Joellyn says no picture can capture how steep this is.
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26 comments:
Roger and Joellyn,
you are a great couple. Money is not all in life. I lived in NYC for 30 years and to some people money is all. I live in Italy now, and realize that it is important to balance life. I have been following this blog since june 2008, and Roger, thanks for your blog to give some insight about markets, world finance and most of all suggestions about balance in life.
Jeff From Milan, Italy
Hey Roger:
Keep doing what you do man! The market teachs us that nobody knows what the future holds.
Happy Hiking. Cynthia
We walked the road. We had a rented Jeep and I'd like to have tackled it, but NOOOO. Heheh.
Hi Roger,
Your comments about balance are certainly good reminders to really think about what is important in life.
Well, anyway, getting back to understanding our financial/investment environment. I know that what I will be asking is slightly off the topic of investing, but it is certainly something that influences our investments:
Do you know what it means when it is reported that the Federal Reserve will by treasury debt? I heard that the Federal Reserve is buying government debt (treasury bonds etc.). Where does the Federal Reserve get the money to buy Treasury bonds (and all of the other money the Federal Reserve is lending out)? And will they soon run out of money? (Does the treasury print it and give it to the federal reserve so that the Federal reserve can then give the money right back to the treasury by buying bonds from the treasury?!!!!)
I am hoping that you are a little less confused than I am.
DOW 4,000?
http://tinyurl.com/bd4yzj
The market is getting a tad annoying.
Hi Roger,
Listening to what you said in your video post, I'm not really sure what to make of it. Your thesis, I think, is that people get scared/upset/angry during bear markets, and this is normal behavior. No offense, but that isn't exactly headline news. If someone loses 40%+ of their nest egg, they are bound to be upset.
Every bear market is different, and every bear market is the same. I think your thesis used to be that this bear market is "normal" because it would go down about 35% from its peak. Now I understand your thesis to be this bear market is "normal" because people are getting scared.
I wonder - what would it take for you to concede that this bear market is NOT "normal" (however you define it)? I guess I just don't understand what it is you are trying to say. Bear markets instill fear? Can't disagree there. But the point is, this particular bear market has both similarities and differences from the past 5 or 6 bear markets. It's great that you understand the similarities (i.e., the market goes down, people get scared), but I think it would be helpful if you also understood the ways in which this bear market is different from the other ones we had in our lifetimes.
P.S. This is a bit stale, but a couple posts ago, Kirk said in response to my previous comment that, "Financial planners get paid to help clients build portfolios that match their goals with their risk tolerance."
I completely disagree. Any Average Joe with half a brain can spend 1/2 an hour looking at products and come up with a portfolio of low cost index funds that "matches his goals with his risk tolerance."
What financial planners REALLY do is the really, really hard part, which is hold Average Joe's hand as he actually takes the step to execute his plan, and then continue holding his hand and reassuring him as the market tumbles up and down. In other words, picking a portfolio isn't hard. If you want to go super simple, just put your money in a target retirement fund. The hard part is executing your plan, engaging in that risk, and following through the long term, and that's what financial planners are there for. Roger would probably agree with me.
7:33, you hit on the fear that exists if we monetize the debt (ie print money to pay for it). one thing being done is printing money to fund all of the acronyms.
Dave,
My hunch is there is nothing I could say to please you. I have said many times that I was wrong about the magnitude (including this video) so I don't know what you are fishing for.
Additionally I perceive value, even if just for clients reading the site, in reminding them of the fear that goes along with being in the market during bear phases and that succumbing to that fear is a bad idea. People, not you apparently, need to hear this every now and then.
I'm not sure if you want me to draw your conclusion or what but I view things the way I view them and that is what gets posted.
"Any Average Joe with half a brain can spend 1/2 an hour looking at products and come up with a portfolio of low cost index funds that "matches his goals with his risk tolerance." is simply not true. You're making the assumption not just that they have access (internet access, for instance) but that they know what to look for.
Anon 7:33 I'm no expert in monetary policy but it sounds like you are describing quantitative easing. Metaphors aside, central banks don't just print new money and toss it out of helicopters, there has to be a mechanism and a path: Buying government bonds from Treasury (helps keep long bond rates down), lending it to banks (helps reduce inter-bank rates), or buying assets from banks can serve in a pinch.
As I understand it, it serves to help banks recapitalize and clean up balance sheets while encouraging them to lend; it can also serve to fend off deflation by increasing the supply of money. One risk is it "pushes on a string" because when everyone is afraid to spend then no one wants to borrow. Another risk is higher inflation, possibly even hyperinflation, could occur down the road. The case of Japan, which used quantitative easing extensively during its "lost decade," demonstrates that down the road can mean an awful long time however so who knows; certainly I don't.
Bank of England has announced a quantitative easing policy and the US Fed appears to be doing it as well although it's hard to tell exactly what Bernanke and company are up to sometimes.
In the absence of a robust fiscal response -- the government spending to replace the lack of private spending (tax cuts aren't as effective because people use them to save more or pay down debt rather than borrow or spend) -- I'm inclined to doubt quantitative easing will prove sufficient but, frankly, some of this stuff is counter-intuitive (when it's not bloody Greek) so that opinion is worth about two cents more or less (actually, keep the pennies, I'll take the same weight in copper).
Does anyone happen to know if a site/link/paper that describes what exactly managed futures are and how they work? I'm still trying to understand how RYMFX works.
did you try this?
client and personal holding.
The UYG Powershares ETF is down to $1.50 and it has traded over 128 million shares so far.
Can it go to zero?
when originally created the answer was no. every day it resets, whatever the underlying does the fund should do double. the action now is odd, obviously, and while I guess I would say no, i have no skin it that game.
The prospectus and fact sheet essentially say "we try to meet hte performance of the S%P Diversified trend indicator". I'm trying to understand what's going on under that - if there's a general strategy followed, or if this is essentially a managed ETF.
the index goes long or short quite a few commodity futures and financial futres based on 7 month relative strength. it rebalnces monthly.
from anon 1:21
Thanks to you both for your comments.
roger - interested to hear your thoughts on the obama blame debate.
http://bespokeinvest.typepad.com/bespoke/2009/03/presidential-starts-1900-2009.html
Kind of hard to argue that its been the worst start to a presidential term, worst inauguration day and worst election to inauguration date results ever
what are the odds the market would have been much different with any other person in the hot seat?
don't know, but look at the healthcare issue. As soon as he announced it, anything healthcare has been killed. Not blaming the entire decline on him, that would be ignorant. But his very anti-business / anti-"rich" policies cannot be helping matters.
i certainly wish capitalism was a higher priority for him and I wish he understood how many people are actually involved with capital markets, ie pensioners.
Based on this from Bloomberg, we appear headed toward bailing out a lot of pension funds because their results have been so far below plan for years,
saw that article over at bloomberg. that is another disaster waiting to happen but I'm still amazed of gov't pensions (guess unions dues are good for something). it just seems crazy that gov't workers are continuing to be guaranteed pensions of 80 - 100% of salary plus full medical, when every other industry is pulling back on these benefits. But no one cares, because there is no competition and the taxpayer will eventually be on the hook.
Steven
The 10 year performance of the Diversified Trend indicator looks OK on paper, but after Rydex take a near 2% p.a. cut there's not a lot of difference to a low cost SP500 tracker
http://www2.standardandpoors.com/spf/pdf/index/SP_Diversified_Trends_Indicator_Factsheet.pdf
Cool, 10 years of annualized returns. I'd like to look at the correlation. Thanks.
Stephen (sorry for the misspell earlier)
From the link that Roger provided earlier if you follow the Fact Sheet link there's a PDF that shows SP500 correlation (1985 and 2008) as -0.14
http://cbsmw.cfgweb.com/showpdf.cfg?pid=98229&pdfid=288781
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