The big take away seemed to be that people are saving more but not investing it, there is a lack of buy-on-the-dip mentality. People are sitting on relatively high cash balances despite rates being so low. There was also a comment about investors not wanting "complicated, financially engineered products" as a function of not trusting Wall Street.
In contradiction to that study, another was cited that said "72% of financial advisors have recommended that clients increase their retirement contributions, yet only 18% of boomers did so in the past 12 months."In having a Facebook debate with a friend I was reminded of something Nassim Taleb has said several times. (Paraphrasing) everything you need to know about finance, you learned from your grandmother; don't borrow money, don't lend money and save a lot of money.
One point I've made repeatedly over the years is that finding out after a large decline in stocks that you had too much exposure is a bad place to be. I think this happened on a grand scale in 2008 and as opposed to past market events it is possible that more people remember what the pain of cutting in half felt like. I don't know if this is the case but if it is then it can be a good thing. There is nothing wrong with having less in stocks as long as the trade off of probably needing to save more money is understood.
Being wary of investment products makes sense. I have no idea to what extent this pertains to ETFs. Obviously I think there is great utility with ETFs but they are a mixed bag. Investors have lots of problems (I think mostly from incorrect expectations) with certain commodity based products where contango is involved, there are also problems with perception of levered funds and they way in which they reset daily and I don't doubt that there will be future market events that draw negative attention to the space.
The vast majority of funds are plain vanilla, tracking baskets of stocks. If there is something there you distrust then don't use ETFs. To me this differs from avoiding complex products that might be difficult to fully understand or have a lot of moving parts but either way no one should use products they are not comfortable with.
Hopefully people start to get serious about saving money, assuming the one study is correct. I don't know what the fate of entitlements will be (I have an opinion) but it seems like they are now on the table for discussion. Regardless of anyone's politics discussions look like they will happen soon. Speaking personally, having my financial fate determined by politicians making up policy as they go is simply unacceptable. I have no control over whether we get social security but we have some control, by virtue of saving aggressively, over the impact of not getting social security. If this makes sense to you then you know what you need to do.
3 comments:
Good morning. An ETF is a structure, a container, and once you are satisfied the container itself is sound and the laws governing your relationship with it adequately enforced you can concentrate on the contents and the processes that manage those contents. Some contents just aren't well conceived or, when they are, management is lacking. Tracking error can usually reveal either but for that you must wait awhile and waiting is usually wise because many of these products are developed in response to a trend, a good story, but that's typically only a suitable rationale for the short- to intermediate-term trader.
Many years ago while working at HP a friend participated in a seminar with fellow programmers in which there were two main takeaways (with the usual plethora of details): (1) divide all tasks into column A and column B based on importance and do not do any B tasks until the A tasks are completed and (2) there are situations you can control and situations you can influence and situations where you can do neither; don't waste your time on the latter.
I can choose what products I buy so I have considerable control there but I'm just one vote in a sea of millions so that isn't much influence. I can't control what happens with the three biggest federal trusts -- social security/disability* and medicare (medicaid is state-based, federally augmented)* -- so I don't waste a whole lot of time about them other than to occasionally correct misinformation that might lead a fellow citizen to vote against his/her real interests.
NB: *there is no such thing as "entitlements" in the aggregate -- social security is contributory paygo, currently in surplus and not part of the deficit (it can't be part of the deficit as a matter of law too) while medicare as currently configured and implemented is clearly doomed -- so anyone who uses the term "entitlements" authoritatively as if it represented a single situation or problem domain can and should be ignored as a source of information regarding situations that can be influenced; e.g., by voting.
http://latimesblogs.latimes.com/lanow/2011/04/lenny-dykstra-arrested-facing-bankruptcy-fraud-charges.html
Perhaps no one is buying the dips because they are all waiting for the "big dip"
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