John Hempton;
I think what is going on here is a general problem. When someone says something - anything - that is so far from the consensus as to sound outrageous then they will be considered mad, and sometimes they will be considered mad even after they are proven right.
Louise Yamada in Barron's;
Preservation of capital is our prime concern. We would rather be out of the market wishing we were in than in the market wishing we were out.
The picture is of what is called the Grand Canyon of Yellowstone.
3 comments:
The posy seems to show more fear on your part.
I know Louise said it but you chose what to post
Yamada's statement about preservation of capital is particularly spot on for retirees. I don't know many of my fellow retired people who could stomach a 30-40% drop in net worth at our ages, particularly with so much uncertainty regarding the health of the economy going forward. Except for the retired public pension employees that I know (teachers, police, Government, etc) who have rather huge pensions and seemingly give no thought at all to investing in the market, the rest of us need to be cautious but not stupid. Keeping all your money in CDs and Treasuries is a recipe for going broke slowly... The problem is how do you balance the need to preserve capital with the need to have enough investment returns to live on?
No easy choices here.
On the CDs and treasuries: I'm looking at that more closely lately. We're going through my parents' estate; they primarily saved via banks and bank instruments like CDs. I specifically remember going to the bank with my dad when I was a kid and getting a CD that had a great rate somewhere around the early 80s. Now, granted, we may never have that opportunity again, and he lived in a rural area with a very low cost of living.
So, looking at that from an investment standpoint (setting aside the obvious things like avoiding debt, etc.) I find it a very interesting exercise to work on each year. What can I accomplish with "safe" savings vehicles? Can I get what I want with a less risky allocation? Say, 50/50 vs 60/40? Today I noted that long term treasuries have kicked butt this year. I can't CDs yielding 8% or 10%, but maybe I can increase my bond allocation? There are always things to learn.
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