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  • Retirement Strategy: How Much Money Will You Spend On Money?  [View article]
    I understand your objection. But you misread his comment.
    Aug 15, 2015. 12:27 PM | Likes Like |Link to Comment
  • Looking For Value In Today's Market? Avoid These Sectors  [View article]
    I understand about the central bank programs. But, are those programs likely to change much in the near future? Seems that it will be connected to their overall policies.

    I think the tax policy change is notable. But, I doubt that it will fully close the door for tax maneuvers by multinationals. The question is how much more tax will these companies pay when these changes are implemented.
    Aug 15, 2015. 12:22 PM | Likes Like |Link to Comment
  • Scanning The SA Family For Alpha: S_Belton12  [View article]
    My real estate...only about 7% average total return per year...
    Aug 15, 2015. 01:52 AM | 1 Like Like |Link to Comment
  • Scanning The SA Family For Alpha: S_Belton12  [View article]
    Yes. I leverage my returns in the stock market.
    In prior cycles (before I retired) I used more leverage than I have in this cycle, and my returns were notably higher.

    I also have rental properties which are modestly leveraged.
    Several are debt-free. In prior cycles I leveraged them by much more, and my returns were dramatically higher. I typically buy rentals in the early years of a business cycle with lots of leverage, and then sell about half as we near the top.

    Being retired, I am not as aggressive as I used to be with leverage.
    I also spend less time selecting individual stocks, and have recently decided to place less emphasis on real estate, as it is more work, and not as easy to leverage as it was in prior cycles. Without much leverage, real estate gives only a modest total return, and I think the near future will not be as good as the past.

    As for my returns and losses, I am up by over 200% in the stock market since the last market peak in 2007. Much of this outperformance is because I exited the market in late 2007, and I repurchased on a dollar cost averaging basis in late 2008 through mid 2009. I expected the market to bottom somewhere below 900, perhaps below 700. So I started buying as it passed 900. Of course, once I started buying into the decline I had growing losses during the final months of the decline. I was losing money every day, but, I kept buying in as the S&P500 declined from about 900 to under 700. I accelerated my buying substantially in March 2009 as the market bottomed (especially financial stocks), and I was fully invested by late spring, as the S&P500 passed 900 on the way up. I then slowly added to my positions (and real estate) using margin debt.

    My real estate portfolio has made only about 7% total return over the same period. It lost significant value in the recession, but has since largely recovered, and my new purchases made in 2009- 2014 are up nicely in value. But, my new purchases were all cash, so the future return prospects are modest. I plan to slowly sell those properties in the next few years.

    I have been an aggressive investor for most of the last 40 years.
    At some point I will shift to a lower risk and easier investing style.
    Aug 15, 2015. 01:18 AM | 2 Likes Like |Link to Comment
  • Scanning The SA Family For Alpha: S_Belton12  [View article]
    "You leverage YOUR returns in the stock market?"
    Yes. What do you mean by this? You don't like my returns?

    You say you only leverage when you control the outcome.
    When is that the case?

    You also say that you only leverage with someone else's money.
    Leverage is the use of others' money.

    Why do you say I am giving up a great deal of power by leveraging my real estate?

    How do you take advantage of the people who use leverage?
    Aug 15, 2015. 12:22 AM | 1 Like Like |Link to Comment
  • Looking For Value In Today's Market? Avoid These Sectors  [View article]
    You make interesting points. The Tech and Financial margins are bloated. But, it seems that the tax and interest rate environments are not likely to change substantially in the near term. Seems to be a longer term risk.

    I am more concerned about using the tech bubble years and financial bubble years as part of the historical data for deciding what is normal. These two sectors might not be as good as they look.

    Performance relative to the business cycle timing is also important. Understanding how each sector performs at this phase of a business cycle is probably more useful than the full historic averages.
    Aug 14, 2015. 10:47 PM | Likes Like |Link to Comment
  • Retirement Strategy: How Much Money Will You Spend On Money?  [View article]
    Actually, GetReal said it correctly.

    When he said "they" are taxed as ordinary income, it was clearly a plural reference. "ROTH" was singular in his sentence and "investments" was plural. Standard grammar clearly requires that the plural items go together ("they" clearly referred to "investments").

    To read it any other way is grammatically wrong... and the height of nitpicking, I might add.

    As for the more substantive points:
    One certainly can do better than the index funds by picking better than average investments. The problem is that most people can't do this, and they end up underperforming those index funds. The only real test of your ability is to compare the performance of your portfolio against the relevant index funds to see if you actually do have the ability that you think you have.

    If the relevant index is beating your picks, then your "skill" has negative value.
    Aug 14, 2015. 09:23 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: How Much Money Will You Spend On Money?  [View article]
    "Investment gains and distributions are NOT subject to ANY taxes when they are in a ROTH."

    Yes. That is why it is good to put high income investments in a ROTH, as GetRealHere said. It is a good way to avoid being taxed at ordinary income rates.
    Aug 14, 2015. 08:51 PM | Likes Like |Link to Comment
  • Scanning The SA Family For Alpha: S_Belton12  [View article]
    Simply put, MOST people do it poorly... Not all people.

    If you have the skill, the time, and the interest, then do pick your stocks for the portfolio. You can get better returns if you carefully pick better companies to invest in. However, it takes significant effort to do properly, and the majority of people will do it poorly.

    My process starts with my assessment of the macroeconomic environment and outlook. I then decide how to invest for that. ETFs let me move quickly without doing all the work of building a portfolio.

    I do pick some individual stocks, and collectively my picks do outperform the broad market averages. But, I do not want to do the intense work of selecting an entire portfolio this way, all of the time. Especially considering that I will regularly sell portions of the portfolio as I rotate through the business cycle, and I will sell the entire portfolio when the bull market ends.

    So, I make heavy use of ETFs, which lets me bet on the changing market and economic conditions without doing extensive research on individual companies. As part of this process, I will buy sector ETFs, and some individual stocks that I think will perform better than the average.

    But, because I am not holding forever, I am not always looking for the best companies to stand the test of time. Instead, I am often looking for the companies that will have the best near-term (1-3 year) returns. So, that could be a not-so-great company that is heavily oversold. An example of this was the banking sector in March of 2009. So, I loaded up on XLF and various banking stocks including 20,000 shares of BAC mostly at under $4 per share. In October, I sold 10,000 shares of BAC for over $17 per share. I exited the rest of the BAC and other banking stocks during early 2010, and moved the money into consumer discretionary, and 5,000 shares of MCD. In 2012 I sold the MCD and bought XHB and various homebuilders. I added to that bet by selling SPY to buy more XHB, and for added juice, I added UMDD and UPRO 3x ETFs (they have more than doubled since I bought them). I also buy on margin to leverage my returns.

    My portfolio changes after 2012 have been relatively minor tweaks and rebalancing. Since I have been fully invested since 2009, all purchases are funded by selling something else, or by increasing the margin debt.
    Aug 14, 2015. 04:36 PM | 2 Likes Like |Link to Comment
  • Retirement Strategy: How Much Money Will You Spend On Money?  [View article]
    "Fair value" and "intrinsic value" are very sensitive to the assumptions used in the analysis. Change a few assumptions and get a very different answer. Even so, the exercise is worthwhile.
    Aug 13, 2015. 05:54 PM | Likes Like |Link to Comment
  • The Unemployment Rate Is Not Signaling A Recession: Update August 7, 2015  [View article]
    U-6 is a more complete measure of unemployment.
    But, it is the least reliable of the measurements.

    Civilization Type I is correct. The people collecting unemployment benefits are only 1.6% of the workforce.

    The BLS published 5.3% is the unemployment rate counting people who are actively seeking work. People who have become discouraged and have given up looking for work are not counted in the standard unemployment number. There are also many other people who choose to be unemployed.

    This link explains how the BLS measures unemployment:

    Because of the issues with measuring unemployment, I prefer to look at the workforce participation rate. Looking at how many people are actually working tells a more accurate story.
    Aug 13, 2015. 05:39 PM | Likes Like |Link to Comment
  • How To Recognize A Major Market Top... Or Bottom  [View article]
    The important tax rate for business expansion is the marginal tax rate.

    It is important to know your costs, and when expanding the business it is your marginal tax rate that will be in play. Depending on the circumstances it could be less than the max published rate, but not likely as low as the company's average rate.
    Aug 13, 2015. 03:11 PM | Likes Like |Link to Comment
  • Scanning The SA Family For Alpha: S_Belton12  [View article]
    You don't have to predict cycles to recognize economic conditions, and the prevailing trend. Fighting against the trend is a losing game.

    When the economy is expanding, it benefits some industries and companies more than others at various times. An investor can benefit from understanding this, and allocating his investments accordingly.
    But, the prevailing trend is always a factor, even for those great companies that can outperform the rest.

    I mostly invest in ETFs to save myself the massive work of searching for the best companies. Most people delude themselves into thinking they are good at picking stocks. I know what it takes to do it right, but no longer want to do the work.
    Aug 13, 2015. 03:01 PM | Likes Like |Link to Comment
  • Contrarians Buying Up XLE  [View article]
    The oil supply is very real, and growing. The demand is still soft.
    The balance is not favorable to price increases.

    Because both supply and demand change slowly, and are not very sensitive to price, the shift in the balance has a very significant impact on the price of oil - more so than most products or commodities.

    High sunk costs combined with relatively low marginal costs induce producers to keep pumping at what seem to be uneconomical prices.

    The oil supply development cycle is very long. As a consequence the oil pricing cycle is usually very long. Don't hold your breath on this one.

    I don't have a prediction for when the bottom will come.
    It could easily be a decade from now, or maybe next year.

    Oil will be a good place to invest at some point.
    But, I will wait for the rebound to be clear before jumping in.
    Aug 13, 2015. 12:11 AM | 2 Likes Like |Link to Comment
  • Retirement Strategy: How Much Money Will You Spend On Money?  [View article]
    As Baron Rothschild said:

    "Buy when there is blood in the streets, even if it is your own blood."
    Aug 12, 2015. 05:05 PM | 3 Likes Like |Link to Comment