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GotLife

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  • Weighing The Week Ahead: Time For A Turn In Housing? [View article]
    dtrager,

    Interesting reply since one of our nephews recently moved to Austin but before leaving walked away from all his rental properties in Kane and Cook, leaving the mess behind. His partner in the investments, another nephew, and I spoke this weekend. All their properties now have underwater mortgages and are continuing to decline in quality because the neighborhoods they are in are declining because of the large number of foreclosures and poor employment. All his tenants are now Section 8 and the repair, maintenance and management is overwhelming him. Another friend of a relative is in similar straights but luckily has long-term tenants that do most of their own repairs.

    Our nephews business is doing quite well, demanding more of his time and causing him to lose almost all of the depreciation benefits his rentals offer. Looks like the handwriting on the wall to me.
    Feb 21 07:38 AM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Time For A Turn In Housing? [View article]
    Thanks Jeff. Two recent experiences convince me things will improve because it simply can't get worse. My neighbor listed her house in Florida in December. She has only had two offers, both for 45K. She paid 207K in 2006.

    We thought of listing a rental condo in Schaumburg, Illinois. The agent found 112 listings with none having sold in the last six months. If we did list it, with a full rehab including new bath and kitchen, it would appraise at 35% less than our 2004 purchase, and likely only sell to FHA purchasers. The realtor also expects a wave of foreclosures that will soon make things worse.

    Fortunately we can rent and gain a positive cash flow. But the question is whether sellers will entertain the damage these low prices cause or continue to sit while watching more and more foreclosures shell the market. I suspect "improving" is not the same as a healthy, vibrant housing market nor will it be for some time to come.
    Feb 20 10:07 AM | 5 Likes Like |Link to Comment
  • The Truth About Asset Allocation And Active Management [View article]
    Great analogy Twest!

    Perhaps we need to start the education early - the concept of cash flow, saving and delayed gratification. Based on the recent financial melt down, it seems most don't even understand that simple concept. After all, you need to save in order to have a garden to tend.
    Feb 18 10:56 AM | Likes Like |Link to Comment
  • The Truth About Asset Allocation And Active Management [View article]
    Augustus,

    I attempted to edit my comment after rereading yours and realizing that you were proposing an undiversified dividend stock strategy, not MPT. Sorry for my confusing replies. For some reason SA wouldn't allow me to edit my reply below.

    I would hope that when assigning dividend stocks that you would not assign me CITI, which was one of my dividend stocks in 2008. Ouch!

    A friend did hold an exclusive position in CITI and rode it down from $60. Sadly, that year was filled with many personal tragedies, for him and his family, and he completely ignored the market. But, he is alive, well and discovered a life without wealth can be very satisfying.
    Feb 18 05:03 AM | 1 Like Like |Link to Comment
  • The Truth About Asset Allocation And Active Management [View article]
    Augustus and faustius,

    Thanks for the replies. The irony for me is that I am currently reading a book on the history of Rome called "Roma." The picture in my identifier is of a gold shop in Florence on the bridge of gold. I just had to reply to you guys. There ARE coincidences in life. :)

    Augustus, analyzing the performance of any population such as 500 investors will yield a bell curve. I totally agree with you that there will be an average performance and that there will be winners using MPT. But my hunch is that the outliers performance will be only marginally better, or worse, and based on allocations that are skewed towards a particular asset class, sector or stock. If you put that same population and mixed it into a broader population of non-MPT investors, I suspect it will be close to the median but that the outliers at both ends would consist of those doing less diversification and that they would be far above, or below, the average return. With greater risk comes greater reward, or greater failure.

    faustius, diversifying across 20 stocks, a preference I share with you, is quite different from what the Professor was advocating. He was proposing asset allocations across multiple index funds, such as SPY, bonds, etc. claiming an individual investor could never beat them in the long haul since studies had proved conclusively that the average investor could not outperform this strategy. But who strives to be average? And, if all were, the world would consist of no Tom Bradys, Eli Mannings or Aaron Rodgers. I would like to be one of those outliers but as a retiree personally shoot for something with less risk but above the average performance I believe MPT offers.

    Since I am unlikely to obtain a large government grant to prove my hunches, I will have to rely on my personal strategies to invest wisely and safely. The Professor will no doubt at some point receive massive grants and will waste it or massage the data properly to win a Nobel.

    Good fortune to you both!
    Feb 18 04:12 AM | Likes Like |Link to Comment
  • The Truth About Asset Allocation And Active Management [View article]
    During a graduate level investments class, there was a spirited discussion between the Professor and a student. The Professor was extolling the wisdom of a Modern Portfolio Theory, asset allocation strategy using indexing. "Can't possibly be beat in the long term," he suggested.

    The student challenging him was attending class merely for the pedigree, a very successful businessman that had just completed the sale of a LBO and had pocketed $20,000,000. The Professor was young and was driving a decade old Toyota. The student's argument was that above average investment returns in the market are possible if the investor was skilled, knowledgeable, disciplined and attentive. The Professor hung on to the MPT/ Indexing mantra until all credibility was lost.

    I sense some of this closed mindedness whenever I listen to MPT advocates. I had at one point tripled my IRA by being blindly committed to all company stock and at another point enjoyed an annual return of over 11% for a couple of years by being all in on a bond fund. Meanwhile, my well-meaning manager brought in a financial planner who must have used the word diversify a hundred times. At the time it fell on my deaf ears.

    But does an investor even need to be skilled and knowledgeable to glean outsize returns? I have read about or been acquainted with a number of small investors that have stayed exclusively long an HPQ, IBM, ABT, GOOG, AMZ, or AAPL, and have become fantastically wealthy with a simple buy and hold in a single asset class. My Uncle retired from RR Donnelly in the 80's and built his entire portfolio around 12% long term bonds. A secretary kept all her Abbott Lab stock, leaving $3M to charity. A gentleman bought Apple at $12 and is still holding 25%... and similar stories from others.

    There are lots of ways to make a buck. Passive investing might even work if you retire and then die in the correct 30 year window. But my experience says that most passive investors want to be non-thinkers, robotically allocating and then cashing checks. If so, good luck to you.
    Feb 17 03:56 PM | 2 Likes Like |Link to Comment
  • Jan. Housing Starts: +1.5% to 699K vs. 675K expected and 689K (revised) last month. Permits +0.7% to 676K vs. 680K expected and 671K (revised) last month.  [View news story]
    Two recent experiences convince me otherwise. My neighbor listed her house in Florida in December. She has only had two offers, both for 45K. She paid 207K in 2006.

    We thought of listing a condo in Schaumburg, Illinois. Agent found 112 listings and none had sold in the last six months. If did list it, with new bath and kitchen, the last one sold appraised out at 35% less than our 2004 purchase. Realtor also expects a wave of foreclosures that will make things worse.

    Improving my arse...
    Feb 16 12:24 PM | Likes Like |Link to Comment
  • As well flagged, President Obama sends Congress a $3.8T budget request for FY 2013, but given the tax rises that are included, it's unlikely to pass intact and certainly not before the election. The request forecasts that the deficit will rise to $1.33T this FY before falling to $901B in FY 2013. You can watch Obama's budget remarks live here.  [View news story]
    Wish everyone would ignore him. Terry is either a pathetic troll or an automated bot. Why SA editors don't pull the plug on him, or it, I can't figure. If you look at Terry comments they are not remotely about investing. Although what is even more amazing are the thumbs up posts so many readers click. They make Terry, human or otherwise, seem absolutely brilliant.
    Feb 13 07:25 PM | 1 Like Like |Link to Comment
  • As well flagged, President Obama sends Congress a $3.8T budget request for FY 2013, but given the tax rises that are included, it's unlikely to pass intact and certainly not before the election. The request forecasts that the deficit will rise to $1.33T this FY before falling to $901B in FY 2013. You can watch Obama's budget remarks live here.  [View news story]
    Just as easy to buy the rich as it is the pauper. Since there is a lot less of them, it is cheaper as well. The result is the upper middle class wage earner will wind up paying the lion's share of the bill without enough votes to prevent it. How are you going to hide a corporate salary or investment income from the IRS?

    But I bet there are tax breaks for "critical" jobs like teachers and highly payed government workers.
    Feb 13 07:19 PM | 2 Likes Like |Link to Comment
  • Dropping The Dime On J.C. Penney [View article]
    If he had to sell 777,000 shares to pay for his grant, he is not nearly as bright as he pretends. Or, did he sell because he was not aware that such large moves of insiders can hurt the stakeholders and send a message? Again not too bright. On the Degeneres event he stated that Ellen shares the values of the majority of Americans. Really? Was that poll tested? Can a retailer save $800M in a year without decimating staff, advertising and locations?

    But hey, that's the beauty of capitalism. You have to do more than talk the talk. Time to start the walk...
    Feb 12 08:29 PM | Likes Like |Link to Comment
  • Markets might by signalling that Spring is coming, says Martin Taylor in the FT, but the similarities to the 1930s - "a time of persistent false dawns" - are "multiplying ominously." The "shockwaves of the crash" are touching more and more people, and the debate is once again between austerity and the need to seek full employment.  [View news story]
    Ironic Ginsberg recommended South Africa. Could she have seen that Egypt will soon be installing a system based on permanent apartheid, complete with religious and gender inequality for all?
    Feb 12 08:08 PM | 1 Like Like |Link to Comment
  • Bank Of America: Trading Around The Edges [View article]
    Stockmajor,

    Like you comment. But if you don't sell you haven't "made" 60%. Basically you are risking your 60% gain to gain a much smaller 20% return. Why not a different strategy on a different stock for the smaller return?
    Feb 12 08:04 AM | Likes Like |Link to Comment
  • Why now? The loud cover of Barron's calls for Dow 15K in 2013. The corresponding article relies on data from Jeremy Siegel, whose Stocks for the Long Run came out while the 1990s run was still a wholesome bull market. His message eventually got twisted into an "all stocks, no matter the price" mantra, with others publishing Dow 36,000 to mark the epic top.  [View news story]
    Go all in then!!
    Feb 12 07:55 AM | 1 Like Like |Link to Comment
  • Why now? The loud cover of Barron's calls for Dow 15K in 2013. The corresponding article relies on data from Jeremy Siegel, whose Stocks for the Long Run came out while the 1990s run was still a wholesome bull market. His message eventually got twisted into an "all stocks, no matter the price" mantra, with others publishing Dow 36,000 to mark the epic top.  [View news story]
    They are never wrong, especially in economics.

    Full Disclosure: Author has been known to use sarcasm to state a contrarian position and to use a facetious comment in an effort to mask cynicism.
    Feb 12 07:51 AM | 2 Likes Like |Link to Comment
  • Why now? The loud cover of Barron's calls for Dow 15K in 2013. The corresponding article relies on data from Jeremy Siegel, whose Stocks for the Long Run came out while the 1990s run was still a wholesome bull market. His message eventually got twisted into an "all stocks, no matter the price" mantra, with others publishing Dow 36,000 to mark the epic top.  [View news story]
    My first manager drove me crazy with this one but I learned it well.

    "If "Ifs" and "Buts" were candies and nuts, it would be Christmas all year round."
    Feb 12 07:36 AM | 1 Like Like |Link to Comment
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