Tag Archives: inflation

Safe Withdrawal Rates – insist on 1966

Today I want to touch on a little understood aspect of safe withdrawal rates (SWRs) in retirement. Using the historical method to determine SWRs (as opposed to Monte Carlo analysis) means that the maximum SWR (approx 4%) is singularly determined by one 30 year period, the 30 year retirement period for the 1966 retiree. The 1929 Great Depression retiree had it better than the 1966 retiree did. By looking at the details of the 1966 retiree’s situation we can gain some insight into implications for the more modern retirees and use it as a benchmark for more modern portfolio allocations. … Continue reading

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Pray for higher interest rates

OK. I know. I’m schizophrenic.  In my last post I’m telling you why I think interest rates will stay low longer than people expect. Now, I’m going to explain how rates could go higher and why I’m hoping they do. One of the things that makes investing a challenge is that you’re dealing with the future. As Yogi Bera so eloquently put, “It’s hard to make predictions, especially about the future”. The future, having many possible outcomes, is about dealing with probabilities. Most investors can’t deal with this. We’re emotionally wired with many biases that prevent us from effectively dealing … Continue reading

Posted in Bonds | Tagged , , | 3 Comments

A contrarian view on interest rates

How many times a week do you read that interest rates have no where to go but up? That bonds are terrible investments and will be crushed by rising rates? And when was the first time you started to hear these stories? If you read pretty much any source of investment news then you’ve been hearing these stories for almost 4 years now and, at least to me, they seem to be constant. Yesterday the latest one I heard was ‘the bond bubble will pop tomorrow’. Oh dear. Well, today I wanted to provide a counterpoint to all the rising … Continue reading

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Longevity insurance – not worth it

There was a recent post at the Times’ Bucks Blog about Longevity Insurance that caught my attention. I decided to run some numbers to see what returns are implied in the current prices of longevity insurance and compare that to the risks, and the alternative of just keeping your money and investing it yourself. Lets dive in. Longevity insurance seems to be just a fancy new name for a type of product that’s been around for a long time, a deferred annuity. As the Bucks Blog says in the title of their post longevity insurance is just a way of … Continue reading

Posted in Bonds, Retirement | Tagged , , , | 2 Comments

Death by Bonds II

Here I go again. Bond bashing time. I think many income investors worried about risk mistakenly focus too much on the lower volatility of bonds as a risk measure. Volatility is only one measure of risk. On other measures of risk bonds perform just as poorly as stocks but with lower returns than stocks. Lets look at some of these other measures of risk and what they tell us about bonds. One of my favorite measures of risk is drawdown, i.e. the maximum peak to trough loss for an investment. It is a measure of the first rule in risk … Continue reading

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A couple of thoughts on inflation

The holidays are here and its made posting a bit tougher. Its hard to work on a post with family members all around, left over turkey and pumpkin pie all over the place. Not that I am complaining. For today, I found a couple of interesting charts on inflation. Its hard to find a more controversial topic today than the US dollar and inflation. There is a lot of gloom and doom on the US currency these days and rampant fears of its precipitous decline with accompanied hyper inflation. I find during times like these it is instructive to look … Continue reading

Posted in Economy, Retirement | Tagged , , | 3 Comments