November 2008
November 21, 2008 –
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RELATED TICKERS: C
I remember somebody asked what was C fair value based on their projected earnings . At the time C was at $20. I looked at their forward P/E and I got $3. So, is it time to buy or did they slash their earnings even more?
I just bought 100 shares just for the fun of it. If it goes bankrupt, I might have to go without a new pair of shoes. LOL.
November 19, 2008 –
This is thinking aloud about how one should go about saving enough for retirement. I’ve been thinking about it a lot last few months. Now that the whole 410K/ buy and hold thing has been completely discredited, how is America to save for retirement?I agree with somebody who posted earlier today that stock market is good for short-term trading but too risky for long-term investing.Dividends are not safe anymore either.Bonds were underperfoming until recently due to very low interest rates in the last decade. Only now they are starting to recover because people started putting premium on lower risk and bonds are perceived to be safer than equities, and in most cases this is true. But is it going to last?I hear more and more people suggesting Treasury bonds as an alternative. However, with 2-3% return, they are basically in line with inflation. So, really they protect the money but they don't increase it. if you are saving 10% for 30 years and plant to live 20-30 years in retirement, it is not going to be enough because roughly you'll have to live on the same 10% of your pre-retirement income.What other options are out there? Putting 10% of your annual income for retirement requires at least 5-7% rate of growth to provide for any sort of tolerable retirement.Thanks to our Federal Reserve keeping interest rates at 1-2% last 10 years to stimulate economy it undercut the rates banks pay to consumers on CDs. So, really people are forced to spend/ invest since the safest options for savings like CDs are really unattractive.Keeping interest rates anywhere below 3% is clearly bubble inducing since people always chase higher returns and that leads them into riskier schemes and assets. One might call it greed, but in reality all most people want is secure retirement.And my conclusion is, that first of all there is no free lunch and now we are paying for all our free lunches in the previous 10years, and second I don't see a path to a secure retirement for an average american barring some new "get rich quick" ponzi scheme. I only hope I will be one of the first to find it.
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November 14, 2008 –
As market continues +/- 5% daily swings for the second month in a row, being in the market reminds me more of being in a casino than anything else. You never know which hand is likely to win or lose and when. Given that, I don't see how anybody can advocate 401K and IRA plans as legitimate tools to provide for retirement. It is the same as suggesting earning your retirement money in a casino. Just take 10% each year and go to Vegas. Imagine, the gambling advisory industry we could create to teach people how to diversify their gambling and how much to gamble at a time.Sounds ridiculous? Because it is. 401K have proven to be a complete failure. First, when they were introduced, mutual funds grew very fast, thus inflating the stock market and giving credibility to 7% on average returns. Now, with massive deleveraging and baby boomers retiring we have come to the end of the road. The 40% defilation we have experienced in the stock market could actually be permanent.I am curious to see what the next administration will offer as our next retirement vehicle, if anything. And whatever it is, it could end up being the next bubble.As a side note, I saw some Vanguard guy advocating in Business Week increasing tax on short term gains so that they are higher than ordinary income to promote "long term investing". That just made my blood boil. It is clear, mutual funds industry is about to fall off the cliff and they are trying desperately to hold on. Do they not understand that long term investment theory is dead and so are mutual funds? Putting them on life support through tax policy is the same as supporting GM, they will still fail. And they are trying to couch their blatant self-interest in such nice terms and present it as something that is good for an average Joe. When will people stop talking advantage of an average person every step they go? When the so-called executives start looking at the big picture instead of the next quarter? They need to adapt to nbew conditions not try to hold on to the old order. Ok, stop the rant.
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