You have probably heard by now that the S&P 500 index ended the year exactly where it started.
All that volatility and all that worrying. Where did it get you?
I wasn’t too kind on the Bills in a recent post. My intent wasn’t to outwardly criticize their less-than-stellar market calls. I was just trying to point out the danger of hitching your (financial) wagon to a media superstar.
Guess no one is listening to me. Yesterday, in the same article, they both were asked to weigh in on 2012.
Interesting reading, I guess, but I keep on asking myself, what do their opinions have to do with me reaching my financial goals?
I know I should be talking about financial things on this last day of the year, but I would rather share with you another article that is profound in its own right, and will have a far greater impact on your happiness than all the Bills combined.
Hope you enjoy, and see you next year.
It’s that time of year to start planning, organizing, and writing down all of the goals you have full intentions of keeping. The mere acts are good but let’s face it, by summer the goals you’ve set in January become a distant memory.
Instead of good intentions, let’s put some action to the plan. John Bingham is an author, speaker, and avid runner. He is also known as “The Penguin” who writes and inspires countless runners for Runners World magazine. He is starting his second annual 100 day challenge: you must purposely move for 30 minutes a day for a consecutive 100 days. You can move for 15 minutes twice a day or three 10 minute cycles, the point is – JUST MOVE.
Now if physical activity isn’t your thing and “The Penguin” or I can’t inspire you to move, try something positive in your life for 100 days – drink more water, pray, spend less money, hug someone – just make a positive impact on your life for 100 days. See if you can stick with something for 100 days and observe the discipline required.
We would love to hear about challenges you have completed, if you sign up for this challenge, or will try something new for 100 days. What do you have to lose?
Life is occupied in both perpetuating itself and in surpassing itself. If all it does is maintain itself, then living is only not dying. – Simone de Beauvoir
Numbers are a funny thing.
Our experiences in life condition us to expect more of the same, at least when it comes to numbers, and investing in common stocks.
For many of us, our experience of investing in common stocks was born in the 1980s and 1990s, a time when the stock market had its greatest run ever.
During the years from 1982 to 1999, the S&P 500 index generated an annualized return of over 18%, DOUBLE its long term average of 9.87% (1926 to 2010).
During that time period the stock market had only one negative year, a 3.1% decline in 1990. Not until 2000 did the stock market experience another decline.
We got used to the seven-step tango.
Seven steps forward and one step back.
That is what we came to know and love. Seven steps forward and one step back.
My prediction for this next year and beyond?
(Oh, and check out my tango teachers).
More on this tomorrow.
The above picture is my tent – solo snow camping in the middle of winter on Mt. Rainier – my favorite vacation.
Now, down to business.
It’s been a bad year for Bills.
As in Bill Gross (Totally missed the treasury rally)
And Bill Miller (Legendary stockpicker, retired from managing Legg Mason Value Fund after dramatically under-performing the stock market the past few years).
And how about this Bill? How did I fare this past year?
Well, I can’t go too far wrong when all I am telling you is that you should be putting together a financial plan, setting your allocation, and getting on with your life.
But I have made a few predictions over the past 10 years, and I have to say, they have panned out pretty well.
At the height of the 401k craze, in December of 1999, I predicted that 401k plans would turn out to be a nightmare of a retirement savings plan for most investors.
Earlier that year, I was on record (in my weekly financial column) saying that the S&P 500 index, because of its lofty valuations, had nowhere to go.
As the year comes to a close, I am ready to make another prediction. . . so tune in Monday.
On another note, check out this article in Today’s New York Times. Larry Swedroe is a tireless champion of the Coffeehouse Investor philosophy. Kudos to you Larry, though not sure I would have my entire portfolio in small and value and T-Bills.
Merry Christmas to you and yours.
Considering the time of year and the amount of shopping, baking, gift wrapping, standing in post office lines, holiday parties, and overall chaos that ensues, I manage to add just a little more to my plate as I nearly crack under the pressure.
This past weekend, our social calendar became too full as we invited dinner guests to our home Friday and Saturday nights – as if one night wasn’t enough. Nevertheless, not wanting to disappoint we rolled out the red carpet with pomegranate glazed stuffed pork tenderloin and crème brulee Friday night. As our guests savored the food and I watched the clock tick slowly as I tried to stay awake, I had a moment of clarity and KISS came across my mind with a sudden smack to the face.
So you know what I did Saturday night? I made crock pot pork chops and 2 minute brownie a la mode in the microwave. Guess what… every plate came back to the kitchen sink empty as I reveled in the compliments to the chef and the simplicity of the meal.
With the chaos in your life, remember to slow down and simplify things, crock pot the meal and microwave your dessert.
Ranch House Crock Pot Pork Chops – from Real Mom Kitchen.com
6 pork chops, 1/2 inch thick
1 packet dry Ranch Dressing Seasoning
10 oz can Cream of Chicken Soup
Directions: Place pork chops, Ranch seasoning and soup into a medium sized crock pot over high heat for 4 hours or low heat for 6 hours. Recipe called for Parmesan Mashed Potatoes to compliment the meat. For more details, click here.
Speaking of sitting and watching . . .
Are you getting worn out sitting and watching?
This past year seems to have been one of the most volatile years on record for the stock market.
I don’t have hard data to back it up, but when the market goes up 10% one month and plummets 10% the next month, it can get a little weary watching it, especially when your financial security throughout retirement is tied up in it.
With the e mails I am getting from Coffeehouse Investors across the nation, I get the sense many investors are becoming impatient and weary with a stock market that doesn’t go up 10 percent a year (never mind the fact that it has generated an annualized return north of 14% for the past three years).
During a volatile year like 2011, we are challenged to become even more patient to give ourselves a chance of capturing the inherent risk premium found in common stocks.
This risk premium has not materialized in 2011. And there are no guarantees this risk premium will appear in 2012. But at current valuations, it is almost guaranteed to materialize in the not too distant future. Are you running from it, or are embracing it, to capture the premium when it occurs?
I am cranking out some numbers that will shed some light on why investors are feeling weary, so stay tuned.
This morning I get up and I don’t know what to write.
Most of the time I write about Coffeehouse related things; why it makes sense to embrace simple wealth-building principles in managing your portfolio.
By wealth, I don’t always mean “financial” wealth.
Spiritual wealth, emotional wealth, physical wealth are every bit as important, if not more.
But this morning I want to write about nothing – about silence, because in the dead of December we are about to encounter the winter solstice, the longest day of the year – from a darkness perspective.
This is the time of year when the tilt of the earth, not to mention our bodies and minds, reminds us it is time to hibernate, to quiet our hectic pace – pretty hard to do with Christmas barely a week away.
And so in my search for something to write, I hop on over to Leo Babuta’s web site, and he presents us with an introspective opportunity to do nothing but sit and watch.
After ignoring Wall Street, let’s get on with our life one blog at a time… by Julie Klingler
We received a comment a few weeks ago from a reader asking if the “Coffeehouse Investor is only for rich people.” We had to chuckle a little because the book is all about investing smarter and getting on with your life, regardless of how much money you may have.
The three principles that we all know to be true can apply to those with only a hundred or a million dollars in the bank.
- Save for a rainy day – I don’t care how much money you have, every person needs to be prepared and ready for when the rain starts to fall, whether it rains for a day or 6 months. With a volitile market and a dismal economy, you can never be over prepared for rocky turbulence ahead. Furthermore, the need to develop a long term financial plan has never been greater and more impactful in one’s life.
- Don’t put all of your eggs in one basket – if you are just starting out with a 401K plan, diversify over different asset classes. Be wary of investing in just one company’s stock – you do remember Enron right?
- There is no such thing as a free lunch – when you are investing, make sure you capture the entire return of each asset class. Nobody became rich the easy way, it takes time and patience and remaining focused on the long term financial plan you’ve set for yourself.
I came across an article last week written by Jim Parker, Vice President of DFA Australia, titled, “The Good Old Days?”
(Dimensional Fund Advisors (DFA) is a manager of low cost passively managed funds, similar to Vanguard. Check out their web site here.)
Jim Parker’s musings caught my attention like few other articles have in the past few years.
Amid all the challenges we face, both financially, politically, economically, we are still moving ahead.
It is natural to have a sense of concern over the unknown.
But we are still moving ahead.
As Mr. Parker writes,
. . . “foundations are being built for a healthier and peaceful global economy, dependent not on debt, fancy derivatives, and fast profits but on sustainable, long-term wealth building.”
Hope you enjoy the article.
After ignoring Wall Street, let’s get on with our life one blog at a time… by Julie Klingler
When you think you are above frugality, look to the Queen of England for a little direction – even she is cutting back and become more fiscally responsible.
Earlier this week, it was reported that Queen Elizabeth II’s income will fall to its lowest point at around $50 million. I know $50 million seems rather high, but consider she was netting about $120 million in the early 90’s, even she will feel a royal crunch.
However in true queen fashion, Elizabeth has been rumored to be turning off lights and watching the thermostat a bit closer. Public appearances are being cut back and expensive repairs to the royal palace will have to wait until finances look better.
I figure if the Queen of England can become a “recessionista”, what can I do to mimic the monarchy?
- Turn the heat down to 68 degrees rather than the 70 degrees during the day
- Ensure the hot water tank is at 120 degrees, often manufactures set the temperature much higher to start
- Install motion lights on our outdoor lights rather than keeping them on all night long
- Close the doors to empty rooms in the house
So what can you do to live like a royal?