Guest Posted August 23, 2002 Report Share Posted August 23, 2002 yeah, my bar would be a much wiser investment. also, he would not need to go through that incomprehensible small print those beancounters here like to post. Link to comment Share on other sites More sharing options...
JJsushi Posted August 24, 2002 Report Share Posted August 24, 2002 Regards to Worldcomm and Enron. Yes it might be a bit of an overstatement but there is still an effect. You talk about the lending market and mix it up with IB's. IB's make most of their money from merchant banking, brokerage, and trading. Commercial banks are the guys who issue LOC's and participate in the pooled bank financial lending side (gah I forgot the terminology) blah blah blah. These are the folks who do the majority of the lending. [color:purple] These days there is very little difference between the IB business and the commercial banks. Your largest banks are now becoming the bigest players in the IB business: Citigroup, Bancamerica, JP Morgan, Wachovia, Bancone, Firstboston and your maor IB's are getting more into the lending business; Goldman, merrill, Morgan Stanley. The lines have blurred considerably. Citigroup is the perfect example of doing a soup to nuts commercial banking and IB operation. Bancamerica has declared to it's commercial paper and credit facility borrowers that they will close off the funding if these corporations don't do more IB business. Goldman have increased the number of bridge loans to clients facilitate IB deals. color=purple> As for Greenspan giving some assistance to the Pension funds (and I'm not saying saving)... It goes into public perception when folks see their portfolios take such a huge hit. They close their wallets and that really inhibits economic growth. It ain't the first time the fed has helped financial institutions either. Take a look at rates during the times of the S&L. The lending vs deposit rates were at extremely high spreads giving the financial institutions the breathing room they needed. [color:purple] I think that you are comparing apples to oranges with the pension fund and S&L argument. Helping the S&L's prevents a national liquidity crisis and "run" on the monetary system anda perception that all the banks were failing. Recently the Fed did help LTCM but that was entirely different situation and I still disagree about intervening to help those guys out. People can't make a run on their pensions nor would they because a pension is deemed to be ironclad and there for you when you retire (we are not talking about Enron type 401ks here). The largest pension funds are the ones that are for Federal/State/Municipal government employees. These are usually defined benefit plans and are funded in part by tax dollars. You want to keep them solvent you issue more bonds or raise taxes(I do realize that it is a bit more complicated than this but I simplifying it for the sake of the argument) Link to comment Share on other sites More sharing options...
Guest Posted August 25, 2002 Report Share Posted August 25, 2002 OK, so lets beat this thing to death then ? at the least it will give flyonzewall something to bitch about! I will try to dodge the incoming by avoiding joining in the exchange of salvoes on statistics, trends, fundamentals, indicators, deviations, as I don?t think that they probably help Elius that much, and anyway they are beyond the capacity of my feeble intellect to cope with. With the funds he has available, then to avoid spending his retirement living the lifestyle of a poverty stricken Thai peasant he is either going to have to work or to increase the return from his retirement fund. He could teach though he seems reluctant to do so, but if he did he might get 30,000 per month or 360,000 per year to supplement his income. He posted his question on 15 August. Lets assume he invested his 10MM Baht funds in bonds or equities on that day and lets see how he is getting on now. For bonds we can look at the performance of a top bond fund, Pimco Total Return. For mutuals we can look at the top 3 mutuals, Washington Mutual, Fidelity and Vanguard and also at the top 3 ETFs, Diamonds Spyders and Qubes. At close of business on 22 August the results were: Pimco funds : up less than 0.3% Mutuals : up 3.1% ETFs : up 4.3% If he is in mutuals and ETFs he would have had a gain of about 3.5%, that is 350,000 Baht. About the same as a years teaching - and in a week. He could now start skimming the profits off the top and still retain his original investment. Now the numbers are very, very, rough as they do not take account dealing costs, taxes, transfers fees, exchange rate conversions, etc. but they illustrate the principle. The underlying basis of this approach relies on the assumption that the equity markets, after 2+ years of substantial decline, are now past or somewhere along the bottom and will rise over the next few years. That is not a view shared by all and we can see other posts here where both sides of the argument are being cogently made by knowledgeable posters. Nonetheless I see the approach as multi staged. Even if the equity markets are not on a consistent rising trend but about to decline further I would still expect that there will be market rallies where it will be possible to skim gains off the top. By way of example, even if we are still in a long term downward trend, there has been a significant rally in the last month (22 July to 22 August) where the Dow has been up 17.5%, the NDX +17% and the S&P 500 +20%. Taggart made the good point of highlighting trackers. There is always a robust debate whether active management gives better returns than trackers. The one thing for sure though is that trackers will never outperform the market. Note here that the ETFs are in effect trackers (Daimands DOW, Spiders S&P 500, and Qubes Nasdaq 100) which provides a core of market performance to the investments and active management to cream off the profits during rallies and thus overall outperform the market. Of course all this requires that Elius is going to have to pay attention to managing his retirement fund despite his reluctance to do so: ?I would like to settle down and control this money HERE and not worry about overseas bullshit. The last thing I want to do is go online at 8am every bloody morning to see how the market is doing!!? But we are not talking day trading here. It needs an intelligent, aware and active monitoring of what is going on with his investments and a pre planned response if things are turning sour. Probably needs only an hour or two a month with a simple spreadsheet and about the same level of attention, knowledge and interest that he probably already gives to the NFL. I also like the idea of having funds readily convertible into cash (not in property, which is a one time bet, locked in, not easily made liquid, and then with an all or nothing liquidity conversion) to cope with the unexpected - such as an urgent family or medical problem or having to deal with a really serious emergency, like an acute case of sick buffalo syndrome. Are there risks? Of course there are and it will be for Elius to decide his personal preference for the lesser of the two evils as he might see them: a starvation level fixed income with a declining stash and teaching, or having to devote some time and effort to managing his retirement fund though with no guarantees that he will necessarily be that much better off. But I don?t see the alternative. OK so teaching might be a useful way to give him a supplement to raise his standard of living to a semi decent level. But that seems a limited short term palliative to me. What happens when he is 60, 70, 80 ? are they going to be rolling his tired, arthritic and wrinkled old body into the classroom in his wheelchair for him to be delivering the next lesson in English 101 for the zillionth time? Jeez what a future to look forward to. But if it doesn?t work out and he loses some money, losses which he can limit at any level he wants, it won?t be because he foolishly (with hindsight) trusted someone else and had his financial security and his retirement fund totally fucked up by putting it in the hands of either a dishonest tenant or a ?licensed finacial advisor? who made extraordinary claims and promises. Sorry STH I have to vote with the cynics on this one. The headline pitch simply sounds too good to be true ?I can guarantee ..? (so who you, and if your going to guarantee it anyway why not just pay it all up front now?)?.. a return..? (how calculated?) ?.. of at least 28% ..? (over what period?)..?and the money..? (currency? risk?) ?.. is govt ..? (which?) ?.. protected.? (means?) A fuller explanation with much more detail is needed if anyone is going to think that your claim might have some credibility and is not just another ?boiler room? type scam. Go on take up the challenge, convince us and totally shame all the skeptics like me! Link to comment Share on other sites More sharing options...
JJsushi Posted August 25, 2002 Report Share Posted August 25, 2002 I also like the idea of having funds readily convertible into cash (not in property, which is a one time bet, locked in, not easily made liquid, and then with an all or nothing liquidity conversion) to cope with the unexpected - such as an urgent family or medical problem or having to deal with a really serious emergency, like an acute case of sick buffalo syndrome. [color:purple] He could be just as liquid in property. He could open a line of credit at a verry low rate. His property could appreciate in value and he could then do a cash out re-fi. He could raise rents etc. Property allows one many options. Link to comment Share on other sites More sharing options...
Guest Posted August 25, 2002 Report Share Posted August 25, 2002 Just in case anybody tries to tell you that if you use index (or tracker) funds, your portfolio will end up just "average". The majority of professionals can't beat indexed funds, and with a diversified portfolio, you'll do better than over 70% of them. http://www.s-t.com/daily/11-99/11-14-99/b04bu054.htm Link to comment Share on other sites More sharing options...
Guest Posted August 25, 2002 Report Share Posted August 25, 2002 As for setting up the portfolio you have to decide how much risk you want to take. To increase risk increase the equity side of your porfolio. To lower risk increase the size of your bond allocation. You don't sound like a risk taker, so allocate between 30% to 60% of your portfolio to equities. For the equity side of your portfolio have a 50/50 split between a broad based (both large and small capitilization stocks) index like the Wilshire 5000 for the U.S. The other 50% would be put in EAFE (Europe, Australia, and the Far East) index. That's it, just two indexes. If you want to get more complex than that you can go to this site. Click on The Ultimate-Buy-and-Hold Portfolio on the right hand column. http://www.fundadvice.com/ No guarantee you'll do better than the simple portfolio though. Link to comment Share on other sites More sharing options...
Guest Posted August 25, 2002 Report Share Posted August 25, 2002 The above equity portion should give you some inflation protecion. As for the bond portion I would break this up 50/50. Half should be in nominal government bonds, in a developed country or a mix in various countries. Build a bond ladder of one to five year bonds. Each time a bond matures buy another five year government bond. The other 50% should be in inflation indexed bonds. The site below will tell you all about them. It's a Canadian site so a lot of it is about Canada Real Return Bonds. He has a lot of links to U.S. TIPS, France and U.K. indexed bonds as well. http://www.bylo.org/rrbs.html Link to comment Share on other sites More sharing options...
Guest Posted August 25, 2002 Report Share Posted August 25, 2002 The last link is by an American who retired early in his mid-thirties. A lot of good information and links about keeping emergency funds and withdrawal strategies for your portfolio. http://www.geocities.com/WallStreet/8257/reindex.html Link to comment Share on other sites More sharing options...
Guest Posted August 25, 2002 Report Share Posted August 25, 2002 As for portfolio re-allocation, just do it once a year, and the rest of the time you can enjoy your retirement in Thailand. Link to comment Share on other sites More sharing options...
gummigut Posted August 26, 2002 Report Share Posted August 26, 2002 Taggart: While a lot of your information is sound we still don't know the guys age which I think is a real important factor in determining portfolio mix. While index government bonds is a solid bet I would still make most of mine corporate investment grade paper. I would shy away from developing country debt as well. Least Thailand sovereign debt (although lately the rating agencies have changed the foreign soverign Thai debt rating from stable to positive - right now they are at the lowest investment grade level you can get. Positive outlook indicates the possibility of a rate rise in the next six months or so and the agencies know that the current gov't is planning on issuing $1billion in yankee bonds). JJSushi: I disagree that property is liquid. If you need money in a hurry you just can't convert it that quickly unless you have the vehicle for conversion in place ahead of time. If you have to make it liquid on short order you are most likely going to take a hit somewhere. Whether selling it distressed, or by getting unfavorable second mortgage terms. IB and commercial bank division: When I talk about IB's I'm talking about the bulge brackets (BB). Yes the industry has consolidated but those organizations like Citigroup/SSB have definitive lines in the organization. The two environment don't mix although there are synergies to feed off of. Yes the BB do lend and sometimes with disastrous consequences but on the whole they make their money from transaction business. Their bread and butter is not loans. Commercial banks bread and butter is loans. You make an example of Bancamerica but it is not a very good IB shop, especially if it has to rely on strongarming its existing clients. I no longer have access to SDC but wonder how many league tables it's in the top 10. As for the Fed stuff. Yes it was apples to oranges but it wasn't meant to be a direct correlation. Just an alternative reason why the Fed might keep rates low and another to mention a time when the Fed actually helped financial institutions (which you indicated that it did not do). LTCM: The fed didn't really help them out although they were the instigator/catalyst that got all the other firms together to bail LTCM out. Those firms have made back their money already and then some. I think it was important given the potential size of the debacle and the ripple effect it would have had on the major derivative players with such high notional amounts. It's been awhile since I've read about it so I'll refrain from making more expository comments (about which I know nothing about!). Pension funds: People don't make run on their pension funds but seeing a negative growth can hold the purse strings tight (as I've indicated before) thus slowing the economy. I was making the case of mutual funds in general and if I didn't say that I should have. Yes the municipal funds are the biggest pension funds out there. Yes they are funded in part by tax dollars but I don't see what that has to do with what they are invested in. Pension funds can be invested in anything as long as it follows the policy set in the prospectus. That includes supposedly investment grade stuff like Worldcomm and Enron. Again, this was just another reason (and clearly not a main reason) that the Fed might not raise rates. Just like raising rates could case Saturday Night Live to bring back Gumby Dammit! <<burp>> Link to comment Share on other sites More sharing options...
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