"If you follow this approach, there is a 90% chance that your portfolio will last for 30 years of retirement."

1. a Monte Carlo simulation, or
2. an update of the famous "Trinity Study," which looked at historical market returns to see how well various strategies would have worked in the past.

In either case, I have serious qualms about quoting a success rate with such certainty.   More 

This entry was written by Roger Pine, a financial advisor in our office:

We quote below a section from today's letter from David Rosenberg, who publishes a daily commentary for Gluskin Sheff.

Well, for all the talk of a failed auction and all the hand-wringing over China and its bond portfolio, the international community gobbled up a net $61.4 billion of Treasury securities in January--on top of $270 billion over the prior four months. Interestingly, what global investors were doing was shifting out of corporates (-$24.6 billion) and Agencies (-$5 bil­lion) and opting for the safety and liquidity of the government bond market. Net foreign buying of equities was small at a mere $4.4 billion.

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You've probably gotten phone calls like this from mortgage holders in distress. They might go something like this:

"I was referred to you because I need some help. I was laid off last year and my only income is from unemployment benefits. I bought an investment property in 2006. That property is now underwater and cash-flow negative. I could no longer afford to keep burning what little cash I have paying the mortgage if the net value of the property is essentially zero. So I stopped paying the mortgage. I've spoken to my lender and they are reluctant to adjust the mortgage, and even if they did, I wouldn't get to break-even cash flow. If I don't make up the arrears by a certain date, they will 'proceed with acceleration.' I need some expert advice."

I wish I had a magic solution. Clearly, it is not in this person's financial interest to keep paying the mortgage. If you look at the transaction strictly as an investment, the only course of action is to attempt to get the lender to agree to a short sale. If that isn't successful, to accept foreclosure. Yes, the borrower's credit will be ruined. But if it's either that or not eat--the choice is clear despite arguments about the morality of walking away from a debt and not honoring a contract.    More 

We saw almost no economic data last week--certainly none that was market-moving as the Dow saw almost no net movement the last three days of the week. The earnings well was equally dry, leaving only further tightening in China (after higher-than-expected inflation in China was announced) as important market-movers.

I thought the retail sales report was impressive, but the market didn't really seem to care. The trade balance looked better than expected, and initial unemployment claims managed a small decline. Consumer balance sheets continued to improve, with net worth up about $0.7 trillion in the December quarter.

Conventional wisdom still has the consumer firmly in a frugal, not-spending mode. It just isn't so.   More 

The Efficient Market Hypothesis. Modern Portfolio Theory. Black-Sholes. Monte Carlo Simulation. There is no shortage of attempts to use science (mathematics and even physics) to try to impose order and certainty on the stock market.  But while mathematics is a perfectly ordered world, the stock market is chaotic and unpredictable. Still, it is part of our human nature to search for answers to unanswerable questions.

The science that comes closest to stock market analysis is meteorology. Here you have basic, well-understood physical laws that drive the major weather trends. And then, there is everything else. One need only look at the recent emotional debate on "climate change" to appreciate that there is so much we don't understand.  Yet our familiarity with the subject gives us all the feeling that we are near-experts.   More 

Recent events have the potential to reverse the longtime gap between men and women in the office. If things change in the direction I suggest in my imagined news alert below, it'll have big implications for financial planners.

I was prompted to write this largely fictitious story by a study undertaken by Catalyst (a New York-based nonprofit focused on women in the workplace) about women and their lower pay. The Wall Street Journal covered the study in  "Women M.B.A.s Continue to Lag in Pay, Promotions." 

News Alert--April  1, 2020
According to study released today by Catapult, a San Francisco-based nonprofit focusing on men in the workplace, since 2009 men in corporate managerial positions are not getting the same pay and promotions as their female colleagues.    More 

For the fifth straight year, I attended the Technology Tools for Today Conference, now known as the T3 conference. From its humble beginnings in "bed bug" hotels in South Florida, it has risen to be a "must attend" conference; this year held at the Hilton La Jolla Torrey Pines. The conference set records for attendance--for exhibitors as well as advisors.

What were some of the main messages heard in the hallways of the conference? One, technology can make your firm more efficient. Yet your firm has to make the commitment to training, and even further, to establishing "workflows" so each client has a consistent experience allowing your firm to be highly compliance oriented. More important is the bottom line. Technology vastly improves your firm's bottom line. It is clear to remain competitive in our industry; technology must be embraced to survive long term.   More 

I apologize in advance if this post seems like a lot of excuses and whining, but some of the data problems that I've worried about for months have come home to roost. As expected, recent economic data were seriously messed up with weather, seasonal adjustments, and data that just don't seem to match up with what our analysts were hearing from their companies.

There are times in an economic cycle when it's just better to listen to the government's numbers, as companies seem too shell-shocked to see improvement under their own noses (as was the case last spring). Then, there are times when it is better to listen to companies and analysts because the changes in government data become smaller later in a recovery, and the noise levels (weather, for example) become larger than the changes in the raw data. Now is one of those times.   More 

You've heard the Stephen Covey saying that so many of us spend years climbing the corporate ladder only to find that it was leaning against the wrong wall. I think this concept is particularly important when it comes to money.

So much of our lives are spent on thinking about the "how" of money and so little about the "why."

What good does it do to have saved your entire life for retirement then find yourself bored out of your mind three weeks into it? What good is financial success if your kids consider you a failure as a parent because you were never home? Having enough money is preferable to going without, but if the pursuit costs you the things that money can't buy, what was the point?

The important thing to keep in mind it that real wealth comes when we take the time to align our values with our use of capital. I am not really sure how you can make "good" investment decisions until you are clear about where you want to go and why you want to be there.