 million is the figure. Between the two comments I feel like I am being asked in part for my personal views and choices. The best generic advice I can give is to live below your means, don’t accumulate debt, save a lot and if you ever do need to fund your expenses/lifestyle out of your savings take no more than 1% per quarter. My use of the word generic is not meant as a slight, I believe the above combo is an essential foundation to a successful financial plan and we live by the first three now (we are a few decades from the withdrawal stage). Assuming the 4% rule, a $2 million portfolio would allow for $80,000 in portfolio withdrawals. Are you then going to assume getting social security or not? How does the $80,000 (plus social security or not) compare with how much you live on now? Not how much you earn but how much you live on. There are several types of expenses that we have to contend with and try to plan for one way or another. I’ve written about these before; things that probably can be easily planned, those that cannot and one-offs–things like vet bills,...

$2 Million?

The other day a reader left the following comment; I read a lot and figure someone needs $2M to really have a good shot at living well and retiring with few worries. Roger your thoughts? The reader also shared that he is 58 with the implication that he is close to retirement age. Another reader left a comment on a Seeking Alpha post of mine agreeing that $2 million is the figure. Between the two comments I feel like I am being asked in part for my personal views and choices. The best generic advice I can give is to live below your means, don’t accumulate debt, save a lot and if you ever do need to fund your expenses/lifestyle out of your savings take no more than 1% per quarter. My use of the word generic is not meant as a slight, I believe the above combo is an essential foundation to a successful financial plan and we live by the first three now (we are a few decades from the withdrawal stage). Assuming the 4% rule, a $2 million portfolio would allow for $80,000 in portfolio withdrawals. Are you then going to assume getting social security or not? How does the $80,000 (plus social security or not) compare with how much you live on now? Not how much you earn but how much you live on. There are several types of expenses that we have to contend with and try to plan for one way or another. I’ve written about these before; things that probably can be easily planned, those that cannot and one-offs–things like vet bills,...

Understand the Moment

We all have our own philosophies on how we deal with life or our process for making decisions including investment decisions. Part of my make up is to try to live in the moment or realize that life is about the journey more so than the destination. Another aspect to living in the moment is understanding the moment. As some readers may recall I am a huge sports fan and I am from Boston. By the time the Red Sox had won their first world series of the decade in 2004 the Patriots were already the Patriots and I commented to my brother (more of a sports fan than I am) the extent to which we were having a great run. Obviously the run continued for Red Sox, Celtics and Bruins, even the Boston Cannons won a Major League Lacrosse championship, and the Patriots are still the Patriots. While this has been great it used to not be this way for Boston teams other than the Celtics and it is unlikely that the championships will continue at this rate. To me this makes it all the more emotionally satisfying to realize this is a heyday for the teams I have always rooted for. This relates to investing and actively managing a portfolio. For the average portfolio manager (this applies to do it yourselfers) there will be periods where he has a heyday of being right about several things for some length of time and then other periods where little to nothing goes right. When things are going especially well it is important to understand the moment and remember that...

Understand the Moment

We all have our own philosophies on how we deal with life or our process for making decisions including investment decisions. Part of my make up is to try to live in the moment or realize that life is about the journey more so than the destination. Another aspect to living in the moment is understanding the moment. As some readers may recall I am a huge sports fan and I am from Boston. By the time the Red Sox had won their first world series of the decade in 2004 the Patriots were already the Patriots and I commented to my brother (more of a sports fan than I am) the extent to which we were having a great run. Obviously the run continued for Red Sox, Celtics and Bruins, even the Boston Cannons won a Major League Lacrosse championship, and the Patriots are still the Patriots. While this has been great it used to not be this way for Boston teams other than the Celtics and it is unlikely that the championships will continue at this rate. To me this makes it all the more emotionally satisfying to realize this is a heyday for the teams I have always rooted for. This relates to investing and actively managing a portfolio. For the average portfolio manager (this applies to do it yourselfers) there will be periods where he has a heyday of being right about several things for some length of time and then other periods where little to nothing goes right. When things are going especially well it is important to understand the moment and remember that...