Tuesday, March 3, 2009

Over reaching?

I told my financial guy to start investing last week, and he put about 25% of our money into closed-end dividend income funds, whatever those are. Of course, the stock market immediately dropped like a....well....a knife. Ouch. Still trying to pull the blades out of my hands....

I knew that would probably happen; I figure I have a minimum of ten years before I intend to pull it out. I did change at the last moment, and put this year's first contribution into Linda's IRA instead of mine, since she can actually pull it out without penalty.

Despite the risk, I think I'll be more engaged in the stock market shenanigans from here on out. What's life but an engagement? I don't play video poker. I don't buy lottery tickets. Now.....I get to be a stock ticker watcher. Kind of fun.

Besides, it's a pretty small amount of money that I think had earned about...oh, maybe .25 cents in interest over the last couple of years. You guys would laugh.


Meanwhile, in order to make my contribution, I lifted half of our emergency back up money. I forgot that the other half of the money isn't readily available, and that I always have a cash-flow bulge in the first week of the month (Auto bills, rents, mortgages....) So I immediately put my accounts into a bind.

Stupid. It didn't need to be that way. I had until the middle of April to make my contribution. But I had a meeting with the financial guy, and wanted to hand him a check. (When I called his assistant, changing over to Linda's account, and inquired as to what he'd done so far, and whether it would be a problem, and so on...she finally just sort of laughed. And I realized that my little check was probably the least transaction they were dealing with that day.)

Yet for me, it may have been an overreach. By the end of the month, it will all be fine, but this week is scramble time.


By the way, does anyone else get the sense that a 'big bad' is coming? Something in the air. Just saying, since it's been on my mind for a couple of days. Of course, the really big bad's come when you aren't looking.


P.S. Looked up the two funds the money was put into. Looks like they had a real low a week ago, when the money was invested, followed by a big spike upward, and now it's down to where it was a week ago. Bookmarked the two sites, and will keep a running total, for awhile, just for fun....

I could see how this could get obsessive.

12 comments:

RDC said...

Duncan,

Would you turn your store over to a manager without a good understanding of exactly how they were going to run the business?

Then why are you doing that with a money manager?

Your investments have the peotential to, at some point, be a substantial part of your income. Yet it seems that you are happily turning the money over for someone to manage. The person that has the most interest in your money and how it performs is you. You spend hours and hours understanding your business. Why not take some time and understand your investments as well.

I am an advocate for investing, but I am very much against most of the investment businesses as they exist today. Every dollar you spend in fees is a dollar that comes directly from your investment return. That is why individuals returns almost always lag the market. Also there are inherit conflicts between their interests and yours. Their interest is to make money by providing a service and they do that if you make money or not. The conflicts can be minimized by using certain fee based structures, but it does not go away. That is why you would probably be better off with developing a basic understanding and then using a low cost company like Vanguard and self manage a simple selection of funds using a fairly simple approach of averaging in and rebalancing to deal with risk. You can make your IRA contribution and then make periodic transfers to average in.

Now before you give me the same response you did before about it not being that much money, let me say that the same descipline is needed with even small investments, if you want them to become large investments someday.

I would recommend John Bogle's the Little book of common sense investing.

BENDBUST said...

The 'Big-Bad' is when the US public are told they have been 'ROBBED' by the amount of $10 Trillion, in the past six months by Bernanke&Geithner, courtesy of Obama, who telegraphed last summer if elected he would put these two birds in charge.

It's coming, ... and when the US public realizes how bad they have been fucked it will be carnage, ...

Today Bernie Sanders asked the Right fucking question ...

U.S. senator wants Fed to name loan recipients

WASHINGTON, March 3 (Reuters) - A U.S. senator berated Federal Reserve Chairman Ben Bernanke on Tuesday for refusing to name banks that borrow from the central bank, and said he would introduce legislation requiring public disclosure.

In a testy exchange at a hearing before the Senate Budget Committee, Vermont Sen. Bernie Sanders, an independent who usually votes with the Democrats, said he found it "unacceptable" that the central bank risked taxpayer money without detailing where the funds went.

"My question to you is, will you tell the American people to whom you lent $2.2 trillion of their dollars?" Sanders asked, referring to the size of the Fed's balance sheet.

Bernanke responded that the Fed explains the various lending programs on its website, and details the terms and collateral requirements.

When Sanders pressed on whether he would name the firms that borrowed from the Fed, the central bank chairman replied, "No," and started to say that doing so risked stigmatizing banks and discouraging them from borrowing from the central bank.

"Isn't that too bad," Sanders interrupted, cutting off Bernanke's answer. "They took the money but they don't want to be public about the fact that they received it."

He said businesses in his state were in trouble and needed loans, but were not permitted to borrow from the Fed.

"Do you have to be a large, greedy, reckless financial institution to apply for this money?" he asked.

Bernanke said the Fed's lending programs were not gifts or subsidies but rather over-collateralized loans. He said the law restricted the types of firms to which the central bank can lend.

(c) Team-Moss, Read bendbubble3.blogspot.com by UofO prof on how why robbery took place.

Michael said...

Duncan's dichotomy of the bear and the bull. I thought I had you pegged as a realist and bearish in your attitude towards the economic outlook.

Step right up and place your bets.

Good luck.

BENDBUST said...

Nope, long ago it was established that dunc is 'pussy' parlance, for bambist liberal disguised as a bookstore owner.

So be it, as he say's he tosses good money into a pool of feces, and yes, if that 'fund' is still around in 10 years you get your money back, whoooopeee. Lots of 'ifs'.

On the other hand, you can INVEST IN YOURSELF. Build your biz, or another biz, ... do something that lets you 100% manage your money, rather than blindly handing to the next MADE-OFF.

Nope, today dunc has either reverted to pussy, or he's being a devils advocate for moronity.

On the subject, as safe bet would be to put loose cash using 'treasury direct' into TIPS, cuz we're going to have inflation going out to ten years. But still it would be better to keep CASH liquid and close for the next ten, cuz the old six months cash life-support is over, now its years that you need to have on hand.

Good thing is at least your not selling RV's.

It isn't even a question now 'IS the DOW going to 4000'?, todays' question is will the DOW go to 400?

Greed killed the bambi dunc, don't been greedy today its not about making 5%/yr, its about NOT losing your principal. Do what ever it takes to protect the principal, don't think about ROI until we see Volcker bring us back 20% interest rates, then it will be obvious, bend obvious where to park your shot&powder.

Duncan McGeary said...

I'd love to be a day trader. For someone who likes to believe that he can see the patterns underneath the obvious, it's a natural.

The only difference between me and Jesse is money to invest. (Besides a few other things, like his looks, brains and personality....)

I'm pretty much a riverboat gambler by instinct.

35 years ago, I quit my job, holed up in my apartment, and wrote a book. It got published, and turned my luck around.

I look back and think I must have been crazy. But...the alternative was dead end jobs.

The alternative right now is cash, which admittedly hasn't dropped in half in the last couple of years, but has also earned almost nothing; a dead end prospect. No cash, or safe, investments are paying anything right now.

Duncan McGeary said...

RDC,

I only play a naif, doesn't mean I am one.

I asked enough questions of him, and accepted the explanation, enough to go forward. Two funds, which I will buy and hold.

If I was investing without advice, I'd be pretty much doing the same thing.

These guys have had a good track record with my families money; I know I can trust them, for one thing.

Meanwhile, I have been researching the two funds they put me into.

(Is it kosher or wise to mention what they are, and have you guys tell me what you think?)

Duncan McGeary said...

RDC,

If you came into my store, and asked me for a good book, game or comic, I would ask you what you liked in the past, and I'd be able to recommend a title that would probably have an 80% chance of pleasing you.

If you took my advice.

On the other hand, if you came in and picked a book out by your own instincts, I suspect the odds of getting a hit are much less, even with research.

Duncan McGeary said...

Micheal, I've been, I think, a realist.

Not so much a bear.

My mistakes are usually aggressive mistakes.

Have a successful store? Open a second, and a third and a fourth....and then have it all crashing down. And then, yet, a decade later....here we opened another store.

What holds me in check is a hard won awareness of my inclinations and limitations.

Inclinations: I'm bullish to the extreme. I'm Wile Coyote, I think I can defy gravity, I think that I'll catch that pesky Road Runner if I have the right kit.

What you hear from me is talking myself back from the ledge, so it looks bearish, but is a hedge.

Limitations: I run out of energy, time, space or money. I don't have the technical or management skills.

I've got the ideas, I can run my own store, but once it's out of my hands, I can't keep it going.

So yeah, the gamble doesn't bother me. I suspect the money I'll retire on will be the money I make in my store....

BENDBUST said...

No cash, or safe, investments are paying anything right now. - dunc

*

Not the right way to look at it, had you had all your money in stock you would be -50% DOWN, if your in cash, your even which means your 50% ahead of the stock folks, everything is relative.

It just drive's me nuts to see people bitch and moan about not making money on money.

Andrew Carnegie, one of the richest men in world history that built US steel once said, "Making money is easy keeping it is hard".

In todays economy Carnegie is a as correct as ever, FOOL's will take 'chances' to make money, but most will lose their principal. Smart folk know that Capital Preservation throughout history is damn near impossible let alone the existence of a perpetual money tree.

Duncan McGeary said...

Understood. My cash is in my store, so to speak. I suspect that's where it will come from. I believe I can increase the value of a dollar better than any stock or investment.

This money is my hedge, as I've said, my -- try a different path and not have all my eggs in one basket if it pays it will be worth it and if not the downside isn't too much and besides I save a bunch on taxes -- money.

Marge said...

Dunc,
Do you know that in your IRA you can have cash? You don't have to be in a FUND or stock! I converted all $'s in my IRA a year ago into rolling CD's. Granted I only make 2 to 4% interest but the pricipal stays no matter what. Unless you are over $250k, it's a safe bet.

RDC said...

Marge,

Good point.

Considering that one should have part of their retirement funds in cash or other investments that are taxed as income, it makes sense to keep the cash portion in an IRA and to do your equity investments outside of the IRA. THe reason why is that the IRA is taxed as income when you withdraw and you do not get the advantaged treatment that capital gains or dividends get. Not only do you lose the advantages tax treatment, but you also cannot write off losses. By keeping cash in an IRA you get to compound the interest until withdrawal without having to pay taxes each time a CD matures or interest is paid.