Investing is simple but never easy. Part of the explanation is that tech has been hot and US is much more heavily in tech than international. Other events like overseas wars are a factor as well. Back in 2007, I was recommending a third of equities be in international and the typical response was "why so low - international will do much better." Today, I'm recommending the same and you can guess what the typical response is.
Hi Jonathan. It's counter-intuitive but an annuity with a fixed COLA actually increases inflation risk since the duration of the payments is longer. I tell people that actuaries are really smart people and, if they won't take the inflation risk by offering CPI based annuities, I don't think my clients should either.
I built my TIPS ladder nearly two years ago. I discovered it could provide over a 4% real withdraw rate for 30 years at the Bogleheads 2022 conference. I attest that the feeling of a guaranteed inflation adjusted cash flow from SS & the TIPS ladder creates such a calmness when markets plunge. My clients love it as well. I credit Bogleheads Kevin Esler and Bob Hinkley for creating tools anyone can use that makes it easy to construct ladders. They do this without any profit motive - they just want to help people.
I’m also 65. I can say that this is one of the best articles I’ve ever read on any financial site. It really hits home to me. The subject, perspective, and writing style are brilliant! Thank you so much.
I suspect your columns weren't very popular with the WSJ advertising sales force. I was writing the anynoomous column back then called "The Mole" for Money Magazine with advice echoing yours and was told how much the sales force hated me as it made it so much harder to sell advertisements for expensive and exciting financial products.
I love Charles Ellis but have a different perspective.
After the financial crisis, the Fed increased the Fed Funds rate and finally ended quantitative easing. Bond rates decreased rather than increased.
The top economists have called the direction of the 10-year T Bond correctly roughly 30% of the time – less than a coin flip.
Markets aren’t stupid. We know the Fed has to end QE and will eventually increase the overnight Fed Funds rate. But if we all knew rates were going to go up then at the weekly Fed auction, we would bid less for the bonds to get higher yields and rates would have already gone up.
The bottom line is we don’t know if rates will stay low and we will be fighting deflation as has happened in Japan for the last three decades or if we will have higher rates and inflation.
Comments:
Investing is simple but never easy. Part of the explanation is that tech has been hot and US is much more heavily in tech than international. Other events like overseas wars are a factor as well. Back in 2007, I was recommending a third of equities be in international and the typical response was "why so low - international will do much better." Today, I'm recommending the same and you can guess what the typical response is.
Post: Stuck at Home
Link to comment from November 23, 2024
Hi Jonathan. It's counter-intuitive but an annuity with a fixed COLA actually increases inflation risk since the duration of the payments is longer. I tell people that actuaries are really smart people and, if they won't take the inflation risk by offering CPI based annuities, I don't think my clients should either.
Post: Laying Down a Floor
Link to comment from September 14, 2024
I built my TIPS ladder nearly two years ago. I discovered it could provide over a 4% real withdraw rate for 30 years at the Bogleheads 2022 conference. I attest that the feeling of a guaranteed inflation adjusted cash flow from SS & the TIPS ladder creates such a calmness when markets plunge. My clients love it as well. I credit Bogleheads Kevin Esler and Bob Hinkley for creating tools anyone can use that makes it easy to construct ladders. They do this without any profit motive - they just want to help people.
Post: Laying Down a Floor
Link to comment from September 14, 2024
I’m also 65. I can say that this is one of the best articles I’ve ever read on any financial site. It really hits home to me. The subject, perspective, and writing style are brilliant! Thank you so much.
Post: When to Quit
Link to comment from February 15, 2023
I suspect your columns weren't very popular with the WSJ advertising sales force. I was writing the anynoomous column back then called "The Mole" for Money Magazine with advice echoing yours and was told how much the sales force hated me as it made it so much harder to sell advertisements for expensive and exciting financial products.
Post: News You Can’t Use
Link to comment from October 29, 2022
Jeff. Thank you for protecting the mole's identity back when I was writing that column once some smart people on Bogleheads.org discovered it was me!
Post: Striking Out
Link to comment from May 5, 2022
I love Charles Ellis but have a different perspective.
- After the financial crisis, the Fed increased the Fed Funds rate and finally ended quantitative easing. Bond rates decreased rather than increased.
- The top economists have called the direction of the 10-year T Bond correctly roughly 30% of the time – less than a coin flip.
Markets aren’t stupid. We know the Fed has to end QE and will eventually increase the overnight Fed Funds rate. But if we all knew rates were going to go up then at the weekly Fed auction, we would bid less for the bonds to get higher yields and rates would have already gone up. The bottom line is we don’t know if rates will stay low and we will be fighting deflation as has happened in Japan for the last three decades or if we will have higher rates and inflation.Post: No Bonds for Me
Link to comment from October 30, 2021