Outliving Your Money
In this 0%-interest-rate environment, public pensions like Rhode Island’s are using an assumed rate of return of 7.5%. If and when that estimate goes unmet, it’s up to taxpayers to make up the difference. It’s preposterous that public pensions are assuming a 7.5% rate of return. The only way they’ll... Read the full story
Future Dividends, Coupons, and Principal
Your purchasing power is your lifeblood in retirement. On my office credenza is The Theory of Investment Value by John Burr Williams, first published in 1937. Chapter five is titled “Evaluation by the Rule of Present Worth, Section I. Future Dividends, Coupons, and Principal.” Burr writes: [D]ividends,... Read the full story
Owning the Best Performers
In its quarterly funds report printed on January 9, The Wall Street Journal lists the 45 largest stock and balanced funds by assets. The best performers of this group for 2011 were a gold ETF, SPDR Gold (GLD), up 11.2%, and a balanced fund, the Vanguard Wellesley Admiral shares (VWIAX), up 9.7%. The... Read the full story
Annuities Are Challenged
The realities of annuities are being revealed to both buyers and sellers as interest rates in the United States creep along near 0%. Sellers are finding it harder to live up to promises of guaranteed return rates, and buyers are finding it harder to believe them. As the Wall Street Journal’s Hester... Read the full story
Best Buy Annuities
You don’t want to forget your sunglasses. I made that mistake before going in to a Best Buy recently. Blinded by the bright lights, I felt like I was in an airplane hangar with a wall of TV echoes to match. It’s no surprise to me the stock is off by 50% in five years. The same HD marketing blitz... Read the full story
The $100,000 Range Rover Boom!
You can go to a local U.S. Range Rover dealership this weekend and buy a nicely equipped Range Rover HSE for $85,000 or a Supercharged for over $100,000. If you finance it in U.S. dollars, at least you know what you owe. If you want to be as fancy as your new car, you can borrow in a foreign currency... Read the full story
Retirement Stocks
You want to be paid well for investing in this market. Young Research’s 32-stock Retirement Compounders portfolio average dividend yield pays 5%. Compound that for 15 or 16 years and you double your money. Run your finger along the black line, the performance of the Dow Jones Industrial Average, beginning... Read the full story
A Pathetic Payday
Doing less, with less, is one way to describe retirement on a fixed income today. This sad truth is illustrated by Young Research’s proprietary Payday Indicator, the average of the Dow Jones Industrial Average yield plus the three-month Treasury bill yield. In the history of the series, it has never... Read the full story
Rollover that 401k
My first job after Babson College was with Fidelity Investments. I worked at Fidelity Institutional Retirement Services Company (FIRSCO). It managed the 401(k)s of large companies. On big up or down days in the stock market, phone volume would pick up exponentially. Everyone had to help answer calls—including... Read the full story
Twisted Risk to Savers, Pensions, and Annuities
The Federal Reserve has left savers, pensions, and annuities twisting in the wind. Buying long-term Treasuries has resulted in the 10-year bond yielding less than 2%.If we take into account inflation, especially of items needed for survival like food and energy, investors are essentially paying to lend... Read the full story
