Outstanding Financial Pornography

[pitz]

Elderly investors need to look at rotating investments from common stocks

But there does come a point when exposure should be ratcheted down to reflect the fact that, quite simply, the investor is too old to sustain a jarring stock market fall and big losses to the portfolio.

(but maybe the investor is too old to sustain a jarring drop in the value of a bond or GIC portfolio! -- I wonder if the author ever considered that? )

[Lazy Ninja]

So how would you define "a jarring drop" in the context of a bond/GIC portfolio?

[queerasmoi]

If anything, Microsoft's "killer" feature on WP7 may well come from the gaming side. I hear rumours they are planning some amazing integration of Xbox and Zune into the phone. That would give them something no smartphone platform has yet - while iPhone/iPad is great for gaming too, it isn't integrated into any full size gaming products. But I'm not sure there's much they can do for corporate/enterprise users that isn't already done better by RIM's Blackberry.

[pitz]

So how would you define "a jarring drop" in the context of a bond/GIC portfolio?

Dollar devaluation. Inflation. A rapid increase in the price of stocks or commodities.

The point I didn't make is that the article is appealing to a certain age group to sell a losing asset class, at what likely is its bottom, and to put all the money into a winning asset. This can be extremely dangerous for one's wealth.

[Lazy Ninja]

Dollar devaluation. Inflation.

Fair enough. I was initially thinking more in terms of notional value, which I suppose is rather short-sighted.

A rapid increase in the price of stocks or commodities

Hhmmm... getting a little fuzzier here. I'm not sure that's really a fair comparison, in the context of paring down risk (i.e. maybe you won't participate fully in a strong rally in equities, but is that really the point?).

The point I didn't make is that the article is appealing to a certain age group

So? Neither you or I are part of that age group, so that should be a good thing
Particularly if you believe they're being led to do this...

sell a losing asset class, at what likely is its bottom

Assuming that we're not looking at a major douple-dip, this is still nowhere near the bottom.

[FrostedGlass]

Why Don’t We All Just Do What Warren Buffett Does?

Using return, analyst recommendation, insider trading and institutional holdings data for publicly traded stocks listed in Berkshire Hathaway’s quarterly SEC Form 13F filings during 1980-2006 (2,140 quarter-stock observations), they find that:

* Berkshire Hathaway tends to invest in large firms with low book-to-market ratios and large accounting accruals, while avoiding firms with high asset growth and poor past returns.
* Holdings are concentrated and tilted toward banking, business services, insurance and publishing. The number of stocks held ranges from 5 to 95. The average numbers of stocks held during the 1980s, 1990s and 2000s are 22, 12 and 33, respectively.
* The median holding period is one year, with approximately 20% (30%) of stocks held for more than two years (less than six months).
* Over the 1980-2006 sample period, Berkshire Hathaway’s annualized abnormal return from stock holdings (adjusted for market, size, book-to-market and momentum factors) is 7.2%. These returns are substantially independent of those for well-known pricing anomalies, suggesting that Warren Buffett has unique insights regarding future returns.
* A value-weighted (equal-weighted) portfolio that mimics Berkshire Hathaway’s holdings, reformed quarterly based on company filings, generates an annualized abnormal return of 6% (6.6%) over the entire sample period.
* When Berkshire Hathaway announces an increase in a stock position, the average market-adjusted return for the stock is 0.7% to 0.9% over the next five days and two weeks, respectively. The immediate price reaction therefore tends to be very incomplete.
* Net stock sales by insiders (officers, directors, and major stockholders) of companies in which Berkshire Hathaway has a position tend to decrease when Berkshire Hathaway increases its positions, indicating shared private information.
* Contrarily, the behavior of analysts and fund managers indicates overconfidence by disagreeing with Warren Buffett:
o Analyst recommendations are somewhat lower for Berkshire Hathaway’s holdings than for the S&P 500, and analysts tend to downgrade these recommendations following increases in Berkshire Hathaway’s holdings.
o Funds, even those in the top fifth of past performance, appear to take the other side of Berkshire Hathaway’s trades by selling when Berkshire Hathaway is buying.

In summary, evidence indicates that investors can capture a large portion of Berkshire Hathaway’s long-term outperformance by mimicking holdings described in the company’s SEC disclosures, because many other large traders do not.

underlying paper free from SSRN: Overconfidence, Under-Reaction, and Warren Buffett’s Investments

[patriot1]

The point I didn't make is that the article is appealing to a certain age group to sell a losing asset class, at what likely is its bottom

Er, you think the stock market is at bottom now? Relative to what? For that matter, can any asset class reasonably be considered at bottom now? If nothing else is at bottom, cash has to be at bottom.

You are also implying that stocks offer protection from inflation, when the historical evidence clearly states otherwise.

[pitz]

The point I didn't make is that the article is appealing to a certain age group to sell a losing asset class, at what likely is its bottom

Er, you think the stock market is at bottom now? Relative to what? For that matter, can any asset class reasonably be considered at bottom now? If nothing else is at bottom, cash has to be at bottom.

Cash has been in a 10+-year bull market, as the cost of goods has remained flat, if not decreased. Bonds have been the same, as bonds are derivatives of cash. Stocks, meanwhile, have suffered a decade long bear market.

You are also implying that stocks offer protection from inflation, when the historical evidence clearly states otherwise.

Depends on what kind of stocks. Financial pornographers tend to lump stocks into one category, as though they are all identical. They lump banks all together, even though, there are dramatic differences between different types of banks. Some banks try and run a huge duration gap, and perform maturity transformation, as a way to earn a profit. Other banks (ie: the Canadian ones) tend to run matched books, and derive a substantial chunk of revenue from service fees.

[Lazy Ninja]

How much money do you need to feel 'rich?'

http://ca.finance.yahoo.com/personal-fi ... h-20100809

"I'd like to have enough money so my family and I wouldn't have to work anymore or worry about the necessities, and maybe travel a bit," said Deborah Veale, a Southern California resident visiting New York City.

Veale said she'd need about $10 million to consider herself set.

Yes, it's possible there'd be a smidge left over to allow for travelling a bit.

Another from New York City wanted a billion (although she'd still fly coach.)

I always figured that once I hit ten figures, I'd move up to first class. I guess I'm just a snob

[kcowan]

I always figured that once I hit ten figures, I'd move up to first class. I guess I'm just a snob

I had a heated discussion with a neighbour recently. She said that $15 million does not go far enough these days! I guess she is worth more than I thought.

[Peculiar_Investor]

This Financial Post article title seemed interesting, Calling all lazy investors and I thought it might be appealing to FWF'ers. Too bad the article is completely focused on a US based investment approach, with no attempt made by the author to show a Canadian equivalent.

[scomac]

This Financial Post article title seemed interesting, Calling all lazy investors and I thought it might be appealing to FWF'ers. Too bad the article is completely focused on a US based investment approach, with no attempt made by the author to show a Canadian equivalent.

It amazes me the amount of mistakes that make it past the editor's desk these days. Since when did EFA, EEM, RWX, AGG and TIP become Vanguard funds...or did I miss the memo where they bought out iShares and SSgA? I guess investors aren't the only lazy individuals involved in this article.

[marty123]

It's a Reuters article from the US. It does appear to have been left unedited ... possibly not even read by FP editors. May be cutbacks, but probably just laziness indeed. It might soon be difficult to differentiate news outfits that are supposed to have reporters (FP), from those that are merely news aggregators (like Yahoo! News, which just publishes AP and Reuters press releases).

[Bylo Selhi]

It's a Reuters article from the US...

Here's something similar published in The Grope 'n Flail: Protecting your financial documents from disaster

Access to personal identification documents such as your Social Security card... checking and savings account statements; retirement account information, which may include 401(k), IRA, brokerage and Social Security statements

[my bolds]

They couldn't even edit this to conform with their own style book ("checking") let alone translate terms like "Social Security" to CPP/OAS/GIS and "401(k)/IRA" to RRSP, etc.

[kcowan]

...They couldn't even edit this to conform with their own style book ("checking") let alone translate terms like "Social Security" to CPP/OAS/GIS and "401(k)/IRA" to RRSP, etc.

It is lucky that we have our own terminology or it might be hard to detect such US-oriented articles.

[kcowan]

Uncovering Wall Street's Game

It’s really not shocking that small investors believe Wall Street is a rigged game.
...
My work is just good old fashioned common sense combined with a graduate degree level understanding of an income statement.

We all know it but here is an exposee.

[Peculiar_Investor]

With dividend yield and growth driving headlines these days, many companies and financial reporters are joining the "game" of announcing previously announced dividend increases.

Yet another example today of a previously announced dividend increase being re-hashed as if it was something new. Astral Media boosts dividend - The Globe and Mail

Astral Media Inc. (ACM.A-T37.20----%) has unveiled plans to boost its annual dividend by 50 per cent as it reported that second-quarter profit increased, but came in below analyst expectations.

The Montreal-based operator of pay and specialty television, radio, out-of-home advertising and digital media properties, said Thursday that its annual dividend would be increased to 75 cents on all class A and class B shares.

This is taken from the company's earnings announcement press release, ASTRAL MEDIA INC. | Astral shows continued growth in the second quarter of Fiscal 2011

FINANCIAL AND OPERATIONAL HIGHLIGHTS

Corporate

The appointment of Jacques Parisien to the new position of Executive Vice-President and Chief Operating Officer of the Company;
A 50% increase of its annual dividend - to $0.75 per share - on all Class A and Class B shares;

In actual fact, Astral's dividend increase to $0.75 was announced on Dec 9, 2010 -- Astral Media Inc. Holds its 2010 Meeting of Shareholders - Astral

Dividend Increase
Prior to the Annual Meeting of Shareholders, Astral's Board of Directors approved a significant increase of the Company's annual dividend for its Class A and Class B shares to $0.75 per share, or $0.375 on a semi-annual basis. This represents a 50% increase over the Company's previous annual dividend of $0.50 per share.

While technically correct that the Q2 dividend payment represents a dividend increase from the previous year, I don't think the G&M is truthful with a headline stating "Astral Media boosts dividend" and lead sentence in the article "has unveiled plans to boost its annual dividend by 50 per cent". That was unveiled on Dec 9, 2010 and is nothing new -- just financial porn IMHO.

[BRIAN5000]

All of the advanced functionality and access to comprehensive market information and research tools will remain the same, but what should stand out is a brighter, sharper design of the tabs, menus and navigation bars.

Has anyone else noticed .....trades are now executed faster, I have more money in my account, I now feel splendid whenever viewing my accounts, maybe its just me.



This is due to a new set of vivid colours, including a fresh new shade of green.

[Nemo2]

All of the advanced functionality and access to comprehensive market information and research tools will remain the same, but what should stand out is a brighter, sharper design of the tabs, menus and navigation bars.

Has anyone else noticed .....trades are now executed faster, I have more money in my account, I now feel splendid whenever viewing my accounts, maybe its just me.



This is due to a new set of vivid colours, including a fresh new shade of green.

No, it's not just you....and the bloody colors hurt my eyes......typical programmers, change for the sake of change.

[Shakespeare]

The Wealthy Barber explains: TFSA or RRSP?

In the last chapter, we saw that many of us, if not most of us, contribute to RRSPs with after-tax savings and then spend the refund. I hope the previous chapter changes that, but for right now, that’s the way it is. Heck, having some fun with our refund cheque is like playing this year’s first golf game or gardening on May 24th – it’s an annual Canadian tradition. A rite of spring.

Let’s look at a new chart that reflects that reality:

Whether or not you spend the refund is irrelevant to an apples-to-apples comparison of RRSP and TFSA. If you advise someone to invest the refund, you are advising them to save/invest more. But that is not the point of the comparison.

[ghariton]

The Wealthy Barber explains: TFSA or RRSP?.

I had never read David Chilton before. The style in this excerpt from his book is quite annoying, with all the side comments about needing a beer or a scotch, how difficult this all is, and so on and so forth.

And yet, I'm told, Chilton is a very popular author. Is that because of, or in spite of, his annoying style.

George

[Pickles]

The Wealthy Barber explains: TFSA or RRSP?.

I had never read David Chilton before. The style in this excerpt from his book is quite annoying, with all the side comments about needing a beer or a scotch, how difficult this all is, and so on and so forth.

And yet, I'm told, Chilton is a very popular author. Is that because of, or in spite of, his annoying style.

George

Unfortunately, I think it's because of it. I hated his folksy colloquialisms and narrative style. Yet, millions bought and read the book. The retirement planner writer, Alan Roadburg uses a similar style in his books. People lap it up. Everybody loves a story.

[tidal]

He is a fun and very funny guy. I only know him from very-non-barber stuff. I do think he knows his audience and how to communicate well.

[Lazy Ninja]

I had never read David Chilton before. The style in this excerpt from his book is quite annoying, with all the side comments about needing a beer or a scotch, how difficult this all is, and so on and so forth.

And yet, I'm told, Chilton is a very popular author. Is that because of, or in spite of, his annoying style.

It's definitely because of it (I think it's safe to assume you're not representative of his target audience).

From the excerpt:

Down the road, however, when money is withdrawn directly from the RRSP or from the registered retirement income fund (RRIF) or annuity to which the RRSP has been converted, it will be taxable.

I’m alarmed by how many Canadians still don’t fully grasp that last point.

That's who he's writing for; people that don't understand those kind of 'details'.

I do think he knows his audience and how to communicate well.

Agreed. He somehow managed to sell over two million copies of The Wealthy Barber in Canada which strikes me as nothing less than an astonishing accomplishment. He must be getting through to somebody. I've never read his original book, and never will (I glanced at it; it didn't interest me much). I did flip through his latest book (I won't be buying it) and got an occasional laugh out of his writing. I liked the story about him helping his father invest $25000 in an international mutual fund. Years later, after an exceedingly rare glance at his financial statements, the father notes that his initial investment is now worth only $11000. Chilton points out to him that he owns 11000 units worth $70000. His dad responds: "My, I'm doing well with this." Chilton quips: "Yup, that's my dad, master investor."

The people who frequent this forum are unlikely to learn much of anything from his books, but I appreciate that he's trying to help the average befuddled individual investor.

[kcowan]

Maybe using the Chilton style is how we could blow the doors off FWF? Imagine a million subscribers!

(BTW when he replaces KO on the LOE, he does a great job IMHO.)