SD'S -'GET 'ER DONE' IN 2012

[dg]

want to fix the us economy and make life more like the 1950's? I have the solution -- but no one would tolerate it.

force all compensation to be reduced by a factor of ten and force all prices on goods and services to do the same. why? because china is now the world leader in almost all categories; yet the basic difference for which they are growing at 30% per year while we are declining at about 10% per year (buying power) is that their labor cost is 1/6.5 of ours. my solution would have no effect on buying and selling inside the US but would make us the number one labor market on the planet. suddenly manufacturing would grow by leaps and bounds and employers would be begging for more workers. jmho

unfortunately everyone is too in love with numbers to see the wisdom in this approach. so it isn't likely to ever happen.

[bankedout]

Feb 8, 2012 22:29:31 GMT -5 dg said:

want to fix the us economy and make life more like the 1950's? I have the solution -- but no one would tolerate it.

force all compensation to be reduced by a factor of ten and force all prices on goods and services to do the same. why? because china is now the world leader in almost all categories; yet the basic difference for which they are growing at 30% per year while we are declining at about 10% per year (buying power) is that their labor cost is 1/6.5 of ours. my solution would have no effect on buying and selling inside the US but would make us the number one labor market on the planet. suddenly manufacturing would grow by leaps and bounds and employers would be begging for more workers. jmho

unfortunately everyone is too in love with numbers to see the wisdom in this approach. so it isn't likely to ever happen.

This would require a totalitarian government I think. How else could you force private businesses to change their prices and what they pay their employees? It would have to happen simultaneously everywhere. It would be a huge value shift also. Everything you own would suddenly be worth much less (because an equivalent would be 10X less to replace) Would we be able to service our debt in this scenario? If bank accounts remained the same, the rich would feel 10X richer, since their buying power would go up 10X. Stocks would need to come down by a factor of 10 to reflect the new "value" of sales/earnings going forward.

Interesting idea, but I'm not sure if it can be implemented.

[dg]

actually, it's being done now -- without some of the problems you mention. In the last three years, the US dollar has been devalued by 30%; just another 60% to go. Of course the raises and the price rises have to stop, or its just as before.

[sd]

ELIMINATE THE MINIMUM WAGE!- Put em on the street!

That was put forth on Kudlow one night this week - Let the market determine how LOW one's efforts could be valued. Limbo Lower NOW! How LOW WILL YOU GO?
And then, eliminate unemployment benefits - or do away with extended benefits, Maybe give them 6 weeks to find another job-
and With that level of austerity, the recently slightly improved employment picture- 1 job for 4 seeking- could get really knife edge competitive- Employers could competitively "buy-out" the job by getting applicants to bid against each other on lesser wages, delayed or no benefits- Just like a reverse auction- .

If we could just get as competitive as China!
And what's with those ingrates manufacturing the Ipad doing
causing bad publicity by a suicide or two and complaints about working conditions? Don't they realize they are on the leading edge of the FUTURE?

HOW about we start by BUY AMERICA? -This would only be a delaying action to the inevitable process of world equilibrium.
We can't stop this slide of competition against emerging economies. But we can make a substantial difference if we use our buying power to purchase goods produced in the US of A, by American workers.
And then we need to step back and grasp the big picture, and I likely am too nearsighted to adequately accomplish that.
We need to recognize that we are in a competition for the survival of future generations , and their standard of living.
Presently, We have America, In a seeming long slide- Decline-
We are struggling to identify what has happened- Why jobs were lost, why benefits got too high? , Why tomorrow's future is dimmer than yesterday? Or is this only a hiccup in time for this decade?
Wake up time Folks-
As we have seen this past year, we are truly an interlinked world economy today, and that wasn't so much the case perhaps just 10 years ago.
This has happened much faster than we anticipated.
The future changes will likely contine to become reality faster than we anticipate. We are on the edge of a tidal wave of social and technological change that is sweeping the planet.
As with any tidal waves, there will be casualities for those unprepared. Our society is unprepared for this shift that is occurring. The unresolved question is when does equilibrium actually arrive, and what will be left in the reconstruction.
Sounds dramatic, but history records in snapshots over decades. We look at our individual lives in much closer time frames. We focus on the trees, and don't see the forest.
We are collectively led by the nose to blame something tangible that we can vent upon, as the reason for our social/economic ills.
I believe we need to revamp our political system first, take our collective medicine second, and then really focus on playing on a level playing field- How can we possibly accomplish that when we fail at many metrics concerning education of our youth.
I don't know what the answer is , but it's not going to be easy.....We should be prepared to do more with less JMHO..SD

[dg]

Buy America is a nice idea; but unfortunately 40% of the country can no longer afford to do that. Who do you think WAL MART is selling to? Certainly not the rich; not even the middle class!

And do with less? That same 40% has nothing now. How do they do with less? Just 60% of this country has all the wealth. And one third of that lies in the hands of the wealthy top 1%. Perhap Jay Leno could live without all those high priced cars in his collection? Perhaps some of our multimillionaires could do with less yachts or second mansions? Or perhaps tax rates on the rich could be made greater than those on the poor. Did you know that Mitt Romney paid less than 15% on his taxes last year? And he made millions while doing nothing as a blind investor in a trust fund.

IMHO, we can forget the government helping us. They are what created the problems in the first place. We need to return to our roots of self sufficiency and family businesses and small communities that work together for the benefit of the group. And we can get government out of our hair by doing everything by barter with no paper trail. It's time we stop waiting for someone to bail us out (ain't gonna happen) and we pull ourselves up by our bootstraps! It's been done before; and it's time to do it again. Cut the cord and get off the grid. JMHO

[sd]

Getting Off The Grid - that may be possible for some with the skills and initiative- and there is already a portion of the workforce that gets paid "under the table" - And that could be effective for some , but gov't would likely find ways to track and tax any underground business of any size, that employed more than a few individuals.
I believe we start by a REDO of our political system- and our tax structure. We should do everything in our power to reduce costs to small businesses, and be supportive to start-up companies,;
Companies that stay in the US of A should be rewarded for their allegiance, instead of outsourcing their jobs to a foreign market mfg.
All gov't projects using taxpayer monies should have to buy from American mfg's- and perhaps those companies should be "certified" suppliers- meaning that the goods purchased truly benefit an American worker employed by the company and not a
shell import company.
There will be some products truly not available (electronics),
but we have to start by building a new economy, that would see businesses willing to come back to the US- And yes, that means that foreign companies may be the initiators of those businesses, but locating them here in the US.
The Rich should certainly pay their fair share in taxes, and the loopholes and 'deductions' they have legislated for their benefit should be examined and made "equitable" and not because they have the influence.
But how "Rich" is too Rich? I agree that there seem to be gross inequities compared to the average citizen, whose everyday life is a struggle to maintain the basics , and to keep their head above the financial waters.
Yes, the Rich should be held to a "higher standard" and perhaps a higher tax base as well, but it could be very easy to promote punitive taxation on those that are the lifeblood of innovation,;
We see examples of the grossly rich- and ask how is it they can have so much money - Take a Bill Gates, or the next upcoming multi billionaire- Mark Zuckerburg (?) The Facebook spin-off. What about the Google's initiators? They're worth billions - Along the way, some of their employees are now millionares- They took a gamble on an idea....
While we say that seems grossly unfair they reap such outlandish gains, for each one of these apparent successes, there are tens or hundreds of thousands of would be start-up small businesses that some Guy or Gal had the initiative to take an idea, and without any guarantee of success, invested a huge amount relative to the personal effort that the average citizen puts in on their 9 to 5 ; 40 hour work week. Many of these start-ups perish in their infancies, and it is only the lottery winner few that see such success.
That person that starts his or her own business doesn't punch a timeclock, and often borrows or puts all the start up funding out of their own pocket. They take a huge Risk, because they have the initiative to not want to just work "under" someone else. Many of these start up companies, businesses fail , for a variety of reasons, but lack of adequate funding is likely #1. .We should promote the entreprenurial spirit in this country, and teach it in our schools. It requires a true work ethic to be able to stay the course when one is facing the adversities that having one's own business can entail.
I am concerned that that work ethic is no longer part of the fabric of this society. I see that reflected in the unrealistic expectations of many of the youth of today, who grew up in a time of increasing affluence . I suspect this is the same univeral complaint- each older generation labels the younger, but I see examples of this in the younger people entering the workforce- One could go on for days about who makes too much money, How the Unions bankrupted the Airlines, or the Auto mfgs etc, How CEO's took big bonuses when their failing companies were bailed out by American Tax dollars. What is a companies social responsibility to it's employees? Is Healthcare a universal right? How about an employer sponsored retirement program ?
What if a company offers none of these provisions to it's employees - and yet there are still people willing to take such jobs- Obviously, the employer that offers these benefits should garner the better employees who ideally seek to see the company succeed so those benefits can be maintained, and perhaps expanded. But businesses are faced with a cruel economic reality in this decade-
I know that Big Gov't is bad Gov't- and over regulation and taxation need to be reworked- The Gov't has grown huge and bloated- Here in NC, the State employees collectively screamed when the gov't suggested they should have each employee pay a $20 /wk contribution to their great healthcare benefits- They are out of touch with what the rest of us are dealing with- Everyone wants the corrections to start with the other guy going first.
We have a daunting task ahead in this country, both in determining what needs to be corrected , and inspiring a vision of a future that Americans can look forward to. We should start with our political leadership.
SD

[dg]

we change our political leadership all the time. yet that doesn't change anything for us. and it won't as long as the lobbyists own washington and work at the behest of the rich.

if we are going to be saved, we have to engineer our own recovery. one family at a time. time to stop being some one's employee and start being one's own boss.

[sd]

My finger has been off the trigger- figuratively speaking the past weeks. I'm still long ful. PHO. xlk, but have not been pursuing other trades even though the market has been continuing to move higher. I'm retraining myself to not over react to minor "normal' pullbacks, and yet hope to see this 'hands-off" approach with these few positions will continue to see some further gains in the days ahead.

My gut (fear) tells me that this melt-up could end sharply,. and statistically I understand this up move has exceeded most historical precedents. Lets just acknowledge we're in a rarified environment, and one should consider that some impetus- IRAN, GAS Prices, Europe Bank affecting a US bank....... We don't know which type of event will occur, but something will definitely happen that will be justification to rattle the markets- albeit called profit taking after the fact.
Earnings have generally been good, the emerging markets aren't falling off a cliff, Europe is semi stabilizing, and US jobs numbers seem to be gradually improving. What's not to like?

Outside of my trading account, I have been spending a greater amount of time adjusting my retirement account allocations. I had been generally pleased with the results this past year with a large overweighting in bonds , and then shifting into more growth funds these past months. With my retirement account, I only planned to look at it periodically- I once thought once a month, but with this relatively recent market surge, it has caught my attention, and adjusting allocations to a more aggressive weighting has paid off , but It feels like it is time to not be greedy, and to take some Risk off the table. A weekly look seems to be appropriate -
As I checked the various charts, virtually all of them are making new recent highs, and even the bond funds are simply consolidating sideways-
The Dow is pushing the 13K mark today, and Europe is reconciling it's banking crisis, Iran's Oil embargo is not disruptive to the world's supply, and virtually everything seems to be clicking .
I have seen a net 12% gain since the end of Sept. , and I'm going to start to take some monies off the table. Instead of reallocating to underperforming sectors, I'll move the $$$ to a no-interest money market account, I will start with a 25% reduction per position, and evaluate a weekly reduction going forward-
Bonds have had a tremendous run this past year, look to be peaking/rolling over- but that's in response to the gaining market. As $$$ leave bonds and chase equities, investors are taking the RISK_ON trade.
I do plan to be defensive ( bonds likely) by May though.
We are taught by the pros that trying to time the markets is a fool's game- To allow one's financial car to run down the freeway on autopilot is likely ill advised.
To the end of retirement planning- there is a site that I will revisit- bogleheads.org A bit late for me- but they advocate a low-cost investing approach in a few diversified market funds. Of course, he recommends Vanguard funds for their low cost expenses, and there are a number of books out there that support his vision.
I will add this final self analysis- In the last decade, I have traded as an avocation, at times an obsession, but my retirement fund has done quite well with only a few major market exits and reentries. My retirement fund , with continued contributions has continued to grow, with only occaisional meddling on my part. Had I kept my retirement monies within my trading account, I would have likely sustained serious losses in 2008 and beyond . So, while i trade within a Roth IRA in my trading account , I keep my primary retirement accounts separate.
The Bogleheads advocate only a few well diversified market/world funds - as near as I can determine- Their approach is certainly worth evaluation for a systematic retirement approach decades in the future.
I would suggest to any one that is trading their retirement account, to put aside a portion to not be traded, but invested, and gradually reallocated/adjusted. However, when a major market move is underway- take action- I bailed in Oct 2007, good timing, but failed to jump back in at trhe 2009 lows.
Wish I had learned some of this stuff a few decades or so earlier.
Good Luck,
SD

[sd]

I ordered a few books from Amazon on investing for retirement-
"The Investment Answer" by Goldie, Murray-2009 a quick concise 88 page primer on investing . Advocating a low cost diversified approach with periodic rebalancing - critical of the investment industry 's lack of responsibility to the average investor. Good read.
"
" The Ivy Portfolio" 2009 by Faber & Richardson-
Takes a different approach, and starts by doing an indepth analysis of why the top Endowments, -Yale, Harvard, historically outperform the market- Has some similarities with "The Investment Answer" in terms of recommending as essential a low cost diversified portfolio, and periodic rebalancing. From there, This book diverges substantially from the first in that it suggests that the investor could improve historical returns and reduce drawdowns by employing a timing/momentum model to improve results. There are a number of variations covered.
The author cites "Stocks for the Long Run" by Jeremy Siegel that backtested the s&P 500 using the 200 day SMA and exit entry criteris based on Exit if price closes 1% below the 200 sma, and enter when price closes 1% above the 200 sma. Reportedly the timing model since 1972-2006 exceeded the buy and hold approach by 4% /year with 25% less volatility.
The author went on to backtest the S&P 500 from 1900-2008 where the S & P returned 9.21 annual with 17.87 volatility, and the timing model returned 10.45 % with 12% volatility. Of note, the timing model underperformed the buy and hold index in 40% of the years .
The paper the timing model was based on can be downloaded for free @ www.mebanefaber.com/timing-model/ There are additional papers available for free, with Faber doing a paper on Relative Strength investing in 2010 .
As i get into learning more on the subject of a long term approach- diversification in allocation, and having positions that are non correlated become factors in one's success and potential drawdown.
Interestingly, "value" has historically outperformed Growth, but has sustained long periods of market disfavor.
will diversification & rebalancing by itself succeed, or can one improve the resultw with "timing" ?

I'm inclined to be a believer in going defensive when the market weakens - because of those periods when even the baby gets tossed with the bathwater. That's simply Fear of Loss-
The expectation is that "go Away in May" has some historical basis, but is not Always a market truth.
The market snap back from 2009 took many (self included) by surprise. investors should have learned some lessons this past decade- But we have short term memories-

The 3rd book is "The Bogleheads' Guide to Investing" by Larimore,leBouf,Lindauer It is about John Bogle's vision for investors- I have not read this book yet, but it will likely be the most 'grounded' manual on low cost investing for one's future. I expect this book to refute the possible "improvements" suggested by the "timing" model or momentum models., and will refute the end results of actively managed funds over the long term outperforming the market indexes repeatedly.
I suspect that this book should be the one that all investors should have read when they started planning for their retirement.

SD

[sd]

The book is a good read, with numerous statistics on how actively managed funds will underperform index funds over time and at a higher cost. This is a recurring theme in the books I've been reading.
For anyone considering "investing" a portion of their assets- this book outlines what should be a core approach to a long term strategy-
For those of us that think we have the opportunity to improve results by actively managing (timing) our investments, the book assures us that statistically we will not succeed over the long run. As an example of that, one study found that those funds that had outperformance over a ten year period, then became low performers over the next period-

Along those lines- my last stock position stopped out yesterday, for a small profit due to raised stops. I have not been tracking individual stocks these past weeks, but did raise stops to ensure I locked in profits.

My "Take some off the table" last week in my IRA account looks timely after today's sell-off of 2-3% , or is this just a "normal 3-5% correction ?
It could likely be just that, but yesterday and today I have continued to adjust my present allocations to be more defensive, exiting growth funds, keeping a large bond component, and increasing a money market position.
In part of the readings , an Asset allocation should contain positions that are not closely correlated. Bonds vs stocks etc.
In the global market, it may be more difficult to really accomplish a global diversification/allocation.
Does Asia directly affect the US market- It would seem so-
Europe definitely affects the US mkts directly- although the correlation between the two may not go hand-in-hand. The US mkt may still be the safer way to go....
Lots to learn , but by going defensive and locking in some of the gains of the past months, I feel I am being cautiously prudent.
I did go ahead with VIXY as a trade- it's my sole position in my trading account. A good jobs report this week could scuttle this trade, but tensions over IRAN /Israel, an overbought market, makes me think that a short term move to volatility is likely called for-

SD

[sd]

The Vixy trade went South, and it became a larger than average losing trade because i gave it some room due to the volatility.
This was an example of trading my expectations of the market's next move- that crystal ball I must have looked into just got it wrong- as so often happens - the market decided to make a different assessment than I .
As I'm finishing the final chapters in "The Bogleheads Guide to Investing" - a very grounded book on long term investing- WWW.bogleheads.org.
They point out some interesting behavioral statistics -including how men tend to want to be more controlling or over confident in their trading/investing approach. They cite some interesting examples of how even very highly intelligent and knowledgable investors- do not necessarily have an advantage in the markets over time- the 2 nobel prize winning economists whose hedge fund controlled 1.25 Trillion dollars thought they had Risk controlled- through leveraging positions.
It was 1994 when Long Term Capitol Management started, and it was 1998 when it imploded, almost causing a world economic crisis.

The "Mensa Investment Club" average returns over a 15 year period were 2.5% when the market returned 15%.

The authors cite these and some other statistics that point out that in the short run, the market's movements can be random, and non-predictable. The summary of that is most investors practice "recency bias" thinking what the market did yesterday, it will continue to do tomorrow. That indeed is the basis of trend trading, and the authors feel that for an investment approach, it is Not the way to go (My interpretation) for most .

In the retirement accounts, I recognize that I have both Risk Aversion- fear of Loss and perhaps a Recency Bias with the expectation that the markets will be peaking here, and that "locking in some gains" here is prudent. The 'adage" -Go Away in May" contributes to that type of thinking. As I "time" an event that has not yet occurred (Markets still in an uptrend) am I simply allowing fear of loss to reduce the potential for gains ahead?

The authors do advocate periodic rebalancing as the method to lock in gains, and to be purchasing shares in out of favor positions at a lower cost- This asset allocation model is one used by many professionals . This asset allocation model is also set up to adjust using non-correlated funds where possible. The non-correlated aspect- may be difficult to achieve, because there are periods in which many things move in tandem- including Down.

One example is bonds vs stocks- I need to do better research within the funds I can select from, but the bond funds I have,have been trending higher since 2011 (amhix, taftx) - including alongside this market's rally . 16% The market dropped in May 2011 with a substantial pullback, while the bonds continued.

What appeals to me is the thinking that one should be able to benefit using price action to exit growth , and allocating more towards bonds and cash as these market swings occur. One would have to have a regular approach- as in the Ivy Portfolio .

Conversely, one would perhaps want to start to gradually reallocate back into growth at some point-in the pullback- And that's where a simple TA approach could be beneficial. It would have to be a rule based approach, and not intuitive- And there should be some way to determine taking some partial profits off if the trend's momentum gets too far from the mean-ATR, Bollinger bands, etc.

For me, making exchanges within my employer's sponsored 401K does not incur any transaction costs, or taxes. I am however limited to how much I can exchange on a daily basis to less than $5,000.00 per day per position, or I get a 30 day "lockout" to add or deduct from that position.
Just some of what's going through fermentation here.

For those that have years ahead of being able to invest for their retirement, The Bogleheads book makes a compelling argument for a low maintenance, systematic approach for a successful long term approach to building retirement wealth.
SD

[blygh]

There is a time for growth stocks, foreign stocks, blue chips, bonds, gold and cash. I realize better returns when I have gotten the mix right - I am cash heavy now and plan to stay that way until after the election.

[sd]

RE Blygh "There is a time for growth stocks, foreign stocks, blue chips, bonds, gold and cash. I realize better returns when I have gotten the mix right - I am cash heavy now and plan to stay that way until after the election. "
I agree with your assessment- It looks like the market is getting nervous finally. Since the Vixy trade, I've simply been out of the market in my trading account- focusing on how best to make adjustments in the retirement accout.
It sounds like the China fear of further slowing has been the cause of the market's nervousness this week-
Rising Gas is pushing hard on our economy. The US economy may be 'decoupled' from the world- but likely not.
A world slowdown, and rising gas affects the US despite what the Fed will do in this election cycle to keep money flowing.
My Gut tells me that I won't miss out on a large market move if I go more defensive- This week past there was weakness in some bond funds, and I swung more into growth seeing the continued Rise- That may have rolled over this week, and it's indeed getting close to May- Taking a time-out for the next 6 months may may the broker unhappy, but it's likely the right move timing wise-Sd

[sd]

A rain filled weekend has given me the opportunity to look back on some of the "Market Wisdoms" that we all have heard at some time.
3 such "wisdoms"
The Trend is Your Friend, "Go Away in May, and "As goes January, so goes the rest of the Year".

Using a monthly chart and looking back 20 years on the S & P
SPX, I did a quick Cliff's Notes analysis.
"Go Away in May" - If we look back at the past 20 year period, When the trend line of the fast 10 period monthly ema was primarily up (17 of 20 years) , The Go Away In May as an approach that would have the trader leave the market until Jan. was right only 3 of 17 years. There were several other times that exiting in May would have required taking a new position in the months that followed - often at marginal gains- One could dissect this in greater detail, but on the face of it, it does not necessarily make for a trading approach. At what point does one make the Reentry?
Of note, in the recent 3 years, both 2010, 2011 had substantial sell-offs, and exiting in April/May would have been prudent- Both periods had sharp 20%+ pullbacks - but unlike 2008, the pullbacks were temporary, and the uptrend resumed. Will this repeat this year is anyone's guess. The question has to be asked though, what signal- other than what Month it was, would one use to exit to protect one's profits.
What did one use in late 2007-2008?
Wisdom #2 - As Jan goes, so goes the market - meaning if January is positive, the year will be-If Jan was negative, the market would go lower- That proved true just 60% of the time .
Wisdom #3- "The Trend is Your Friend"
Ultimately, recognizing which direction the prevailing trend is heading, - and just using the direction of the trend at the beginning of the year as indicative of where the year would end, proved surprisingly accurate 17 of 20 years- Looking at the period where the ema was uptrending in Jan, Not every year of the 17 years ended with the trend still moving higher, but in each of the 17 years, the trend ended higher than the year began. This was a surprising statistic -

This was an interesting look-back over time-
I will follow up at some point - But note that the present market on the monthly chart looks strongly uptrending this 3-24-12-
SD

[sd]

Are you investing on a level playing field?
We want to believe it is so. We NEED to believe it is so, because what else is available - Stuff the mattress?
The truth is, it is not a level playing field- because the gov't can continue to print money and manipulate rates and push the market .
Peter Schiff is quite outspoken, and is declaring Bernake public enemy #1 on CNBC . His point - is that eventually all that is occurring now is developing a new bubble in the markets that will eventually have to be accounted for, and it will end poorly.
He expects a substantial day of reckoning will need to occur to purge the markets- "When" this could occur is anyone's guess, as the Fed has at it's disposal many resources to continue
a "friendly policy" of low rates-
If the low rates also mean the dollar declines in value, That means inflation, and concerns about the value of the dollar as a world investment-
This falls in line with a theory I read recently that China as a holder of US treasuries will eventually try to make the Yuan the world stable currency based on it's growing Gold holdings.
We'll see- Not anything that will happen next week- but is it possible in a year or two?