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March 31, '23. Christine Benz is a longtime Morningstar personality. She's back with her bucket approach for retirement portfolio construction. It's never been a strategy I could ever hope to actually employ. And if I had the wherewithal, I find it to be just plain too complicated, anyhow. But have a listen, if you'd like: https://wealthtrack.com/build-a-better-more-resilient-retirement-portfolio-with-morningstars-christine-benz/
Christine Benz has long recommended bucketing strategies for retirees. She often credits Harold Evensky for developing this strategy. Mr. Evensky's implementation utilizes 2 buckets while Ms. Benz uses 3 buckets. Certain investors may find bucketing to be a helpful mental construct which allows them to stay the course during market disruptions. For those investors, bucketing can be immensely beneficial. This strategy is unnecessary if an investor has a properly constructed portfolio and a well-balanced temperament. .
Christine Benz discusses six retirement "blind spots" in this weeks episode: Retirement Date Risk Sequence-of-Return Risk Low-Yield Risk Inflation Risk Health Care, Long-Term Care Risk Longevity Risk
Thanks for commenting @Observant1 - I appreciate links so much more when folks add a personal comment. Generally, the only time I’ll watch a linked video is if the poster has commented on it.
Benz’s “Buckets” conjure up an image of somebody in a Bonanza - like western walking to and from the well. Prefer “allocation model” myself, although the label doesn’t matter much. In both personal and financial affairs I’m usually better off having a disciplined approach. So I’d be lost without my allocation model written down and securely stored among the digital archives. Fortunately (or unfortunately, depending on viewpoint) mine is a whole lot more complex than Benz’s. It’s evolved over nearly 25 years in retirement as my knowledge base has grown, opportunities available have multiplied and age has advanced. I’d hate being still crammed into the same “bucket(s)” today as a quarter-century ago.
Benz is no Einstein, but she appears generally well versed on the fund landscape as one would expect from Morningstar. I think 25-30 years back when I was in the process of ditching the Templeton assigned “advisor” (commanding a 4%+ front load) and developing my own self directed investment approach Benz’s advice would have been both stimulating and helpful. Today, not much. I think she’s appealing mainly to inexperienced investors.
Some pertinent thoughts / observations:
- Benz leads off characterizing bonds as a portfolio-wrecking “torpedo” in 2022. An interesting analogy, though I might have said “weighty anchor”. Equities could have have sunk your investment sloop even faster and driven it deeper than bonds last year, depending, of course, on which ones.
- Benz suggests holding 1-2 years worth of cash reserve to “ride out” rough stretches of the market. Surely this is optimistic. While not one to hold a lot of cash myself, in reading others’ posts over the years it appears that her suggested 1-2 years worth of cash reserve is on the low end. Some well-versed investors here who subscribe to the “rainy day” approach have been known to hold anywhere from 3 to 5 years’ supply of cash to draw on in event of a prolonged bear market - a more realistic time frame. (Either you have religion or you don’t.)
- Just 3 buckets seems rather basic - actually pretty simplistic.
- The contents of Benz’s buckets appear to slosh around a bit. She mentions international funds “might be” an asset to include today. OK. Probably good advice. But a staunch “bucketeer” might well adhere to static allocations, periodically rebalancing. Adding / deleting components would appear tantamount to going off the reservation. She suggests some precious metals (now that they’ve appreciated significantly). Consider that there have been periods as brief as 2 or 3 years over which precious metals funds have fallen 50% or more. How many novice investors (to whom she seems to be appealing) would have the staying power to hold on to to an asset like that near the bottom?
- She’s fond of index funds. If one has a 10-25 year time horizon that’s probably great advice. Over longer periods lower fees should translate into better outcomes. But it’s not that simple. First, today’s investors generally have shorter time horizons / are prone to hold funds for shorter periods than a generation ago. Timing decisions might well impact returns more than fees. Secondly, the advice to invest in indexes ignores the extent to which some of those may have become distorted / overpriced after decades of outperformance. For example, the cap-weighted S&P 500 might not be the best place to invest today. Some knowledgeable investors actually maintain small short positions on it, wagering, in effect, that other market areas will outperform.
Bill Wilby is a retired professional money manager with a Ph.D. in International Monetary Economics who will discuss the problems with U.S. Treasuries and why financials are uninvestable.
We continue our interview with Ed Yardeni, an experienced economist, strategist, and Fed watcher who has been closely following the Fed throughout his 40-year investment career. Yardeni is the author of “Fed Watching for Fun and Profit: A Primer for Investors” and head of his own global investment strategy firm, Yardeni Research. He believes that anticipating the actions of the Federal Reserve System's Federal Open Market Committee (FOMC) is critical to successful investing. Despite the historically aggressive pace of interest rate hikes over the past year, Yardeni thinks the Fed is done hiking interest rates for now. We will discuss whether "Don't Fight the Fed" still works as an investment strategy.
Good interview: 1. He believes FED will pause after May3rd FOMC meeting and holds the rate above 5% for a bit longer than people think; perhaps into 2025. 2 FED is losing money by holding long dated treasury yielding 2% while many are paying 4% today. FED is not buying more and let the rest mature and rolling off their book. 3. Mentioned that the FED made the mistake (QE and zero interest rate policy) and now trying to contain inflation that they created when they pumped too much money into people during the pandemic. Vast consumption post-pandemic caused high inflation. (Think the exact root causes are more complex than just the consumer driven event) 4. Large banks are doing fine through this turmoil but he believes there will be more consolidation and regulations just as the time period of S&L crisis. 5. He believes US financial system is strong and recommends investing in S&P 1500 that covers large-, mid-, and small-caps stocks. (Noted that large cap tech stocks are reporting good earnings, and that may not be the case for the smaller caps. Also the earning expectation has been guided downward, not the other way around) 6. Also he like bonds in general, but he like stocks better for the long term
This week on WealthTrack...Terrence Keeley, CEO, and Chief Investment Officer of 1PointSix LLC, left BlackRock, one of the world’s largest investment managers, in July 2022 to publish his book, SUSTAINABLE: Moving Beyond ESG to Impact Investing.
In his 40-year investment career, Keeley has never advised a client to invest in ESG, and he joins us to explain why ESG investing doesn’t work and what does. This is a rare occasion for a top executive at a major investment firm to go public about a major policy difference.
Not sure I completely buy Subramanian’s argument on commodity as US is entering a recession. Oil, a major component of commodities is driven by supply and demand that follows the business cycles. Oil prices have been trading well below its high (Russian-Ukraine war) and fell again this week. Demand from the second largest economy, China, has not met the expected high demand for oil. Same argument can be made for industrial metals. The rise of gold this year to over $2,000 per ounce was driven by fear of economic collapses and recession, and its demand severing as a hedge is used by many investors.
Her argument that this recession is different from others is not sufficient to indicate a demand for commodities, even at the best scenario of a shadow recession or “soft landing”. In reality, there are other more severe “hard landing” scenarios.
For full disclose, we have made modest gains on commodity futures in 2020-2021 as we re-emerged from the pandemic. We exited our positions early this year as there are more compelling opportunities elsewhere.
Recessions & financial crises go hand in hand after Federal Reserve tightening cycles. Outspoken economist Dave Rosen-"bear"-g sees evidence of both and advises defensive investments.
He's predicting 3100 on the S&P 500.
Previous lows: Present Level = 4192 1 year low - Oct 10, 22 = 3500 3 year low - Mar 11, 2020 = 2586 5 year low - Dec 1, 2018 = 2506
Good interview overall with many historical perspectives. He is quite bearish and the economy is entering a recession now. 1. He likes things that you need, i.e. consumer staples (food), utilities, and healthcare, not so much things you want. 2. Long and short tern treasury bonds as in a barbell 3. Gold, but they are near all time high 4. Farmland (impractical for most investors) 5. Defense industries as the budget goes up every year 6. His equity allocation is at all time low (recession)
#5 @Sven did you happen to see 60 Minutes last night ? Over charging for tools that the armed forces use !! All at tax payer expense ! Armed services hurt to : 100 tanks ordered , can only buy 90 with their allotted dollars.
@Derf, no I did not watch 60 Minutes last night. I recall that defense contractors often charge more than what the original contract cost and they are creative in getting it through. During Regan administration, a toilet seat on an aircraft cost many times more - custom made to military specifications.
26 May, 2023. Savita Subramanian, Part II. At the very end of the show, she offers a method/screen/filter for selecting stocks which I've employed instinctively, without knowing there's a name for it. Well.....
Three powerful women in finance share their personal journeys on reaching the top echelons of money management and give advice on what it takes, how to succeed and lessons learned.
Bookstaber’s current analysis highlights several slow-motion risks that he believes pose significant threats to the economy, societal stability, and even civilization itself. These risks encompass climate change, demographic shifts, deglobalization, and artificial intelligence. Alongside these long-term concerns, Bookstaber also evaluates more immediate challenges that impact the economy and financial markets.
Comments
As I remember, despite focusing on retirement, she doesn't mention RMDs and how to factor those into your bucket
She often credits Harold Evensky for developing this strategy.
Mr. Evensky's implementation utilizes 2 buckets while Ms. Benz uses 3 buckets.
Certain investors may find bucketing to be a helpful mental construct
which allows them to stay the course during market disruptions.
For those investors, bucketing can be immensely beneficial.
This strategy is unnecessary if an investor has a properly constructed portfolio
and a well-balanced temperament.
.
Retirement Date Risk
Sequence-of-Return Risk
Low-Yield Risk
Inflation Risk
Health Care, Long-Term Care Risk
Longevity Risk
Video
Benz’s “Buckets” conjure up an image of somebody in a Bonanza - like western walking to and from the well. Prefer “allocation model” myself, although the label doesn’t matter much. In both personal and financial affairs I’m usually better off having a disciplined approach. So I’d be lost without my allocation model written down and securely stored among the digital archives. Fortunately (or unfortunately, depending on viewpoint) mine is a whole lot more complex than Benz’s. It’s evolved over nearly 25 years in retirement as my knowledge base has grown, opportunities available have multiplied and age has advanced. I’d hate being still crammed into the same “bucket(s)” today as a quarter-century ago.
Benz is no Einstein, but she appears generally well versed on the fund landscape as one would expect from Morningstar. I think 25-30 years back when I was in the process of ditching the Templeton assigned “advisor” (commanding a 4%+ front load) and developing my own self directed investment approach Benz’s advice would have been both stimulating and helpful. Today, not much. I think she’s appealing mainly to inexperienced investors.
Some pertinent thoughts / observations:
- Benz leads off characterizing bonds as a portfolio-wrecking “torpedo” in 2022. An interesting analogy, though I might have said “weighty anchor”. Equities could have have sunk your investment sloop even faster and driven it deeper than bonds last year, depending, of course, on which ones.
- Benz suggests holding 1-2 years worth of cash reserve to “ride out” rough stretches of the market. Surely this is optimistic. While not one to hold a lot of cash myself, in reading others’ posts over the years it appears that her suggested 1-2 years worth of cash reserve is on the low end. Some well-versed investors here who subscribe to the “rainy day” approach have been known to hold anywhere from 3 to 5 years’ supply of cash to draw on in event of a prolonged bear market - a more realistic time frame. (Either you have religion or you don’t.)
- Just 3 buckets seems rather basic - actually pretty simplistic.
- The contents of Benz’s buckets appear to slosh around a bit. She mentions international funds “might be” an asset to include today. OK. Probably good advice. But a staunch “bucketeer” might well adhere to static allocations, periodically rebalancing. Adding / deleting components would appear tantamount to going off the reservation. She suggests some precious metals (now that they’ve appreciated significantly). Consider that there have been periods as brief as 2 or 3 years over which precious metals funds have fallen 50% or more. How many novice investors (to whom she seems to be appealing) would have the staying power to hold on to to an asset like that near the bottom?
- She’s fond of index funds. If one has a 10-25 year time horizon that’s probably great advice. Over longer periods lower fees should translate into better outcomes. But it’s not that simple. First, today’s investors generally have shorter time horizons / are prone to hold funds for shorter periods than a generation ago. Timing decisions might well impact returns more than fees. Secondly, the advice to invest in indexes ignores the extent to which some of those may have become distorted / overpriced after decades of outperformance. For example, the cap-weighted S&P 500 might not be the best place to invest today. Some knowledgeable investors actually maintain small short positions on it, wagering, in effect, that other market areas will outperform.
https://wealthtrack.com/navigating-todays-investment-crosscurrents-with-veteran-macro-strategist-ed-yardeni/
We continue our interview with Ed Yardeni, an experienced economist, strategist, and Fed watcher who has been closely following the Fed throughout his 40-year investment career.
Yardeni is the author of “Fed Watching for Fun and Profit: A Primer for Investors” and head of his own global investment strategy firm, Yardeni Research. He believes that anticipating the actions of the Federal Reserve System's Federal Open Market Committee (FOMC) is critical to successful investing.
Despite the historically aggressive pace of interest rate hikes over the past year, Yardeni thinks the Fed is done hiking interest rates for now. We will discuss whether "Don't Fight the Fed" still works as an investment strategy.
1. He believes FED will pause after May3rd FOMC meeting and holds the rate above 5% for a bit longer than people think; perhaps into 2025.
2 FED is losing money by holding long dated treasury yielding 2% while many are paying 4% today. FED is not buying more and let the rest mature and rolling off their book.
3. Mentioned that the FED made the mistake (QE and zero interest rate policy) and now trying to contain inflation that they created when they pumped too much money into people during the pandemic. Vast consumption post-pandemic caused high inflation. (Think the exact root causes are more complex than just the consumer driven event)
4. Large banks are doing fine through this turmoil but he believes there will be more consolidation and regulations just as the time period of S&L crisis.
5. He believes US financial system is strong and recommends investing in S&P 1500 that covers large-, mid-, and small-caps stocks. (Noted that large cap tech stocks are reporting good earnings, and that may not be the case for the smaller caps. Also the earning expectation has been guided downward, not the other way around)
6. Also he like bonds in general, but he like stocks better for the long term
wealthtrack-1945-keely-05-05-23-1080p
Her argument that this recession is different from others is not sufficient to indicate a demand for commodities, even at the best scenario of a shadow recession or “soft landing”. In reality, there are other more severe “hard landing” scenarios.
For full disclose, we have made modest gains on commodity futures in 2020-2021 as we re-emerged from the pandemic. We exited our positions early this year as there are more compelling opportunities elsewhere.
He's predicting 3100 on the S&P 500.
Previous lows:
Present Level = 4192
1 year low - Oct 10, 22 = 3500
3 year low - Mar 11, 2020 = 2586
5 year low - Dec 1, 2018 = 2506
1. He likes things that you need, i.e. consumer staples (food), utilities, and healthcare, not so much things you want.
2. Long and short tern treasury bonds as in a barbell
3. Gold, but they are near all time high
4. Farmland (impractical for most investors)
5. Defense industries as the budget goes up every year
6. His equity allocation is at all time low (recession)
No, seriously...
At the very end of the show, she offers a method/screen/filter for selecting stocks which I've employed instinctively, without knowing there's a name for it. Well.....
...ok. 02 June, 2023. Is this a repeat? Dividends today. That does look like a dark March sky behind him.
Episode #1939 broadcast on March 24, 2023