Clippings 2012

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Park
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Re: Clippings 2012

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http://corporate.morningstar.com/us/doc ... ce2007.pdf

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adrian2
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Re: Clippings 2012

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Thanks for the link.

Bad editing, likely, for the following example which appears in "Pensionize your nest egg" as well:
Imagine five 95-year-old women who live in the United States and are interested in creating an investment club—but a club that is different from the usual kind. Each of the women invests $100 in a pool, but only survivors at the age of 96 can split the proceeds. While they are waiting to reach their 96th birthdays, the five women decide to put the money in a local bank’s one-year certificate of deposit (CD) that is paying 5 percent interest for the year.

So, what will happen next year? According to statistics compiled by the U.S. Social Security Administration, there is a roughly 20 percent chance that a member of the investment club will die during the next year and, of course, an 80 percent chance that all will survive.
80% survival applies independently for each lady; it's only ~33% that all will survive.
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Re: Clippings 2012

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Park wrote:http://corporate.morningstar.com/us/doc ... ce2007.pdf

Free download

Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance
Roger Ibbotson, Moshe Milevksy, Peng Chen, Kevin Zhu
http://corporate.morningstar.com/us/doc ... ce2007.pdf


On page 61 table 5.2 shows Risk Aversion numbers from 1 - 6 anyone have a table showing these numbers expressed in words or asset allocations between EQ/FI.

I beleive 4 = Moderate risk level
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
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Re: Clippings 2012

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adrian2 wrote:80% survival applies independently for each lady; it's only ~33% that all will survive.
That's why you need to invest in a basket of old ladies.

Disclaimer: I bought my first tech stock today: RIM. I am especially excited to have bought it near the low; when it goes to zero, I will have a few more shares than if I had bought it at the close. Seriously, most companies I've bought at this multiple have not have happy endings, but it only takes one deep-value thirty-bagger early in one's investment life to permanently damage one's level of prudence during the remainder :)

Now I should be suffering buyer's remorse. I've just realized that it if techies and Americans won't buy RIM because of Apple, Canadians won't buy it because of Nortel, non-techies won't buy it because it's a tech stock, momentum traders won't try to catch a falling knife, and contrarians have already bought it, then who's left to hold up the share price? Fortunately, I'm in the accumulation phase, so I don't bother worrying about selling :)
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Re: Clippings 2012

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From last summer. Even though the market is up at the moment - I think the message bears rereading - :?
Vanguard’s Davis: Facing The Slow Slog
investors must understand that expected returns are likely to be lower than they have been for much of the past century, and that the market appears to be expressing just that.
Eric Sprott has been saying the same
SPROTT - Unintended Consequences

The recent Bill Gross letter is saying something smilar -
PIMCO | Investment Outlook - The Great Escape:Delivering in a Delevering World
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Re: Clippings 2012

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George$ wrote:Eric Sprott has been saying the same
SPROTT - Unintended Consequences
To me, he sounds much more like a conspiracy theorist:
Eric Sprott, with my underlining, wrote:2012 is proving to be the 'Year of the Central Bank'. It is an exciting celebration of all the wonderful maneuvers central banks can employ to keep the system from falling apart. Western central banks have gone into complete overdrive since last November, convening, colluding and printing their way out of the mess that is the Eurozone. The scale and frequency of their maneuvering seems to increase with every passing week, and speaks to the desperate fragility that continues to define much of the financial system today.
I'm agnostic whether his main argument is true or not; but colluding to save the system? I would have used "co-operating" to save the system...

May I offer a similar statement: "The Western infidels are colluding with the sons of apes and pigs against the true believers".
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Re: Clippings 2012

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http://business.financialpost.com/2012/ ... -jeopardy/

A FP link on taxes on investment income. Makes the case that if you're in the top Ontario tax bracket, taxes on bonds are 46%, on eligible Canadian dividends 52% and 23% on capital gains.
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Re: Clippings 2012

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Park wrote:A FP link on taxes on investment income. Makes the case that if you're in the top Ontario tax bracket, taxes on bonds are 46%, on eligible Canadian dividends 52% and 23% on capital gains.
are 46% make it are 49% after the latest Ontario budget.

Of course, not applicable to yours truly.
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Re: Clippings 2012

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I didn't know where to put this, so it ended up in this thread

"The long and the short of it A guide to finance and investment for normally intelligent people who aren't in the industry" by John Kay

This is intended as an introductory book to investment; it's geared to a British audience. It's not a indexing book, although indexing is an option. It's the most demanding introductory book to investment that I"ve ever read. I wouldn't read it as my only introductory book, but if you're a Boglehead like I am, it gives another perspective that I think is worth reading. The author is an accomplished economists, but emphasizes that theories and models are just that.
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Re: Clippings 2012

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Park wrote:"The long and the short of it A guide to finance and investment for normally intelligent people who aren't in the industry" by John Kay
Interesting reviews. C$15.65 shipped from the Book Depository: http://www.bookdepository.com/Long-Shor ... 0954809324 - and 10% off until 14th May.
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Re: Clippings 2012

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An intriguing view of France and the French election by the G&M's European columnist.

The French are the globalizers – not the globalized
As I listened to these warnings, I couldn’t help thinking about how my week had begun in London.

On Monday morning, I paid the electricity and gas bills by writing a cheque to a French company.

Then I took the garbage bags to the curb, where they were collected expertly by employees of the French company Veolia Environnement.

I hit the road, avoiding the tide of Renault Clios and Meganes and Peugeot 207s, among the most popular cars in Europe,

At the Underground station, I boarded a train built by Alstom, the French engineering company
The train was guided by the Underground’s signalling and control network operated from a central hub in Waterloo Station by Thales, the French company

En route, I made some travel plans. I’ll need to be in Munich, Warsaw and Barcelona in the next while, which inevitably means staying in one of the 5,000 hotels owned by the French company Accor

French companies are impossible to avoid. They employ 4.5 million people outside of France and account for almost a fifth of all the investment in Europe.
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Re: Clippings 2012

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CROCKD wrote:An intriguing view of France and the French election by the G&M's European columnist.

The French are the globalizers – not the globalized
Then I took the garbage bags to the curb, where they were collected expertly by employees of the French company Veolia Environnement.
That's a familiar name in my neck of the woods.
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Re: Clippings 2012

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McKinsey Global Institute has released a new report debunking myths about international trade and globalization. From the summary:
Myth 1: Mature economies are losing out to emerging markets in trade and thus facing increasing trade deficits. In fact the balance of trade between advanced and emerging economies isn't worsening.

Myth 2: Manufactured goods drive trade deficits. No, advanced economies have lately been in surplus in manufactures, even more so in knowledge-intensive manufactures. Imports of primary resources have been driving trade deficits.

Myth 3: Trade is the main cause of lower employment in advanced-economy manufacturing. The main causes are lagging demand and increasing productivity.

Myth 4: Advanced economies can create jobs only in low-end services. Actually trade in services creates high-wage knowledge-intensive jobs--more so than manufacturing.

Myth 5: Trade in services is small, and low-wage economies will capture any increase. Services exports already account for a quarter of rich-economy exports, and the share could be a third by 2030. Trade surpluses in services, properly measured, are growing.

Myth 6: Service economies like the US are the world leaders in services trade. You'd think so, but the US lags Europe in services exports (even discounting intra-EU trade).
Probably won't convince our unions or the NDP...

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Re: Clippings 2012

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Massive transfers by the government from the young to the old are not only inequitable, they are very damaging to economic growth, and are one of the reasons why the U.S. is in such a mess (or at least that's what these guys claim):
...there is strong evidence that Uncle Sam’s Ponzi scheme has already done tremendous economic damage to the country.

...the young, because they have longer remaining lifespans than the old, have much lower propensities to consume out of their remaining lifetime resources. Hence, in taking from young savers and giving to old spenders, which Uncle Sam has spent six decades doing on a massive scale, the lifecycle model predicts a major decline in US net national saving associated with a major rise in the absolute and relative consumption of the elderly. This is precisely what the data show.

In 1965, the US net national saving was 15.6% of net national income. Last year, it was just 0.9%. And the secular demise in US saving has coincided with a spectacular rise in the consumption of older Americans relative to that of younger Americans.

...postwar intergenerational redistribution has not only lowered net national saving; it has also reduced net domestic investment, from 14.0% of national income in 1965 to just 3.6% in 2011. This decline in the rate of net domestic investment is, no doubt, playing a major role in the slow growth in US wages. Indeed, the level of private-sector average real earnings per hour, exclusive of fringe benefits, is lower today than it was 40 years ago.

We call this America’s “fiscal child abuse”. If it continues, it will no doubt shortly drive the national saving rate, which was negative 1.2% in 2009, into permanent negative territory and further reduce net domestic investment and prospects for real wage growth. This, plus the massive lifetime tax bills being dumped on our children, will transform the American dream into something it has never been – just a dream.
I certainly agree with curtailing the transfer of income and wealth from the young to the old. We could start with reforming OAS. I really don't understand why people should be entitled to get money from the general body iof taxpayers, just because they have reached a certain age.

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ghariton wrote:Massive transfers by the government from the young to the old are not only inequitable, they are very damaging to economic growth, and are one of the reasons why the U.S. is in such a mess (or at least that's what these guys claim):
...there is strong evidence that Uncle Sam’s Ponzi scheme has already done tremendous economic damage to the country.

...the young, because they have longer remaining lifespans than the old, have much lower propensities to consume out of their remaining lifetime resources. Hence, in taking from young savers and giving to old spenders, which Uncle Sam has spent six decades doing on a massive scale, the lifecycle model predicts a major decline in US net national saving associated with a major rise in the absolute and relative consumption of the elderly. This is precisely what the data show.

In 1965, the US net national saving was 15.6% of net national income. Last year, it was just 0.9%. And the secular demise in US saving has coincided with a spectacular rise in the consumption of older Americans relative to that of younger Americans.

...postwar intergenerational redistribution has not only lowered net national saving; it has also reduced net domestic investment, from 14.0% of national income in 1965 to just 3.6% in 2011. This decline in the rate of net domestic investment is, no doubt, playing a major role in the slow growth in US wages. Indeed, the level of private-sector average real earnings per hour, exclusive of fringe benefits, is lower today than it was 40 years ago.

We call this America’s “fiscal child abuse”. If it continues, it will no doubt shortly drive the national saving rate, which was negative 1.2% in 2009, into permanent negative territory and further reduce net domestic investment and prospects for real wage growth. This, plus the massive lifetime tax bills being dumped on our children, will transform the American dream into something it has never been – just a dream.
Amazing the conclusions that can be drawn from data by those with an axe to grind.Sorry George-I may be naive but to me all this shows is that as the bulge of boomer retirees start drawing down their savings,since their numbers are greater than the number of younger people contributing, the amount still being saved will inevitably decline.Is anyone really surprised that retirees are drawing on their savings?What has this to do with OAS ?If you want to argue against state support for seniors then you may or may not have a valid argument but the rate of savings is a red herring!
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Re: Clippings 2012

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izzy wrote:Amazing the conclusions that can be drawn from data by those with an axe to grind.
I don't think either the authors or I have an ax to grind in the conventional sense. It's true that Larry Kotlikof was one of the originators of the concept of "generational accounting", some twenty-five years ago, and perhaps he has an interest in using the tool and seeing others use it. But other than that...
Sorry George-I may be naive but to me all this shows is that as the bulge of boomer retirees start drawing down their savings,since their numbers are greater than the number of younger people contributing, the amount still being saved will inevitably decline.Is anyone really surprised that retirees are drawing on their savings?What has this to do with OAS ?If you want to argue against state support for seniors then you may or may not have a valid argument but the rate of savings is a red herring!
I think that the main point is one of inter-generational transfers and equity -- in particular the equity of a universal old age pension with a clawback much less progressive than the personal income tax system. In effect, in aggregate, OAS seems a redistribution from lower-income taxpayers (on average) to higher-income ones (again on average). That seems contrary to the program's original intent (when very many of the old were impoverished and needed help and means testing was not really necessary).

The impact on the national savings rate, and hence on investment and growth, is a secondary consideration. But it should not be ignored, especially since this seems to be one of the rare cases where both equity and efficiency point in the same direction. The argument is very simple:

(1) The old have a lower savings rate than the young. You seem to agree with this, and so I will not give any references in support.

(2) Transferring money from the young to the old will increase the amount of money subject to lower savings rates. This seems to be a result of simple arithmetic. The result is less savings.

(3) The question arises: The above holds for existing income levels. Would it hold true for the additional income received by the young and taken away from the old if a program such as OAS were cancelled? It may be that the young spend a greater share of new money than of money they already receive. But that seems coungter-intuitive. First they pay for food and housing and the children's orthodontist. Only then do they save. New money would more likely be saved since the major items of consumption are already covered to some degree.

(4) This does not deny that the factor you mention -- demographic change with increasing numbers of the old -- is also at work. But inter-generational transfers aggravate it.

Anyway, all this is academic. Behavioural economics tells us that the pain of losing an entitlement one already has is much greater than the enjoyment of reducing an existing tax burden. Combine that with the observation that the old are politically much more active than the young -- perhaps because they have much more free time -- and the result is a foregone conclusion.
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Re: Clippings 2012

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This is what austerity looks like (via Marginal Revolution):
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Re: Clippings 2012

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Moore's Law Over, Supercomputing "In Triage," Says Expert

Seems to be saying that future advances would require an entire root and branch gutting of the industry's build model, and that vendors and users will prefer to avoid that cost and disruption. :(

Beyond the potential for more exotic implementations - which are touched in the article - I suspect consumer electronics has more room to run, just on inertia and catc-up.
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Re: Clippings 2012

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tidal wrote:Moore's Law Over, Supercomputing "In Triage," Says Expert

Seems to be saying that future advances would require an entire root and branch gutting of the industry's build model, and that vendors and users will prefer to avoid that cost and disruption. :(

Beyond the potential for more exotic implementations - which are touched in the article - I suspect consumer electronics has more room to run, just on inertia and catc-up.
ISTM that type of growth can't go on forever. We will have to stop relying on faster processors to make up for poor system performance caused by inefficient programming.
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Re: Clippings 2012

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Insomniac wrote:ISTM that type of growth can't go on forever. We will have to stop relying on faster processors to make up for poor system performance caused by inefficient programming.
Or develop new technologies, e.g. that use light or quantum mechanics. Granted that will take 10 or more years to become commercially viable. But traditionally supercomputers are funded by the military/espionage arms of governments for whom cost is of little importance.
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Re: Clippings 2012

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Bylo Selhi wrote:Or develop new technologies, e.g. that use light or quantum mechanics. Granted that will take 10 or more years to become commercially viable. But traditionally supercomputers are funded by the military/espionage arms of governments for whom cost is of little importance.
You can bet when the new technologies come out that they will be pretty expensive at first. When we buy new servers now, they are the same price or cheaper than 3 years ago plus we get more processing power.

This has lead some software developers to believe that it's easier to buy a faster CPU than spend the time optimizing their code. This attitude may change if the price goes up.
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Re: Clippings 2012

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Insomniac wrote:You can bet when the new technologies come out that they will be pretty expensive at first.
Which is why first implementations will be for supercomputers at governments, universities and military bases with big budgets. Then large businesses, then smaller businesses and finally you and me.
When we buy new servers now, they are the same price or cheaper than 3 years ago plus we get more processing power.
When I started at my first job ~1975 a megabyte of core storage for IBM S/370 sold for $1mega (and occupied as much space as a large refrigerator and required raised flooring, air conditioning, water cooling, etc.) Today 8 gigabytes of RAM (8,000x as much storage) that's faster, more reliable and the size of a stick of gum sells for ~$50 (1/20,000x the price.)

Impressive as that is, I'd expect the rate of improvement in performance/price to increase even more rapidly in the next 35 years than it did in the previous 35.
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Re: Clippings 2012

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Edward Conard has a new book appearing and he's made Chapter 1 available online for free. Some excerpts:

If the United States has become a nation of consumers rather than investors, why has productivity soared?

If the United States has become a nation of hamburger flippers, why were half the jobs created since the 1980s created at the highest and most technical end of the wage scale -- doctors, lawyers, scientists, supervisors, writers and teachers?

If predatory bankers took advantage of homeowners, why did the requirements for down payments decline? Smaller down payments shifted risk from home owners to lenders.

If banks used securitization to offload troubled loans onto naive investors, why did they retain 40% of those loans on their balance sheets?

If mortgage loans were the primary cause of the recession, why were banks rendered insolvent long before home owners defaulted?

If the risks were easy to spot, why did top regulators, even liberal regulators like Robert Rubin, former treasury secretary during the Clinton administration, resign his board seat after having admonished Citicorp to increase its risk? Why did Nobel Laureate Joseph Stiglitz and former Obama budget director Peter Orszag co-author a paper that concluded:
The risk to the government of a potential default on GSE debt is effectively zero.
Sound like good questions to me.

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