Retire Comfortably! Quick Start Guide

June 24, 2014

Retire Comfortably! Quick Start Guide

Get started now, and plan more fully when you have time!

  1. Establish your tax sheltered retirement plan: 401(k), 403(b), 457(b), or IRA.

If your income tax rate is high enough to be a problem then you need a tax-sheltered retirement plan. Tax-shelter allows your savings to grow faster, without the drag of taxation. Filling out the forms or websites to establish plan may be a pain, but it is well worthwhile. Over the course of a working lifetime — or even over an extended retirement — tax shelter will allow your investments to grow and grow faster than ordinary investing subject to annual taxation. Eventually taxes have to be paid on withdrawal, but they are paid only once. They won’t be a drag on investing growth.

 

 

  1. Contribute the maximum allowed to the plan(s). Take full advantage of an employer’s matching contribution. Make equal contributions in each pay period.

If your employer makes a matching contribution, take full advantage of it! Even if you need income right now, contribute up to the match. Not doing so means leaving money on the table for your employer and for the IRS.

 

If your tax bracket is high enough to be a problem, then it is essential to contribute the maximum allowable to your tax-sheltered plan.   That allows your money to work for you and grow in the plan for years and decades before it gets paid out (and is subject to taxation). The tax-sheltered plan offers you an interest-free loan of money that would otherwise go straight to the IRS. Contributing to the plan means taking advantage of that interest-free loan.

 

Making equal contributions in each pay period keeps the process simple for you and arranges dollar cost averaging (smoothing out the risk of buying at the peak and the benefits of buying at the trough of securities prices).

 

  1. Allocate the money in the plan(s) to common stock index funds. A typical allocation is 75% to Standard & Poor’s 500 Index Fund, 25% to an international common stock index fund. Specify reinvestment of all dividends and distributions.

Over long periods of time (years and decades), the risks of common stocks are repaid by much higher returns than more predictable savings and interest-bearing securities. If you don’t hold common stocks elsewhere, then you should have them in your tax-sheltered account. It’s not really possible to actively manage these holding successfully. For most individual investors, most of the time, a broadly diversified index fund is the best place for your sheltered money. Reinvesting all the returns allows them to grow and compound over time. That makes the miracle of compound interest work for you. That means earning dividends, dividends on the dividends, dividends on the dividends on the dividends, … .

 

  1. Don’t worry about market declines — they are a buying opportunity.

The stock market will fluctuate. A lot! Since you’ve scheduled regular investment and reinvestment, each market decline is an opportunity to buy at an advantageous low price. The plan is to buy low and hope to sell high. Over long periods, the stock market always appreciates. No one has a crystal ball that allows perfect timing, but buying steadily over the course of decades allows your account to take advantage of market fluctuations. There’ll be time to worry about safety as you approach withdrawal of your accumulations.

 

  1. Keep contributing and reinvesting until retirement.

As long as you have a significant income tax rate, there is an advantage to contributing. Money that goes in escapes taxation at that time and can be paid out over the following decades, leaving it time to compound and grow. 21st century longevity means there is a long time to enjoy (and to need) the growth of your wealth. Many people find that their income and their tax rates go down with retirement.   Reduced income is not good news, but your lower tax bracket in retirement makes tax-sheltered investing during your working years doubly rewarding!  

Copyright 2014, R. M. Starr

 

Dealing with Inflation, Part 2: How to hedge against inflation — if you must

September 14, 2013

Dealing with Inflation, Part 2: How to hedge against inflation — if you must


As this is written (mid-2013), a rapid uncontrollable increase in inflation is really unlikely; see $tarrBuck July 17 and August 31, 2013. But if you’re still worried, for investors who want to be prepared for significant inflation risks, there are asset choices that make sense —- and some panicky choices that don’t. Inflation is an increase in prices and wages, degrading the value of fixed monetary assets. An increase in inflation will usually be accompanied by an increase in interest rates.

Thumbnail summary: I-bonds from the US Treasury are virtually perfect inflation protection, but they are limited in the quantity any individual can buy. TIPS (Treasury Inflation Protected Securities) are an excellent inflation hedge but subject to market price risk. Real estate and common stocks appreciate with inflation over long periods of time, but there’s no guarantee that the market will be accommodating when you buy or try to sell. Gold is a traditional safe refuge from war and inflation, but the price of gold is really unpredictable and often fails to track inflation. Bonds, preferred stocks, and long term fixed-rent leases are severe victims of inflation. They don’t belong in an inflation-safe portfolio.

Real assets (real estate, common stocks) eventually appreciate in money-value to retain real value under inflation. But timing the market, both for buying and selling may be tricky: inflation disrupts markets. And for all inflation hedges, gains in dollar value — merely reflecting the increase in prices and decline in value of the dollar — are subject to income taxation on the increase in money value.

The Range of Assets and How They Move with Inflation
Bonds: Increasing inflation and the rising interest rates that accompany increasing inflation can cut a long bond’s market value in half. That’s not because of a reduction in credit-worthiness of the borrower. The bond will still be repaid. It’s just that with an increase in other interest rates, an older low-interest rate bond becomes less attractive. On maturity, the repayment of principal is in dollars depreciated by inflation. Long-term bonds should not be in your inflation-safe portfolio.

Cash, CD’s, T-bills: Currency or assets of fixed money-value and fixed yield (CD’s, Treasury bills, bank deposits) are directly subject to inflation. But those assets are very liquid. You can turn them immediately into spendable money and reinvest in an inflation hedge. Interest rates track inflation rates but, unfortunately, the increase in interest rates may not be enough to compensate money holders for the loss of purchasing power. Staying in short term holdings and rolling them over regularly to the highest yielding cash alternative is an imperfect, but conservative, inflation strategy. Buying a succession of 6-month Treasury bills and rolling them over as they mature should contain, but not eliminate, losses due to inflation.

Real estate: Owning your own home is an inflation hedge. Owning income property with rents that can be adjusted regularly is similarly an inflation hedge. Income property, leased with a rent fixed in dollar terms far into the future leaves little room for inflation protection until the lease expires.
Since buying a home or income property is an inflation hedge, buyers may bid up the price of real estate by more than the increase in the general price level, reflecting anticipated future inflation and the favorable tax treatment of mortgage debt. But selling your real estate during an intense inflation may be tricky. As interest rates increase with inflation, prospective buyers may find borrowing to finance a purchase becomes difficult and expensive.

Gold: Gold is the traditional inflation hedge. In the 19th and early 20th centuries, gold was money. But now money is government-issued paper. The value of gold rises and falls with the willingness of buyers to buy and hold. Nothing supports the price of gold but the price expectations of current and future gold owners and buyers. Since gold’s price peaked in 1980, the price has increased but it has not kept up with inflation.

Common Stocks: Common stocks are a good inflation hedge over long periods of time. Eventually increases in inflation show up as an increase in the dividends and share prices of common stocks. But over a few years or even a decade stocks can fail to protect you. High inflation rates lead to high interest rates and high interest rates depress stock prices as common stock earnings and dividends compete with high yielding bonds.

I-bonds: I-bonds are savings bonds from the US Treasury, including repayment from the Treasury timed at the holder’s option. Currently, I-bonds pay zero interest but there’s a big plus: the redemption value fully represents the accumulated inflation from the time of purchase to the time they’re cashed out, and the proceeds are taxable only when they are cashed. There are restrictions on I-bonds: maximum $10,000 purchase per person per year; I-bonds are illiquid for the first year; there’s an interest penalty for cashing out during the first five years. For up to $10,000 (annually) in wealth, I-bonds provide full inflation protection, good liquidity, and no possible loss of monetary value.

TIPS (Treasury Inflation Protected Securities): TIPS are US Treasury bonds whose principal grows with inflation. Interest is paid on the inflation-adjusted principal; inflation-adjusted principal is repaid on maturity. From issue date to maturity, this is as perfect as inflation protection can be.
What’s the downside? If you want your money prior to maturity, or if you buy on the secondary market, you may take a loss as market prices vary. Diversification can make the TIPS portfolio less risky: laddering and dollar-cost-averaging. ‘Laddering’ means holding a range of maturities. Dollar cost averaging means spreading the timing of purchases over several years. A TIPS mutual fund can manage TIPS holdings for you.

Inflation Protection for Worried Wealth
So what should an inflation-worried wealth holder do? Avoid long bonds and owning property with a long fixed-rent lease. Don’t rely on gold, its price is simply unpredictable. Real estate and common stocks will protect you from inflation over long periods of time, but may not provide you with the money you need when you need it. Stock and real estate markets can be unpredictable so timing the market for favorable buying and selling opportunities is risky. I-bonds are perfectly predictable and for up to $10,000 per year per person, they provide genuine inflation protection. For larger amounts of money, a laddered portfolio of TIPS from diverse purchase dates provides a mix of inflation protection and moderated market risk.

Copyright © 2013, Ross M. Starr

Dealing with Inflation, Part 1: How the Fed will Protect You

August 31, 2013

Dealing with Inflation, Part 1: How the Fed will Protect You


Americans of middle age remember the corrosive inflation of the 1970s: Continually rising prices, particularly of gasoline, lagging wages with uneven attempts to catch up, high interest rates on borrowing but never high enough to compensate for inflation on savings, and — adding injury to insult — income tax liability on interest earnings that were only partial returns of inflation’s theft. No one — with the possible exception of a few oil well owners — wants to repeat that experience. In the 1970s, runaway inflation was the US dollar’s problem. It was solved in the traditional way, by raising interest rates enough to generate the severe recession of 1980-81. The lesson from that time is that the Fed has the tools needed to fight inflation — but unemployment and loss of income may be collateral damage. Is there another bout of inflation on the horizon? Will it be as long and painful as the decade of the 1970s?

Central banks (US Federal Reserve, European Central Bank, Bank of England) are in charge of maintaining price stability. They try to avoid inflation (general increase in prices and wages, eroding the value of currency and dollar-denominated assets) and deflation (generally declining prices and wages leading to economic stagnation). The US Federal Reserve (the Fed) has announced its target as a steady 2% annual inflation. But there is a difference in attitude: central banks hate excessive inflation; they hate and fear deflation. Why? Central banks know how to fight inflation: raise interest rates. They don’t really know how to fight deflation: they can’t reduce interest rates below zero.

Since 1982, US price inflation has been well contained (with occasional bursts of gasoline price increases and declines). Nevertheless, some Americans are concerned that the current low rate of inflation will be followed by a period of runaway inflation as a result of the flood of money that the Fed has placed in the banking system as part of its program of bond purchases (known colloquially as quantitative easing or QE3); see $tarrBuck July 17, 2013 for more on this topic. Fortunately, too much money doesn’t turn into inflation automatically —- first the excess money activates spending: excess demand for housing, consumption, and labor. Then prices and wages increase, apparently uncontrollably.

What can the Fed do if inflation does appear to start accelerating beyond its target? Is there any way to stop an apparently uncontrollable rise in prices? Generally, the Fed’s response to excessive inflation is to raise interest rates in the expectation that higher interest rates will slow economic activity and reduce price inflation. Higher interest rates also raise the return to holding dollar-denominated assets, reducing the pain of inflation.

  • Step 1 Reduce quantitative easing; stop or slow buying intermediate term debt
  • Step 2 Raise short term interest rates: discount rate, federal funds rate, yield on Federal Reserve Bank deposits (held by banks)
  • Step 3 Reverse quantitative easing: accept bond repayment on maturity; sell bonds back to market.

The Fed’s first step will be to reduce its quantitative easing. That means it will stop or slow its buying of intermediate term bonds (up to ten year maturities) and stop adding cash to the already abundant supply in the banking system. That move will increase interest rates on mortgages and most intermediate to long term debt. Increasing interest rates slows new housing construction and the purchase of capital equipment by businesses. That slowing of economic activity may be enough to slow the inflation.

But suppose inflation continues and perhaps accelerates, what can the Fed do next? The next move will probably be to increase short term interest rates. It will take three steps, probably at the same time. The Fed will raise its discount rate (the interest rate that it charges on lending directly to banks). It will increase the yield it pays to banks on deposits in the Federal Reserve system. Further, the Fed will act to try to raise the interest rate on interbank lending, the Federal Funds rate. The way it raises the Federal Funds rate is by selling Treasury bills (short term US government debt) into the Treasury debt market. That drives the price of bills down and the prevailing yield up.

And if inflation is still accelerating? The next step is to reverse quantitative easing. First by allowing the debt instruments acquired over the last several years to mature, debtors will repay cash to the Fed taking it out of circulation. Then the Fed can start selling its large holdings of intermediate term bonds back to the debt market, again withdrawing cash from private hands. Even before that selling takes place, market participants — fearing the flood of bonds coming back into the market — will bid down bond prices and bid up interest rates. When the sales take place, the increase in interest rates will be confirmed.

By that point in the tightening process, home builders and buyers may be crying for mercy. New housing construction and new business purchases of capital equipment will have slowed and their slowing will trigger a general contraction of economic activity. Meanwhile, prevailing interest rates will have caught up with inflation rates. That should be enough to slow and counter the inflation. Meanwhile, savers and other holders of cash assets will find that interest rates have increased enough so that they are no longer losing purchasing power as savers; their interest income overcomes the loss of purchasing power through inflation.

Bottom line: There’s not much to fear from the inflation that isn’t here yet. The Fed has ample tools to deal with inflation, to contain it and reverse it if need be. But they are not costless. Once the inflationary process starts and gets well integrated with the rest of economic activity, slowing the inflation may require an economic slowdown with increasing unemployment. The time to stop unwelcome inflation is before it starts, raising interest rates and tightening monetary policy when excessive inflation is expected but has not yet appeared.

Copyright 2013, Ross M. Starr

Bitcoins and Bubbles

August 29, 2013

Bitcoins and bubbles

The government can do it — why can’t we?  The government turns worthless paper into valuable currency; it turns meaningless deposits in Federal Reserve banks into valuable purchasing power.  In this electronic age any programmer can create notional electronic credits — shouldn’t they be valuable too?  That’s Bitcoin.  Its total issue is limited, in principle, and occasional additions to the issue are supposed to be based on solving a family of mathematical problems.   It has no guaranteed backing, no guaranteed use, no guaranteed conversion value in dollars or euros.  You can’t buy gasoline or food with Bitcoin, nor can you pay your taxes with it.   How much is Bitcoin worth?  Whatever the consensus of users expects its value to be tomorrow.  That’s what a bubble is. 

 

In 2002 notes and coins in a completely new intrinsically worthless (fiat) currency, the EURO, began to circulate.  All goods in participating countries were soon priced in euros and euros were accepted as valuable throughout the Euro-zone.  Worthless paper was transformed by command of the European Central Bank (ECB) into a valuable tradeable  asset.  Why can’t a clever programmer do that too?   What has the ECB got that any electronic programmer hasn’t?  The support of governments, each with police, judiciary, taxing authority, and jails.  The governments  agreed that euros were acceptable in payment of taxes.  And not paying your taxes could get you into trouble.   It’s the power to tax that sets government-authorized fiat currency apart from privately issued instruments.   The US government jealously guards its currency monopoly: the Stamp Payments Act of 1862 outlaws notes that are “intended to circulate as money or to be received or used in lieu of lawful money of the United States.”

 

Any asset (including a notional currency) whose value is based only on the expectation of its future value is a ‘bubble.’  Like the tulip bulbs of the 17th century Netherlands, or Las Vegas apartments in 2006.  That’s true even for gold, which trades at a price far beyond its dental or jewelry value simply because its holders expect it to be even more valuable in the future.  Bubbles eventually burst.  In 1975, private ownership of gold was legalized in the US, fully demonetizing gold.   Since then the value in of gold in US dollars has varied from $200 per ounce (January 1975) down to $100 (mid 1976), up to $800 (1980) down to $400 (1981), up to $ 1900 (2011), to $1365 (mid 2013).   It won’t go to zero only because gold makes nice looking wedding rings.   Since the local peak in 1980, gold’s price hasn’t even kept up with inflation. 

 

Bitcoin’s price has varied from a few dollars in January 2012, to a few hundred dollars in April 2013, to under $100 in July 2013.  What will its price be in 2014?  Whatever its owners and buyers expect the price to be the following day — that’s what a bubble is.   When the bubble bursts, the natural stopping point for the price of an intrinsically worthless instrument is zero.   Once it gets there, there’s nothing to lift it back up. 

Where’s all that inflation?

July 17, 2013

Where’s all the inflation?

Since the onset of the financial crisis of 2008, the US Federal Reserve (America’s central bank) has been flooding the market with cash. The Fed controls the monetary base —- that’s currency in circulation plus deposits held by banks in the twelve regional Federal Reserve banks (those deposits can be converted into currency at a moment’s notice). The monetary base has tripled in just five years. http://research.stlouisfed.org/fredgraph.png?g=kH7 . This sure looks like printing press money. Some senators and many opinion-leaders claim that a tsunami of inflation cannot be far away. Too much money chasing too few goods.

How does the Fed create the monetary base? It buys debt instruments for cash. It usually buys US Treasury bills. Recently, in the move known as quantitative easing , it’s been buying longer term Treasury debt and mortgage debt. It pays in cash (since the Fed is uniquely empowered to issue Federal Reserve Notes). The monetary base grows when the Fed buys more assets for its portfolio and pays in newly created cash. In this way, by making money easily available and buying up outstanding debt, the Fed plans to keep long term interest rates low to encourage business investment, housing purchases and construction.

Will this policy result in galloping inflation? Classical style economists, Chicago school monetarists, and Keynesians have been fighting this battle since the late 1930s. Recent experience may prove decisive (a fond hope; seldom do we get decisive evidence in economics).

The quantity theory of money is very well adapted to the 19th century, when real money was gold. Double the amount of gold around and you double the nominal amount of economic activity, some of it price inflation. That’s what William Jennings Bryan’s ‘Cross of Gold’ speech was about : deflation associated with a relatively constant gold supply in a growing economy

Modern money is paper and accounting entries convertible to paper. The only backing is the government’s promise to accept it in payment of taxes.

So the fear of upcoming inflation is based on the rapid growth of the monetary base. All of that money sloshing around must generate inflation. Except that it does so only if it generates economic activity and shortages of labor or output (the Keynesian view). So far the Keynesian view has been the more reliable guide to reality. Inflation has remained under 2% annually throughout the period of intense monetary base growth.

Copyright 2013 Ross M. Starr

 

Retire Comfortably! Quick Start Guide

July 3, 2013

Retire Comfortably! Quick Start Guide
Get started now, and plan more fully when you have time!
1. Establish your tax sheltered retirement plan: 401(k), 403(b), 457(b), or IRA.
If your income tax rate is high enough to be a problem then you need a tax-sheltered retirement plan. Tax-shelter allows your savings to grow faster, without the drag of taxation. Filling out the forms or websites to establish plan may be a pain, but it is well worthwhile. Over the course of a working lifetime — or even over an extended retirement — tax shelter will allow your investments to grow and grow faster than ordinary investing subject to annual taxation. Eventually taxes have to be paid on withdrawal, but they are paid only once. They won’t be a drag on investing growth.

2. Contribute the maximum allowed to the plan(s). Take full advantage of an employer’s matching contribution. Make equal contributions in each pay period.
If your employer makes a matching contribution, take full advantage of it! Even if you need income right now, contribute up to the match. Not doing so means leaving money on the table for your employer and for the IRS.

If your tax bracket is high enough to be a problem, then it is essential to contribute the maximum allowable to your tax-sheltered plan. That allows your money to work for you and grow in the plan for years and decades before it gets paid out (and is subject to taxation). The tax-sheltered plan offers you an interest-free loan of money that would otherwise go straight to the IRS. Contributing to the plan means taking advantage of that interest-free loan.

Making equal contributions in each pay period keeps the process simple for you and arranges dollar cost averaging (smoothing out the risk of buying at the peak and the benefits of buying at the trough of securities prices).

3. Allocate the money in the plan(s) to common stock index funds. A typical allocation is 75% to Standard & Poor’s 500 Index Fund, 25% to an international common stock index fund. Specify reinvestment of all dividends and distributions.
Over long periods of time (years and decades), the risks of common stocks are repaid by much higher returns than more predictable savings and interest-bearing securities. If you don’t hold common stocks elsewhere, then you should have them in your tax-sheltered account. It’s not really possible to actively manage these holding successfully. For most individual investors, most of the time, a broadly diversified index fund is the best place for your sheltered money. Reinvesting all the returns allows them to grow and compound over time. That makes the miracle of compound interest work for you. That means earning dividends, dividends on the dividends, dividends on the dividends on the dividends, … .

4. Don’t worry about market declines — they are a buying opportunity.
The stock market will fluctuate. A lot! Since you’ve scheduled regular investment and reinvestment, each market decline is an opportunity to buy at an advantageous low price. The plan is to buy low and hope to sell high. Over long periods, the stock market always appreciates. No one has a crystal ball that allows perfect timing, but buying steadily over the course of decades allows your account to take advantage of market fluctuations. There’ll be time to worry about safety as you approach withdrawal of your accumulations.

5. Keep contributing and reinvesting until retirement.
As long as you have a significant income tax rate, there is an advantage to contributing. Money that goes in escapes taxation at that time and can be paid out over the following decades, leaving it time to compound and grow. 21st century longevity means there is a long time to enjoy (and to need) the growth of your wealth. Many people find that their income and their tax rates go down with retirement. Reduced income is not good news, but your lower tax bracket in retirement makes tax-sheltered investing during your working years doubly rewarding!

Copyright 2013 Ross M. Starr

$TARRBUCK FOR OCTOBER 2011: TOXIC TREASURIES

October 3, 2011

TOXIC TREASURIES

Long term US Treasury yields are at historic lows : 2% for ten-year bonds, 3% for 30-years. You have to go back to the Truman and Eisenhower administrations to find yields this low. There’s a good-news-bad-news story here. Investors are betting on the solidity of the US Treasury and the US dollar in a time when everything else looks too risky by half. That’s the good news. And it’s right. There is absolutely ZERO chance of the US government defaulting on its dollar-denominated debt. Why ? Because it can always print more dollars to pay off the debt. And if the Treasury won’t do it, the Federal Reserve System will. That debt will be paid.

The bad news is that there is nowhere for Treasury yields to go but UP. And as yields go up, bond prices fall. So if you buy a 30-year T’bond now, and yields go up to 6% in a few years, your bond will be worth 65 cents on the dollar. You’ll get paid off, but if you need to liquidate before maturity, you’ll take a loss. And why should yields go up? The bonds are currently pricing in low inflation and low productivity of capital. When an economic expansion gets going, inflation or real returns to capital have to go up. And with that, interest rates, eroding the market value of your bonds.

Treasuries are expensive now because investors are scared of everything but inflation and prosperity. If either of those occurs, they’ll have another thing to be scared of.

What’s a fixed income investor to do? Ladder the portfolio, emphasizing the short end with its lower risks and lower returns; CD’s at 1% instead of T’bills at 0.10%; muni’s at an historically high yield premium over Treasuries.

Susan’s Ribollita (Tuscan Stale Bread Soup with Black Kale)

December 17, 2010

Susan’s Ribollita
INGREDIENTI:
1 head of cavolo nero (black-leaf kale)
half head of Savoy cabbage or one fourth head Napa cabbage
1 bunch of Swiss chard
1 leek
1 onion
2 carrots
2 zucchini
2 celery stalks
300 grams (approx. 10.6 ounces) of cannellini (white beans)
2 peeled plum tomatoes
3 cloves garlic
extra virgin olive oil
salt and pepper
250 grams (approx. 8.8 ounces) of stale homemade white
Italian bread
PREPARAZIONE:

Pre-soak the beans for about 8 hours. Boil them in two quarts of water.In another pot, sauté the sliced onions in olive oil. Slowly add all of the other vegetables, chopped into large chunks. Let them slowly soften for about 10 minutes. Then add the water leftover from cooking the beans and half of the beans. Add the other half after pureeing them. Add salt and pepper. Cook over low heat for about two hours. Now add the sliced bread, stir well and let it boil for ten more minutes. Let it stand. Serve in earthenware bowls. Pour in a little genuine Tuscan extra virgin olive oil with a full, fruity flavor.

$tarrBuck for March 31, 2008: What’s hot, what’s not?

April 1, 2008

$tarrBuck for March 31, 2008: What’s hot, what’s not?

Financial Markets are going through a credit crisis. That means that risk, and illiquidity are severely discounted — they carry low prices and high yields.

Everyone needs liquidity — don’t bet the rent or tomorrow’s dinner. As always, an investor’s portfolio should be arranged with a balance between safe assets and risky assets. See the $tarrBuck Report, June 25, 2006. If you arranged your portfolio this way before the equity market decline (starting in November 2007) you’ve had the benefit of a well-balanced portfolio.

Safe liquid assets are hot; they carry high prices and low yields. It’s a good time to sell; a poor time to buy.

Risky and illiquid assets are cold. If you can handle the risk and illiquidity, it’s a good time to buy. It’s a bad time to sell.

What’s hot?

The following asset classes have appreciated in price during the credit crisis. It’s time to think about reducing holdings here or not adding to them:

TIPS (Treasury Inflation Protected Securities)

Long-Term Treasury Bonds

Gold

Oil, Copper, Commodity funds

What’s not? The yields on the following asset classes have climbed during the credit crisis. It’s time to think about augmenting holdings here; it’s too late to reduce them now:

Preferred stocks (fixed income)

Municipal bonds (fixed income tax advantaged; best purchased as exchange-traded muni bond funds)

REITs (best purchased as no-load mutual funds; $tarrBuck’s preference is Third Avenue Real Estate Value Fund, TAREX)

Common stocks (best purchased as exchange-traded index funds, e.g. SPY, or no-load mutual funds)

Financial firm common stocks (mutual funds, exchange traded funds; picking individual winners is hard).

Value stocks ($tarrBuck’s preference is Third Avenue Value Fund, TAVFX).

May 27, 2007: Florence and Tuscany: A Pictorial Travelogue

May 27, 2007

Florence and Tuscany: A Pictorial Travelogue

Click on “Slideshow” at

http://picasaweb.google.com/Susan.S.Starr/Florence2007?authkey=ZUhoUIGby64