My end of week reading

• How To Be An Index Investor (Rick Ferri) see also The inspiration for John Bogle’s great invention (MarketWatch)
• Big Company CEOs Just Aren’t Worth What We Pay Them (Forbes)
• Of Brokers and Bankruptcy (Reformed Broker) see also Finra deletes brokers’ red flags, says bar association study. (WSJ)
• Eisinger: When Regulation Threatens, Bankers Predict Doom For Main Street (ProPublica)

continues here

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “10 Friday AM Reads”

  1. willid3 says:

    job creators and the ‘job’ the create?

    now you need at least 2 of these ‘jobs’ to be considered poor?

  2. RW says:

    This Is Not a Better Labor Market than We Had a Year Ago This Is a Worse One

    As far as the long-run prosperity of America is concerned, this past year has been yet another disaster for the labor market. Demography would lead one to expect a decline in the labor force of 0.1% or 0.2% points–not 0.5%.

  3. rd says:

    I find these stories benchmarking people’s retirement accounts to the S&P 500 to be both annoying and destructive:

    In this article they give a figure of 12.7% as the average retirement account investors returns and indicate that this is much lower than the S&P 500 gains.

    My response is that the average investor should not have the S&P 500 gains over the past five years. Instead, they should have something much closer to the 16% annualized gains that Morningstar’s moderate target risk category had over the past 5 years. The article should be focusing on why the average investor did not achieve that 16% annualized gain instead of 3% less. Or it could look at whether or not the average investor lost less than both the S&P 500 and the moderate target risk categories between 2007 and 2009 and how their 10 year returns look like overall compared to these benchmarks.

    We are in the waning years of a major bull market. These types of articles indicating that people need to keep pace with the S&P 500 can push many readers to reduce diversification precisely when they need it the most.

    • Iamthe50percent says:

      I tend to agree, but doesn’t ZIRP radically alter those retirement strategies? We used to say that you can’t get blood from a turnip. Now we say you can’t get interest from a Treasury bond or a CD. I’m getting a good return on emerging interest bonds (bonds themselves are going down) but really, they behave more like stocks than bonds. Today 5% is what you get from risky dividend payers while once upon a time it was what you got from insured deposits.

      • rd says:

        We have to understand our portfolios on a lifetime basis. ZIRP will pass along with all of the other relatively short term distortions, like NASDAQ 2000, housing bubble of 2006, 1980 gold and silver etc. We have already seen 10-yr T-bonds snap back towards more rational pricing. A well-diversified low-cost portfolio, even something as simple as Bogle’s 50/50 or Vanguard Moderate Growth Lifestrategy fund, will tend to ride those waves successfully with absolutely no effort on the investors part. They will do ok in bears and ok in bulls.

        The ZIRP resulted in large gains in the bond part of the portfolio over the past decade, so you can still get income – just a smaller percentage of a bigger number. There isn’t any more dividend yield in the stock market than in a broad-market bond fund today, so the only advantage that stocks have is the potential for capital gains if corporate earnings rise and revenue grows. We have probably used up most of the P/E multiple expansion available unless we go to crazy levels like 2000, so stocks’ fate is entirely in the hands of GDP growth and maintaining very high corporate margins.

        Human beings are not very well structured to make rational decisions with assets that swing wildly like the stock market. There were only a handful of articles in media outlets like Marketwatch about how early 2009 would be a good time to invest (I think Mark Hurlbert had one or two of those looking statistically at long-term returns after crashes). Most were doom-and-gloom because it would attract eyeballs, so it is very disengenuous when the same outlets are putting articles out now chastising small investors for not having put all of their funds in US stocks at that moment and implicitly recommending that they should pile into the stock market at high valuation levels in order to keep up with the Jones.