Mar 10

We’ll start this week with Pragmatic Capitalism’s It’s 2000 & 2007 All Over Again. Has the market come too far too fast? We are just above 1500 on the S&P after 13 years since it was 1500 the first time. Is it time to worry another decline is coming?

Investors’ Quandary: Get In Now? – The Reformed Broker, Joshua Brown tells us why this is the Wrong question. I’ll spoil the punchline, the correct question is “Why are you out in the first place?” I agree, there’s a never ending cycle of buying just as new highs are reached, so the same people that panic-sold when he S&P dropped below 800 are now thinking 1500 is time to buy back in. I’m in it for the long term, but if I were thinking of reducing our stock allocation it would be just as this money flows in.

At Couple Money, Financial Samurai suggests ways to Beef Up Your Job Loss Emergency Plan. Sam explains why getting laid off from work might not be a bad thing, and I’m convinced he’s right about that. If you’re getting burnt out at your current job, a layoff may be a blessing.

This week there was a lively discussion at Man vs Debt. Joan Otto, Man Vs. Debt community manager, wrote Are 401(k) and 529 Plans a Good Idea When You’re In Debt? In this article, Joan makes the case for skipping the 401(k) for the time it takes to pay off your debt first. I offered the comment that someone should never walk away from the free money of a matched deposit. Joan kindly stood her ground preferring the motivation of seeing the debt reduced as fast as possible. Let me just say this –  I know it’s not always about the numbers. There’s psychology, feelings, and sleeping at night. Know what? That’s ok, too. One size doesn’t fit all, and if the math doesn’t impress Joan, I’m not insulted.

Barbara Friedberg talked about The Overlooked Wealth Building Trait. You don’t know what it is? You will.

My friend John Wedding will tell you why A pizza guy shouldn’t make a cardiologist salary. Seems a delivery guy received a $10 tip on 85 pizzas costing over $1400. What do you think? $10 was too little? (Agreed) But how much is too much? $210? And what’s ‘just right’?

This week I had two guest posts I’m proud to share – At Block Talk, H&R Block’s Tax Blog – my Top Ten Tax Audit Triggers. For the tax pros in my audience, let me know if you think I missed any. And at TurboTax – Save More Green with Daylight Savings and Energy Efficiency Credits.

And that’s a wrap for the week. Uh, not yet. Post Operative? Oh, right. Jane had a bit of pain in her stomach this past week, and went to see a doctor on Wednesday. 1PM Doctor Visit, 4PM MRI. And off to a 9PM surgery to remove her appendix. That made for a bit of a stressful week in the Taxpayer household.

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Jun 30

In a simulcast of publishing both here, and my main web page, where I publish a monthly article, I am happy to offer my List of Lists;

    Ever since 1977’s “Book of Lists“, our fascination with lists and sets of rules has grown. David Letterman’s Top Ten List has been going on for decades with no end in sight. These are Rules of Money that I’ve saved over the past few years, enough to post my favorite “List of Lists”. If I missed one of your favorites, please leave a comment and I will add it.

Take your time, enjoy the list, and send me your thoughts.

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Jan 30

Some time back, I wrote a book review on my main site for Zvi Bodie’s “Worry Free Investing“. I’ve recently been drawn into an online conversation asking about this author’s strategy of investing all of one’s portfolio in TIPS (Treasury-Inflation Protected Securities).
When Professor Bodie wrote his book, TIPS had a real rate of 3% (TIPS have two components – they are tied to the CPI and will rise in value tied to that rate, and also have a ‘real yield’ which is adjusted every 6 months.) and the spreadsheet he offers advises a saving rate of 21% with an eye toward replacing 70% of one’s pre-retirement income using TIPS. Now, as we move to the present, we find TIPS sporting a real yield of 1.2% which, when entered in Bodie’s spreadsheet, now councils us to save at a rate of 34%! As I state in my book review, this hardly seems ‘worry-free’ to me, as someone who was on the plan at 21% now needs to bump his savings by over 50% or miss his target retirement goals by as much.
I also need to mention that the entire return is taxable. If one is in the 25% bracket, 1.05% of that total 4.2% is lost to taxes and leaves a real return of only .15%. To be fair, he does state that these securities be held in tax-favored accounts. I find it curious that in a recent Business Week interview Prof. Bodie maintains his TIPS focus, although he does suggest an S&P call strategy which presumably will juice yields a bit. Such a strategy is not for the feint of heart.
I sent him a question, through his Worry Free Investing Site, I don’t know if he monitors the blog there, or will offer a reply.
As an alternative to this strategy, I’d offer DVY, the iShares Dow Select Dividend ETF which currently yields near 3.7%. That dividend is taxed at favorable rates, 0% if you are in the 10% or 15% bracket and 15% if higher. So 3.15% worst case. I have every reason to believe the stocks in this ETF will keep up with inflation, and for this strategy, that’s all we are asking of it.

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