Search found 1942 matches

by Oicuryy
Sat Aug 09, 2014 12:59 pm
Forum: Personal Finance (Not Investing)
Topic: Tax on Death beneift held inside an annuity inside an IRA?
Replies: 21
Views: 2814

Re: Tax on Death beneift held inside an annuity inside an IR

The death benefit, as I understand it and in the eyes of the IRS, would not be paid to the IRA itself but would instead be paid directly to the heirs. If so, then this would disqualify the heirs from reclassifying the IRA as an "inherited" IRA which is something they might have been able to do in order to lessen the tax consequences. Is it correct to assume an "inherited" IRA conversion would be impossible when receiving a death benefit payment? Let's hope Alan S. comes back to answer that question. He answered it in his post above for the case where the spouse is the sole beneficiary of the IRA. Normal spousal beneficiary options that apply to IRA accounts likewise apply to IRA annuities including rolling death benefit...
by Oicuryy
Sat Aug 02, 2014 11:42 am
Forum: Personal Finance (Not Investing)
Topic: Tax on Death beneift held inside an annuity inside an IRA?
Replies: 21
Views: 2814

Re: Tax on Death beneift held inside an annuity inside an IR

This guy's understanding is different from yours, bobsmith. Decide for yourself if he knows what he is talking about.
Annuity Death Benefit Tax Implications

Ron
by Oicuryy
Wed Jul 30, 2014 12:34 pm
Forum: Investing - Theory, News & General
Topic: Stocks: losing money for 20-30 years not uncommon
Replies: 43
Views: 6146

Re: Stocks: losing money for 20-30 years not uncommon

Browser wrote:
In fact, MOST countries had a 30 year period where you could have lost money- ouch!
I'm guessing that 30-year period was 1916-1945; a period that included two World Wars and a worldwide Great Depression. I would call that period uncommon.

Ron
by Oicuryy
Tue Jul 29, 2014 2:22 pm
Forum: Investing - Theory, News & General
Topic: Market not interested in inflation protection?
Replies: 32
Views: 3225

Re: Market not interested in inflation protection?

thx1138 wrote:Or I'm all wet and inflation protection isn't a risk worth protecting against for individuals?
This, IMO. Nominal yields are (usually) high enough to cover expected inflation and some part of the risk of unexpected inflation. Most individuals must think insurance against the rest of the risk of unexpected inflation is not worth the cost.
by Oicuryy
Sun Jul 27, 2014 6:21 pm
Forum: Investing - Theory, News & General
Topic: Vanguard sued for [failing to charge market rates to and then paying taxes on services to its mutual funds]
Replies: 806
Views: 174017

Re: Vanguard sued for charging too little

ResearchMed wrote:What is/was the advantage to having the separate funds "hold" the one company, vs having the one company hold all the funds as subsidiaries?

RM
Mutual funds cannot be subsidiaries. They must be "mutual". That is, they must be owned by their customers.

The Vanguard mutual funds own a subsidiary because Jack Bogle needed a job. After Bogle was fired from Wellington Capital he persuaded the other directors of the Wellington funds to use assets of the funds to start a company for him to run.

Ron
by Oicuryy
Sun Jul 27, 2014 12:41 pm
Forum: Investing - Theory, News & General
Topic: Vanguard sued for [failing to charge market rates to and then paying taxes on services to its mutual funds]
Replies: 806
Views: 174017

Re: Vanguard sued for charging too little

Could VGI offer to sell its services to unrelated mutual funds at cost?

Ron
by Oicuryy
Sat Jul 26, 2014 5:56 pm
Forum: Investing - Theory, News & General
Topic: Vanguard quietly adds longevity annuities
Replies: 85
Views: 16609

Re: Vanguard quietly adds longevity annuities

ResearchMed and Willmunny,

Individual Retirement Annuities and Individual Retirement Accounts are two legally distinct types of Individual Retirement Arrangements (IRA). Payments from an immediate Individual Retirement Annuity or from a QLAC are paid to the IRA owner and are considered distributions from the IRA.

In theory, it should be possible for an Individual Retirement Account to own an immediate annuity or a delayed annuity and receive the payments from it. But no such beast has ever been seen in the wild.

Ron
by Oicuryy
Fri Jul 25, 2014 8:01 pm
Forum: Investing - Theory, News & General
Topic: SEC Adopts Money Market Fund Reform Rules
Replies: 52
Views: 5772

Re: SEC Adopts Money Market Fund Reform Rules

It is about time that investors who buy money market securities through mutual funds bear the risk of those securities.

Ron
by Oicuryy
Thu Jul 24, 2014 1:43 pm
Forum: Personal Finance (Not Investing)
Topic: Help with Math Problem
Replies: 7
Views: 947

Re: Help with Math Problem

dad2000 wrote: Should be 0.7 not .07.
Drat! Missed it by a decimal point. Thanks for the correction.

Ron
by Oicuryy
Thu Jul 24, 2014 1:29 pm
Forum: Personal Finance (Not Investing)
Topic: Help with Math Problem
Replies: 7
Views: 947

Re: Help with Math Problem

My guess.

Capacity A = Capacity B * ((Cost A/Cost B) ^ (1/.07))

Capacity B = Capacity A / ((Cost A/Cost B) ^ (1/.07))

Ron
by Oicuryy
Fri Jul 18, 2014 9:06 am
Forum: Investing - Theory, News & General
Topic: [Learning about] Economics 101
Replies: 37
Views: 6357

Re: Economics 101

sscritic wrote:Here are housing starts in CA. Check the dates:
http://www.cbia.org/tasks/sites/cbia/as ... 4-2013.pdf
Thanks for that data. It looks like housing "bubbles" are recurring events in California. This could be the kind of data the OP is looking for.

Image

Ron
by Oicuryy
Wed Jul 16, 2014 12:44 am
Forum: Investing - Theory, News & General
Topic: Man turned $2 m into 187 million and gave it away
Replies: 7
Views: 3173

Re: Man turned $2 m into 187 million and gave it away

wrysys wrote:... whether investing in S&P 500 or a VG 3 fund portfolio would have worked out similarly ...
Measuring Worth put the January 2013 average of its "Accumulated S&P Index" at 360 times its January 1953 average.
http://www.measuringworth.com/datasets/sap/

Also see Morningstar's growth of 10k charts for Wellington Fund, VWELX, and Massachusetts Investors Trust, MITTX, two mutual funds you actually could have bought sixty years ago.

But don't forget to adjust for taxes. There weren't any IRAs or 401ks sixty years ago.

Ron
by Oicuryy
Thu Jul 03, 2014 2:44 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Managed Payout Fund (VPGDX)
Replies: 40
Views: 6527

Re: Vanguard Managed Payout Fund (VPGDX)

Most mutual funds only distribute the amount needed to avoid paying corporate income taxes. Mutual funds do not have to pay corporate income tax if they distribute an amount equal to substantially all of their taxable income. Distributions from Vanguard's Managed Payout fund are different. The amount of the twelve regular distributions each year is calculated using Vanguard's version of the 4% withdrawal rule. If the fund's taxable income is not enough to cover the regular distributions then other fund assets are used to cover the shortfall. If the fund's taxable income is more than enough to cover the regular distributions then the excess is distributed as an additional distribution that is automatically reinvested in the fund. One version...
by Oicuryy
Tue Jul 01, 2014 5:07 pm
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 27047

Re: Merton: 401(k) retirement plans face crisis

BobK,

Congratulations on your foresight.

I spent the 80s learning the hard way that Bogle's unmanaged fund did as well as or better than the funds managed according to some proprietary secret formula. Maybe that is why I am leery of trusting Merton's proprietary secret formula.

It seems our views of Merton's current idea are based on what we have learned from our past experience.

Ron
by Oicuryy
Tue Jul 01, 2014 3:09 pm
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 27047

Re: Merton: 401(k) retirement plans face crisis

bobcat2 wrote:Most of the objections on this thread that I have seen are simply misunderstandings of how the plan works. The objections that aren't misunderstandings are complaints that this is some sort of ivory tower ripoff.
That lack of understanding must extend well beyond the posters in this thread. No other financial services company offers a similar service. Only one or two companies in the world have signed up for Smartnest. Is Merton right and the rest of the world wrong? Or is it the other way around?

Ron
by Oicuryy
Tue Jul 01, 2014 1:09 pm
Forum: Personal Finance (Not Investing)
Topic: Longevity Insurance now allowed in IRA/401k/etc.
Replies: 108
Views: 14041

Re: Longevity Insurance now allowed in IRA/401k/etc.

manwithnoname wrote:But who would invest in an annuity policy that will pay 0 if you die prematurely.
Maybe some of the same people who invest in a homeowners policy that will pay 0 if their house does not burn down.

If having your house burn down is not a financial problem for you then you would be wasting your money to buy fire insurance. If living past age 85 is not a financial problem for you then you would be wasting your money to buy longevity insurance.

Ron
by Oicuryy
Tue Jul 01, 2014 9:41 am
Forum: Personal Finance (Not Investing)
Topic: beneficiary form trumps will
Replies: 56
Views: 7624

Re: beneficiary form trumps will

RustyShackleford wrote:Seems like the simplest thing to do is not designate ANY beneficiaries. Then, wouldn't all the accounts pay into my estate, and then be bequeathed as designated by my will ?
No. IRAs might go to the default beneficiary specified in the IRA agreement. Often that is the surviving spouse. That is what happened in the North Carolina case that started this thread. The court ruled that the beneficiary form revoked all previous beneficiary designations but failed to designate any new beneficiary.

Ron
by Oicuryy
Mon Jun 30, 2014 5:34 pm
Forum: Personal Investments
Topic: Figuring out the break even point to leave an annuity
Replies: 11
Views: 4980

Re: Figuring out the break even point to leave an annuity

Each year you wait you spend 1.25% of the account balance (~$127) on M&E fees and save 1% of the purchase price (~$100) on surrender fees. It might be worth waiting six months or so for a 1% drop in the surrender fees.

You said this is a Roth Individual Retirement Annuity, right? So there is no tax benefit to keeping it instead of transferring it to a Roth Individual Retirement Account.

Ron
by Oicuryy
Mon Jun 30, 2014 5:20 pm
Forum: Investing - Theory, News & General
Topic: How do I calculate STDEV of my portfolio?
Replies: 11
Views: 4812

Re: How do I calculate STDEV of my portfolio?

I wonder if there would be much difference if you did the standard deviation calculation on the time-weighted returns instead of the dollar-weighted returns. See these gummy-stuff pages.
http://www.financialwisdomforum.org/gum ... nd-you.htm
http://www.financialwisdomforum.org/gum ... eturns.htm

I believe Morningstar uses time-weighted returns.

Ron
by Oicuryy
Sun Jun 29, 2014 10:37 am
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 27047

Re: Merton: 401(k) retirement plans face crisis

BobK, When I said "that real annuity" I did not mean an inflation-adjusted immediate annuity that one buys at retirement. I meant an inflation-adjusted delayed annuity like the one Merton claims to have created. A 45-year-old could buy that annuity and know then what the amount in real dollars of his lifetime payments will be when those payments start twenty years later at age 65. Merton is doing a bait and switch. The bait is that delayed real annuity. The switch is to an actively managed portfolio of three DFA mutual funds. Dimensional Managed DC is vaporware. No US 401k plan uses it. It is straightforward enough for an individual to build an income stream in retirement from some combination of immediate annuity, TIPS portfolio ...
by Oicuryy
Sat Jun 28, 2014 9:26 pm
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 27047

Re: Merton: 401(k) retirement plans face crisis

Confusing the need for a pot of money with the need for income can lead to very expensive mistakes. “You cannot say wealth goals are approximate to income goals . Imagine you are a 45 year old and you are going to retire at 65. In returns of income, what is the risk free asset? It is an asset, fully guaranteed, that 20 years from now starts paying you a level income for the rest of your life, corrected for inflation. I created one of those, called a real annuity, and from 2003 to 2012 I ploughed the monthly returns and we saw swings of -17 per cent and +15 per cent, on a risk-free asset. Yet when you measure this asset in terms of income, there’s no risk. So when someone says we can approximate an income goal with a wealth goal, as a pract...
by Oicuryy
Sat Jun 28, 2014 3:16 pm
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 27047

Re: Merton: 401(k) retirement plans face crisis

windhog wrote:As I stated above, it seems to me that Merton is acting as a consumer advocate in regard to 401(k) plans on behalf of the Average Joe or Jane who is not particularly financially sophisticated.
Don't be fooled by Merton's marketing hype. He is selling product. Of course he makes it sound like he is doing the consumer a favor. That is what good marketing hype does.

Ron
by Oicuryy
Fri Jun 27, 2014 10:36 am
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 27047

Re: Merton: 401(k) retirement plans face crisis

Does anyone know of a US company that uses Dimensional Managed DC as its 401k?

Ron
by Oicuryy
Thu Jun 26, 2014 6:51 pm
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 27047

Re: Merton: 401(k) retirement plans face crisis

Does DFA still sell its Dimensional Managed DC product in the US? I can't find it on their US web site.

I did find this brochure. It explains what they do. They don't do much.
http://us.dimensional.com/pdf/smartnest ... an2014.pdf

Ron
by Oicuryy
Thu Jun 19, 2014 8:41 pm
Forum: Investing - Theory, News & General
Topic: Can someone explain B Bernstein's math
Replies: 42
Views: 6083

Re: Can someone explain B Bernstein's math

Johno wrote:However as I said before I wouldn't rule out any reference to option prices in assessing equity risk. Because risk is after all the difference between being hedged (with regard to equity exposure or any other) or not.
Fair enough. That definition of risk makes more sense than Bernstein's. It would be interesting to see the prices of 30-year options on, say, the S&P 500 total return index.

As for those real-world examples, I suspect the price of those products includes more – maybe a lot more – than "the cost of reducing equity downside, determined by option prices, priced off forwards."

Ron
by Oicuryy
Thu Jun 19, 2014 4:11 pm
Forum: Investing - Theory, News & General
Topic: Can someone explain B Bernstein's math
Replies: 42
Views: 6083

Re: Can someone explain B Bernstein's math

Thank you, Johno, for that detailed reply. I am still working on understanding your second paragraph. It sounds like option prices have nothing to do with the probability distribution of 30-year stock market returns. Rather, options are priced on the expected net gains/losses on a series of short-term bets on the movements of the price of a forward. That makes me think the prices of long-term options might not be too useful as a measure of the riskiness of a long-term investment in the stock market.

Ron
by Oicuryy
Wed Jun 18, 2014 5:45 pm
Forum: Investing - Theory, News & General
Topic: Can someone explain B Bernstein's math
Replies: 42
Views: 6083

Re: Can someone explain B Bernstein's math

Johno wrote:Either an American or European put on a stock index would be worth substantially more in 30 than 10 yrs,
Would you explain that again, please.

We are talking about a stock market index that has never, since at lease 1926, ended a 360-month period with a value less than nine times its value at the start of the period. Consider a put option with a strike price of three times the current value of the index. There is a good chance it will still be in the money after ten years. But there is an excellent chance it will be out of the money after thirty years.

Why would that option be worth more after thirty years than after ten? Aren't in-the-money options worth more than out-of-the-money options?

Ron
by Oicuryy
Tue Jun 17, 2014 12:14 pm
Forum: Investing - Theory, News & General
Topic: Can someone explain B Bernstein's math
Replies: 42
Views: 6083

Re: Can someone explain B Bernstein's math

Bill Bernstein wrote:If the ratio is zero, that implies you're withdrawing, in which case stocks are extremely risky, and certainly much riskier than bonds, over *any* horizon, and that risk increases monotonically with horizon. (Which, if you get a bad draw, is going to be relatively short.)
That is not what the Trinity Study found. Their Table 3 shows that a 100% stock portfolio survived much better than a 100% bond portfolio over long horizons for all but the lowest withdrawal rate.

Ron
by Oicuryy
Tue Jun 17, 2014 10:54 am
Forum: Investing - Theory, News & General
Topic: Can someone explain B Bernstein's math
Replies: 42
Views: 6083

Re: Can someone explain B Bernstein's math

Kelly quoting Bernstein wrote:The dispersion of total 30 year returns – a high of +6,153% and a low of +851%- is much higher than for the annual returns.
I don't think so.

The ending value of the best 12-month period was 8.1 times the ending value of the worst 12-month period. The ending value of the best 360-month period was less than 6.6 times the ending value of the worst 360-month period.
Kelly quoting Bernstein wrote:Moreover, over the long run, markets recover nicely from annual returns of even -67.57%.
Right. That is what makes stocks less risky in the long run.

Ron
by Oicuryy
Sat Jun 14, 2014 1:14 pm
Forum: Investing - Theory, News & General
Topic: ECB Deposit Rate [European Central Bank]
Replies: 4
Views: 735

Re: ECB Deposit Rate [European Central Bank]

BUT, it was my understanding that the bank's had the option to deposit their excess reserves into the central bank. It is not exactly an option. By definition excess reserves are amounts banks have in their accounts at the central bank in excess of the amounts needed to meet reserve requirements. The ECB gives banks the option of leaving their excess reserves in their current account at the central bank or transferring them to the ECB's deposit facility. Sometimes the deposit facility pays a higher interest rate than the rate earned on excess reserves in the current account. But not now. From the ECB's press release: The negative deposit facility interest rate will also apply to: (i) banks’ average reserve holdings in excess of the minimum...
by Oicuryy
Tue Jun 10, 2014 9:14 am
Forum: Investing - Theory, News & General
Topic: To own at least 1 share of every company in SP500
Replies: 27
Views: 6411

Re: To own at least 1 share of every company in SP500

inbox788 wrote:Where are you seeing that (1 share Prospect Global Resources)?

Not seeing it at Vanguard:

https://personal.vanguard.com/us/FundsA ... r@78d8c198

Haverty Furniture Cos. Inc. Class A 300 $7,674
InterGroup Corp. 301 $5,264
Oconee Federal Financial Corp. 321 $5,858
In the 12/31/13 annual report.

Using the 4/30/14 share counts and net assets Erhan only needs $1.1 billion in the fund to own one share of Haverty Furniture.

Ron
by Oicuryy
Mon Jun 09, 2014 11:37 pm
Forum: Investing - Theory, News & General
Topic: To own at least 1 share of every company in SP500
Replies: 27
Views: 6411

Re: To own at least 1 share of every company in SP500

Erhan wrote:Would love to have the answer for VTSMX (total stock market).
$307,332,121,000 as of 12/31/13.

The fund owns 1 share of Prospect Global Resources Inc. To own that share you would need to own the whole fund.

Ron
by Oicuryy
Mon Jun 09, 2014 9:47 pm
Forum: Investing - Theory, News & General
Topic: To own at least 1 share of every company in SP500
Replies: 27
Views: 6411

Re: To own at least 1 share of every company in SP500

I get $2,412,141 as of 4/30/14.

BRK.A is not in the S&P 500. Graham Holdings Co., GHC, has a share price of $671.23 but is only 0.0278271% of the total market cap of the S&P 500 stocks. So you would need to own $671.23/0.000278271 = $2,412,141 worth of an S&P 500 index fund to own one share of GHC.

Calculations based on data from here.
https://www.cboe.com/products/snp500.aspx

Ron
by Oicuryy
Sun Jun 08, 2014 10:29 pm
Forum: Personal Consumer Issues
Topic: Enough: True Measures of Money
Replies: 28
Views: 3255

Re: Enough: True Measures of Money

The rules for the Personal Consumer Issues forum say, "Note that topics must be directly connected to your (or your friend's or family's) life as a consumer. General comments or complaints about these topics will be locked or removed."

I suggest you edit the opening post. Change it to something like, "I made $19.9 million last year. What should I spend it on?"

Ron
by Oicuryy
Thu Jun 05, 2014 12:51 am
Forum: Investing - Theory, News & General
Topic: Can we have negative interest rates?
Replies: 33
Views: 4901

Re: Can we have negative interest rates?

From Treasury's August 2012 quarterly refunding statement.
http://www.treasury.gov/press-center/pr ... g1663.aspx
Treasury is in the process of building the operational capabilities to allow for negative rate bidding in Treasury bill auctions, should we make the determination to allow such bidding in the future. Treasury encourages market participants to study their systems and report any operational issues that could arise from Treasury bill auctions settling at negative rates.
They should be ready by now.

Ron
by Oicuryy
Tue Jun 03, 2014 3:40 pm
Forum: Personal Finance (Not Investing)
Topic: Can a dead woman take her RMD?
Replies: 47
Views: 6120

Re: Can a dead woman take her RMD?

Would something similar to this TurboTax tip apply here? https://turbotax.intuit.com/tax-tools/tax-tips/Family/Death-in-the-Family/INF12090.html Say a taxpayer who has a substantial amount in money-market mutual funds dies on June 30th. Only interest earned up to that date would be reported on the final tax return. Earnings after that date are taxable to the beneficiary of the account, or to the estate. That can create some hassles since the payer – a mutual fund, bank or broker, for example – will report income to the IRS on a 1099 form. Although you should try to get ownership of the account changed as quickly as possible after the death of the owner, the 1099 income report may well show more income assigned to the decedent than it should...
by Oicuryy
Mon Jun 02, 2014 5:18 pm
Forum: Investing - Theory, News & General
Topic: Social Security at 66 vs. 70: A Bird in the Hand?
Replies: 54
Views: 6560

Re: Social Security at 66 vs. 70: A Bird in the Hand?

To put this in another context, would I choose to purchase this benefit if it were an annuity ? The cost of this “annuity” would be $2538 per month payable in 48 monthly installments. After 4 years, the benefit would start and be $813 per month (adjusted for inflation.) This benefit would continue until my spouse and I both died. (For the sake of this illustration, there is obviously no need to consider the risk of the annuity provider’s insolvency.) That is the right way to think about delaying Social Security. If you want to calculate a rate of return you could use excel's IRR function on those cash flows. But investment return is not the right way to think about immediate annuities. Immediate annuities are insurance not investments. Del...
by Oicuryy
Fri May 30, 2014 7:47 pm
Forum: Personal Investments
Topic: Deleted
Replies: 25
Views: 6931

Re: $2,065,140 lifetime earnings = second bend point (SS)?

pshonore wrote:I used the same worksheet and got 18.9 years.
You're right. I see what I did wrong. Thanks for double checking.

Ron
by Oicuryy
Fri May 30, 2014 5:14 pm
Forum: Personal Investments
Topic: Deleted
Replies: 25
Views: 6931

Re: $2,065,140 lifetime earnings = second bend point (SS)?

letsgobobby wrote:If this is all correct then the bonus question is: what is the fewest number of years one could work to reach the second bend point in the PIA formula/lifetime earnings? I am guessing 17.65 years, because $2,065,140 divided by 2014's SS wage base of $117,000 = 17.65. Am I right?
I count 27 years for a person born in 1952 based on data in this worksheet.
http://www.ssa.gov/pubs/EN-05-10070.pdf

The wage-adjusted tax max has been going up. This year's value is too large to use as a divisor in your calculation.

Ron
by Oicuryy
Tue May 20, 2014 6:59 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Managed Payout Fund
Replies: 11
Views: 2200

Re: Vanguard Managed Payout Fund

grok87 wrote: 4) I would love to know what commodity strategies the fund uses.
See notes A2 and D to the financial statements in the annual report.
https://personal.vanguard.com/funds/rep ... 2210085391

Ron
by Oicuryy
Sat May 10, 2014 8:03 pm
Forum: Investing - Theory, News & General
Topic: Federal reserve balance sheet may take 5-8 years to shrink
Replies: 41
Views: 6384

Re: Federal reserve balance sheet may take 5-8 years to shri

This paper at the New York Fed explains how paying interest on reserves enables the Fed to create and uncreate reserves independently of raising and lowering its target for the federal funds interest rate.

Divorcing Money from Monetary Policy

Ron
by Oicuryy
Sat May 10, 2014 3:18 pm
Forum: Investing - Theory, News & General
Topic: Federal reserve balance sheet may take 5-8 years to shrink
Replies: 41
Views: 6384

Re: Federal reserve balance sheet may take 5-8 years to shri

Ged wrote:
Oicuryy wrote:
The Fed created the dollars it used to buy assets. It will uncreate dollars when it sells or redeems assets.
No, QE changes the composition of the Fed's reserves. It does not create money.

http://www.cnbc.com/id/100760150
Your link argues that reserves are not money because they are not currency. Fair enough. Reserves are not counted in M1 or M2.

I said the Fed created dollars. I think of reserves as dollars that are not currency. But if you prefer, change my statement you quoted to read: The Fed created the reserves it used to buy assets. It will uncreate reserves when it sells or redeems assets. And keep in mind that the Fed will swap reserves for currency one for one any time at the banks' request.

Ron
by Oicuryy
Sat May 10, 2014 8:47 am
Forum: Investing - Theory, News & General
Topic: Federal reserve balance sheet may take 5-8 years to shrink
Replies: 41
Views: 6384

Re: Federal reserve balance sheet may take 5-8 years to shri

MnD wrote:Does a shrinking federal reserve balance sheet for 5 to 8 years have any consequences for stock and bond investors?
Not anymore. Yellen's comment was factored into the price of stocks and bonds shortly after she made it.
MnD wrote:And while we're on the topic, where did the money come from to buy the bonds, and where does the money go when these bonds mature and the principal is returned?
The Fed created the dollars it used to buy assets. It will uncreate dollars when it sells or redeems assets.
MnD wrote:I honestly do not understand the fed to any extent.
For a short course see these Fedpoints.
http://www.newyorkfed.org/aboutthefed/fedpoints.html
For a longer course read the Fed's book.
http://www.federalreserve.gov/pf/pf.htm

Ron
by Oicuryy
Thu May 08, 2014 9:57 am
Forum: Investing - Theory, News & General
Topic: A riddle about "attributing" gains.
Replies: 44
Views: 6653

Re: A riddle about "attributing" gains.

nisiprius wrote:But could you explain why that's correct, and why "90% attributable to dividends" is incorrect, in a couple of sentences, to a someone with average investing savvy?
Second try.

90% of the total dollar return is "attributable" to dividends in the sense that it comes from shares purchased by reinvesting all dividends. Much of the total return is due to the price increase of those additional shares. Crude calculations on Shiller's data suggest the sum of the dividend payments equals about 25% of the total dollar return.

Ron
by Oicuryy
Mon May 05, 2014 7:22 pm
Forum: Investing - Theory, News & General
Topic: A riddle about "attributing" gains.
Replies: 44
Views: 6653

Re: A riddle about "attributing" gains.

nisiprius wrote:But could you explain why that's correct, and why "90% attributable to dividends" is incorrect, in a couple of sentences, to a someone with average investing savvy?
I doubt it.

Does a person with average investing savvy know about continuous compounding? Do they remember Pert? Nepers is just rt.

An ert of 4 from Cappy takes P from $100k to $400k. An ert of 4 from Divvy takes that $400k to $1600k. e is a constant, t is the same for both Cappy and Divvy, so r must be the same for both. They contributed equally to the total growth.

Ron
by Oicuryy
Mon May 05, 2014 5:50 pm
Forum: Investing - Theory, News & General
Topic: A riddle about "attributing" gains.
Replies: 44
Views: 6653

Re: A riddle about "attributing" gains.

Gains and losses should be measured in nepers.

From $100,000 to $400,000 is a gain of 1.386 Np. From $100,000 to $1,600,000 is a gain of 2.773 Np. Cappy's gain is half the total gain.

From $100 to $17,470 is a gain of 5.136 Np. From $100 to $265,851 is a gain of 7.886 Np. Price gain is 65% of total gain.

Ron
by Oicuryy
Mon May 05, 2014 3:30 pm
Forum: Investing - Theory, News & General
Topic: A riddle about "attributing" gains.
Replies: 44
Views: 6653

Re: A riddle about "attributing" gains.

Here is a 2012 version of the Mortimer and Page paper.
http://www.gafunds.com/wp-content/uploa ... Matter.pdf

Look at Figure 2. The price return line (blue) looks to have climbed about two grid lines and the total return line (red) climbed a little over three. Price provided about two-thirds of the total return and reinvested dividends provided about one-third.

"B" is the correct answer.

Ron
by Oicuryy
Mon Apr 28, 2014 5:20 pm
Forum: Investing - Theory, News & General
Topic: What's wrong with equity-indexed annuities?
Replies: 29
Views: 7921

Re: What's wrong with equity-indexed annuities?

dhodson wrote:This is why I feel one should concentrate on what goes on behind the scenes for these companies which is investing almost all the money in their normal general accounts and a small % in options.
And that is why I said above that EIAs are not much better or worse than other types of deferred fixed annuities. The only difference is that small percentage in options.

Ron
by Oicuryy
Mon Apr 28, 2014 10:11 am
Forum: Investing - Theory, News & General
Topic: What's wrong with equity-indexed annuities?
Replies: 29
Views: 7921

Re: What's wrong with equity-indexed annuities?

The big "gotcha" is that people don't understand what they're buying. The most objective piece of evidence for this--and something that anyone considering them should be required to read --is the FINRA Alert: Equity-Indexed Annuities—A Complex Choice . FINRA is the body that regulates investment advisors. They are, by the way, a creature of the industry and not inclined to be too negative or alarming, so when they issue an alert everyone should listen up. FINRA is biased. They are a creature of the securities industry. EIAs are a product of the insurance industry. Where is FINRA's warning on index-linked notes that are created and sold by the securities industry? Index-linked notes use similar types of interest crediting methods ...