Is the stock market going to tank?

[Benny Profane]

Berkshire is the name of the original textiles company Buffett bought. When he bought it he knew it was obsolete and destined to fail. The cash flow from that investment got him into the insurance business and the rest is legend.

Cash flow? What cash flow?

Listen, sometimes you just have to smile at the old nerd. Overall, he has kicked ass, although you're pretty much treading water with him over a decade.

[liv2ski]

Zerohedge conveniently forgets the most important element of stock prices. Earnings:

What ever you say brother.

"There is ample debate going on in the market right now about the long-term effects of the Fed’s seemingly never-ending QE. The well-respected Stanley Druckenmiller was on CNBC this morning defending his recent commentary that the mal investment currently being instigated by the Fed can only end poorly. The counter-point was provided by former Fed governor Kevin Warsh who in his best status quo pleasing way essentially said Bernanke is in charge and all is well.

Perhaps it is, perhaps it isn’t. Personally, in the debate between a Fed governor academic and a man who successfully managed billions of dollars for decades, I’ll put my money behind Mr. Druckenmiller any day of the week and twice on Sundays!

But I’m not smart enough to know what will be the result of the Fed’s latest monetary experiments. Perhaps all will be well. Perhaps the magical money multiplier really works and is higher than anyone thinks? Perhaps the wealth effect is just about to kick in. Perhaps inflation really is low and muted, as Bernanke keeps repeating. Perhaps housing is recovering despite a continuing decline in real wages. Who knows? I don’t.

But one thing I do know is that the Fed’s hands are all over markets today. Consider for a moment the current QE program.

QE aka Money for Nothing
In March, there are exactly 20 business days. Also in March, the Fed will commit to purchase via their Permanent Open Market Operations (POMO) approximately $85bn in securities from the TBTF primary dealers. The $85bn in cash (not real cash but actually 1s and 0s in an electronic account) didn’t exist on the world’s ledger in February. However, yesterday at the Fed some functionary sat down at a computer, went into one of the Fed’s POMO accounts and entered the numbers 85, followed by nine 0s. Suddenly, the world had an additional $85bn. It doesn’t exist and then POOF! 11 key strokes later and it exists.

Over the course of the next 20 business days in March, the Fed will take this newly “minted” money and buy things with it. This new cash now enters the system and starts chasing other assets almost immediately – otherwise it sits in cash earning a negative return, something Bernanke is very actively discouraging.

The net effect of all this is that on average, every business day in March will see the Fed effectively seed a new $4.25bn AUM investment firm whose sole goal is to buy, not sell, securities. Think about that, out of thin air, a new $4.25bn competitor is starting up each and every business day in March, courtesy of the good folks in the Marriner Eccles building in DC.

Some of you have worked in asset management your entire careers. You know how hard it is raise assets. You know how long it takes and how important it is that your investors know that you can both buy AND sell assets effectively in order to earn their business. You know how hard you must work to study your markets, sectors and companies to be able to understand the fundamental drivers.

It must be hard to sit by and watch while the Fed creates a new $4.25bn competitor every business day where the sole goal of that money is to buy simply because a Princeton academic thinks it should. The Princeton academic thinks stocks should be high, so they are. The Princeton academic thinks bond yields should be low, so they are. Period. Of course this makes a mockery of those of you who actually try to understand fundamental value, but hey, the Princeton academic gets what the Princeton academic wants. The devil take the hindmost.

Again, I gave up long ago trying to predict how the massive manipulation currently being conducted by the world’s central banks will end. However, I do know that what the Fed is doing now – essentially creating a $4.25bn asset manager every business day in March 2013 – is unsustainable and certainly unfair to those of us who actually work for a living.

And what is unsustainable and unfair in the long-run does not last".
http://www.zerohedge.com/news/2013-0...ho-work-living

[char]

Please, lord, just get me up to 10% for the year. I'm almost there. I promise to go all safe and cuddly and cash for the rest of the year. 10%, that's all. I promise.

Ridiculous returns this year. One of my healthcare funds was up 22% this year. Hell, my government managed 401k was up 11% for the year.

Seriously trying to figure out if this is the time to cash out and get back in later. I'm not good at market timing though.

[Benny Profane]

And what is unsustainable and unfair in the long-run does not last".

And in the long run, we're all dead.

This inflationista mongering is getting old. Somebody's pissed off about all of that worthless gold they own.

[4matic]

The well-respected Stanley Druckenmiller

Typical straw man argument. Use a well known name and then change the topic to fit the argument. So Zerohedge.. Price is truth. Druckenmiller reminds me of the late Martin Zweig. "I'm worried Lou, but I'm long."

[4matic]

And in the long run, we're all dead.

This inflationista mongering is getting old. Somebody's pissed off about all of that worthless gold they own.

Gold at a key juncture here. It can be bought with a very small risk. Not for me but the trade is there.

[4matic]

my government managed 401k was up 11% for the year.

Year over year or year to date?

[char]

Year over year or year to date?

Year to date. Had a big down in 08. The last few have been good.

Target date fund.

[4matic]

Year to date. Had a big down in 08. The last few have been good.

Target date fund.

sp500 is up about 8% ytd. It would be very unlikely that a target fund is beating the SP500 by 3% ytd. Are you sure it's not 1 year performance which 11% would fit a 20+ year target date profile.

[char]

Duh. I meant 1 year performance. Need more beer.

[Tippster]

Our RBC-managed 401K is up 16% since Jan. 2012.

[Benny Profane]

How much do you guys pay to have a "managed" 401k?

[4matic]

How much do you guys pay to have a "managed" 401k?

All 401k's have a manager even if they are self directed. I'd suspect the institutional rate for a managed portfolio would be at least .75%.

[char]

How much do you guys pay to have a "managed" 401k?

Supposedly the net expense ratio was .027% in 2012.

[Benny Profane]

All 401k's have a manager even if they are self directed. I'd suspect the institutional rate for a managed portfolio would be at least .75%.

I guess we can quibble over the term "manager".
The 401k industry is so corrupt. So happy to roll over mist of my money into a Vanguard IRA some time ago. No more bloodsuckers and their fees.

[4matic]

There are mgt fees and fund fees. Mgt fees are pretty well hidden while new federal law last year requires annual disclosure in writing. Benny is right about many 401k'S. Working for a big company helps because they can negotiate lower fund fees and mgt fees are typically low.

[Tippster]

How much do you guys pay to have a "managed" 401k?

You're right - after fees I maybe only made 15%... which is 15% more than had I tried to manage that shit myself. :shrug:

[Benny Profane]

It's really not that hard, you know. There are a lot of people making a lot of money spending a lot of time trying to convince you otherwise. In the end, though, a few nice index funds and ETFs diversified through asset classes from a low cost provider will actually beat the bloodsuckers.

[huckbucket]

This is your friendly reminder that ...

BUY AND HOLD IS DEAD.

[4matic]

It's really not that hard, you know. There are a lot of people making a lot of money spending a lot of time trying to convince you otherwise. In the end, though, a few nice index funds and ETFs diversified through asset classes from a low cost provider will actually beat the bloodsuckers.

Correlation is still high but your idea of "a few index funds" is shallow. I can do that in my account but I choose not too. Listed below is the diversity in a target fund. Some of these asset classes cannot be emulated with etf's and the auto rebalance is worth the fee for me:

Disciplined Equity Fund 11.0
Core Bond Fund 7.7
International Opportunities Fund 7.3
International Equity Fund 7.3
Value Advantage Fund 7.2
Intrepid America Fund 7.2
High Yield Fund 6.9
U.S. Equity Fund 6.7
Growth Advantage Fund 6.5
Emerging Markets Equity Fund 5.6
Emerging Economies Fund 4.8
Intrepid International Fund 4.0
Realty Income Fund 3.9
Mid Cap Core Fund 3.9
Prime Money Market Fund 2.0
International Realty Fund 2.0
Emerging Markets Debt Fund 1.4
U.S. Treasury Notes 1.4
Small Cap Growth Fund 1.0
Small Cap Value Fund 1.0
Small Cap Equity Fund 0.9
Emerging Markets Local Currency Debt Fund 0.4

[iceman]

Just put it all on red and spin the wheel.

[Benny Profane]

Correlation is still high but your idea of "a few index funds" is shallow. I can do that in my account but I choose not too. Listed below is the diversity in a target fund. Some of these asset classes cannot be emulated with etf's and the auto rebalance is worth the fee for me:

Disciplined Equity Fund 11.0
Core Bond Fund 7.7
International Opportunities Fund 7.3
International Equity Fund 7.3
Value Advantage Fund 7.2
Intrepid America Fund 7.2
High Yield Fund 6.9
U.S. Equity Fund 6.7
Growth Advantage Fund 6.5
Emerging Markets Equity Fund 5.6
Emerging Economies Fund 4.8
Intrepid International Fund 4.0
Realty Income Fund 3.9
Mid Cap Core Fund 3.9
Prime Money Market Fund 2.0
International Realty Fund 2.0
Emerging Markets Debt Fund 1.4
U.S. Treasury Notes 1.4
Small Cap Growth Fund 1.0
Small Cap Value Fund 1.0
Small Cap Equity Fund 0.9
Emerging Markets Local Currency Debt Fund 0.4

Felix Salmon calls you a white, middle aged hobbyist. A very serious amatuer.

[4matic]

Felix Salmon calls you a white, middle aged hobbyist. A very serious amatuer.

Like Bobby Jones was an amateur? I'll take it

[Tippster]

It's really not that hard, you know.

Neither is Drywalling, Photography, Auto mechanics, or teaching. The rub, of course, is being good at it.

There are a lot of people making a lot of money spending a lot of time trying to convince you otherwise. In the end, though, a few nice index funds and ETFs diversified through asset classes from a low cost provider will actually beat the bloodsuckers.

I would rather pay someone else to take care of my money than spend the little free time I have to do it myself.

[Benny Profane]

There is an oft spoken cliche, that, most Americans spend more time planning vacations than their retirement. That's why everyone is broke.