SUMMARY - "PIG":
The Contrarian's View is published 11 times per year on a mostly-irregular schedule, and the views expressed are those of the author and editor, Nick Chase. Because nobody can predict the future, results of past suggestions or recommendations are no guarantee of future results. Material in this publication may be freely quoted provided proper attribution is given to its source. Subscription rate: Free on the Internet through the World-Wide Web service at Assumption College. Using your favorite Web-browsing program, Open URL http://nick.assumption.edu. Mailed paper subscriptions, one year for $39 to The Contrarian's View, 132 Moreland Street, Worcester, Massachusetts 01609. There is a limit of 50 paid subscribers at one time; please check for availability before sending any money. Sorry, Visa and Mastercard are not available. Overseas subscription rate, U.S. $54. Unsolicited material sent to us by UPS or by courier other than the postal service is refused and returned to sender! Phone: (508) 757-2881
The story profiles Florida postal letter-carriers Lisa Jiminez and Jay Maxwell, who are planning to retire in 2002, he at age 56 and she at age 44. Maxwell will have worked 30 years with the USPS, and will receive a pension of about $20,000 per year upon retirement, somewhat indexed to inflation, depending on the success of union-contract negotiations. Jiminez currently has about $85,000 in stock index funds in a 401(k), and is eligible to collect Social Security at age 62 or later under current law.
They're cheap.... as the reporter puts it, they live frugally.... and they are able to sock away almost half their combined $80,000 per year gross pay into IRAs and fully-taxable stocks and mutual funds. The story doesn't say so, but from the figures given I estimate their annual take-home pay (after income taxes, pension contributions and investments, but not including other deductions such as medical) to be around $31,000 or $32,000. In addition to the $85,000 in her 401(k), the couple has about $9700 in stocks /funds in Roth IRAs (not much money, of course, because Roths were created by Congress only recently) and around $106,000 in (taxable) individual stocks and mutual funds. Their home and cars are fully paid for and they are otherwise debt-free. (I might add, being out of debt already puts them way ahead of 93% of the U.S. population and your typical USA Today reader.)
They wanted to know if it was realistic for them to retire in 2002, as they planned.
Financial planner Barry Johnson says, yes, they can. Assuming a 6% return on their investments, they should be good to age 85, and they can even afford to spend $90,000 for a seasonal second home in New Hampshire, for which they should take out a mortgage, with the carrying costs are around $1,000 per month. (After 10 years, they'll have to decide which house to sell.) He also recommends the couple shift 40% of the assets they control (in each area) into fixed-income vehicles such as high-yield bond funds for a more appropriate 60/40 stock/bond mix for people about to retire. Their first-year gross retirement income Johnson estimates will be around $27,000.
I wanted to know, does Johnson's advice pass the smell test?
The reason I want to know is that 2002 is the beginning of the window for my retirement.... late 2002 is the earliest I could possibly retire if everything goes smoothly in our retirement strategy, and I maybe get a lucky bounce in the bond market, and I assure you, $200K is not nearly a big-enough retirement kitty. (On the other hand, we're not planning to live on $27K income per year.) My wife and I are in a similar situation as this couple.... she will be receiving a (not indexed to inflation) public-school pension and I will be drawing primarily on Social Security and TIAA-CREF and/or a rollover IRA.
Let's see, assuming Johnson's 6%-per-year portfolio return and continuation of the duo's saving habit, at retirement they will have socked away about $310,000. If their retirement portfolio continues to yield 6%, the first year's appreciation from the portfolio will be almost $19,000, $7,000 in interest and dividend income beyond the civil-service pension, and enough capital gains to meet the monthly payments for the house, so they will be drawing down only about $7,000 per year in the first few years to maintain their standard of living. Eventually they will need to draw out more money to compensate for inflation, which is why the kitty will last only for 29 years (even after a house is sold and Jiminez' Social Security cuts in). So, on the surface, everything looks A-OK.... all systems go, let's retire!
But sometimes what works well in the long term can get you in the short term. Maxwell and Jiminez (and I) might have the misfortune to retire just as the financial bubble pops and stocks and/or bonds embark on a lengthy period of negative return. If the experience is similar to what happened in the 1970s, investment grade bonds would lose about half their value, and the popular stocks (this includes index funds, because they've become so fashionable) would decline by about two-thirds, while the cost of living escalates to 7%-11%. Ugh! If they continue their withdrawals at the $26,000 rate (while absorbing the loss of purchasing power of the dollar by cutting back on expenses), at the end of a five-year bear market their retirement assets will have shrunk to about $53,000, of which stocks will be only about $15K. To "break even" in a decade, to get back to the $264,000 they originally expected to have left after ten years (and assuming full recovery of the bond market), during the next five years the stock market would have to immediately double, then drive their (remaining) stocks up at a 97% compound annual rate. Not bloody likely.
I can't speak for Jiminez and Maxwell, but if, in my fifth year of retirement, I found that my retirement kitty, which some financial planner had predicted would be around $264,000, had actually shrunk to $53,000 and looked like it might disappear entirely in three years, I might freak out. OK, time to get rid of a house..... oops, the vacation property market in New Hampshire is really soft, that house is worth less than the mortgage on it.... ooohh....
OK, Nick, you say, that's a pretty extreme example. Back in the 1970s, nobody really suffered like that, did they?
Well, probably not to the extent that would be if similar market behavior occurred today. Back in the early 1970s defined-contribution retirement plans were but a pimple on the investment landscape. Most retirees received benefits from corporate defined-benefit plans, or government retirement plans, or from annuities purchased in plans such as TIAA-CREF (which, at the time, had no provisions for switching into or out of stocks, and which forced you to purchase an annuity at retirement), so they were largely unaffected by that granddaddy bear market, as long as the retirement plan sponsor had the wherewithal to continue retirees' payments. Inflation was more of a problem for retirees, as most plans had no inflation-indexing provisions. Also, with the baby-boomers forming families and looking for a hedge against inflation, residential real estate performed very well during the decade and bailed out many a retiree.
But, an extreme example? No. The 1970s malaise did occur during my lifetime and, as far as I'm concerned, something like it could very well happen again. Look, be grateful I'm not old enough to have lived through the 1929 Crash and Great Depression, or I might have vivid memories of how that scenario could happen again.
What would the couple's portfolio look like if a deflationary "accident" (so-called, my opinion is that excessive use of credit always leads eventually to a crash and asset/debt deflation) occurred today, in this age of rubber currency? We might well expect a scenario similar to what has happened to Japan in the 1990s - "price destruction" and stock values at one-third their peak, while investment-grade bonds do very well. For purposes of calculating the "Japanese scenario" as applied to Jiminez and Maxwell, I'll assume a negative 6% compound annual return on stocks for a decade (rather than most occurring in the first four years, with stocks treading water thereafter, as actually happened in Japan) and a 12% compound annual capital gain on bonds.
In this case, the combined stock/bond portfolios would reach their lowest point in the fifth year, around $261,000, in line with the planner's projections. By the tenth year they would have increased to about $287,000 - but the stock portion would have vanished. The originally-40% bond portion is what would have saved our couple, who would no doubt by then be firm believers in the value of bonds.
So it looks like the planner's advice is good for a deflationary scenario, not so good for 1970s-style "stagflation". And ahead of us lies.... ??
But before we assume that a 60-40 mix of stocks and bonds (standard financial planning advice, by the way) will take care of most disaster scenarios, look again at what the planner recommended.... not investment-grade bonds, but "high-yield" (that is, junk) bond funds (except for a tax-free bond fund for holdings which are not tax-deferred). And he suggests the debt-free couple take on debt to own that second home..... presumably treating it as a consumable item which will be disposed of in ten years.
Even more revealing is what the couple were doing before Johnson recommended a more normal investment profile.... they were two years from retirement and, on their own, they had 100% of their retirement kitty in stocks. You can see the extent to which the public has bought the myth that stocks only go up over the long term, no matter the price at which they're bought.
OK, Nick, you say, what would you suggest if you were advising this couple? Well, I'd say the first step is to identify the flaw in the planner's strategy (and in the couple's thinking before hearing the planner's advice). As I see it, the flaw is in assuming a 6% portfolio return when 60% of the portfolio is valued at bubble prices. History tells us that when stocks have torn loose from their moorings of value, we can expect a negative 3% to 6% return for a decade, as the 1930s, 1970s, and Japan in the 1990s have demonstrated. And bonds won't always bail you out, as we saw in the 1970s.
My approach would be to price the couple's portfolio at "historical" value, then assume that conservative 6%-per-year return. That would make the couple's current retirement kitty historically worth about $112,000 (marking the stock portion down from 94 to 25 per the index values given in last month's issue, the bond portion is fairly valued historically and needs no adjustment); at retirement, about $211,000, producing $12,660 per year. That will certainly sustain the couple comfortably if they forgo the expense (and real-estate risk) of the second home; maybe they can rent for shorter periods instead.
Also, I would question continuing to pour 60% ($48K) of my next two years' squirrelling-away into assets (stocks) intrinsically worth about $13K. Doesn't look like such a great deal to me.... might be better to have some cash reserves in the bank or, maybe better, in tax-deferred U.S. savings bonds, either the normal or the inflation-indexed variety.... no taxes need to be paid until they're cashed in for that unexpected emergency. And I would stay away from the junk bond funds right now.
But then, what do I know? My inability to at first expect that
Alan Greenspan would permit and encourage a bubble, then my
inability to time its demise, obviously would make my advice
worthless.... for, as we all know, stocks always go up over the
long term, so you can safely buy them at any time and price.
Right?
Ultimately.... stocks are nothing more than the streams of income they represent. As the flow of cash increases, so should the price we are willing to pay to own it. But there is no rational explanation for the willingness of investors to pay more for the same stream of income one year than the next - or more for a stream of income from one source than from the next. A safe bond yielding $10 a year should be worth about as much as another safe bond yielding $10 a year. And both should be worth about as much as a safe stock with the same yield. Stocks may sell for less money - when investors fear that the stream of income is less sure in the future...or more, if they think the flow of cash will increase. But all things being equal, the capital values of equal streams of income should be equal. Thus, you'd expect that the yield you might get from a Triple-A bond would be about the same as the yield you would get from the S&P 500. Before 1950, it was common for investors to want a bit more yield from stocks - to offset the risk of owning them. Now it is common for investors to want a bit more yield from bonds - to offset the risk of depreciating currency. In 1929 - when stocks were almost as big a sensation as they are today - prices of stocks rose to the point where dividend yields fell well below bond yields. Bonds yielded about 1.7 times what you could get from stocks. Today, according to Ned Davis Research, the ratio has soared to its highest level in history - more than 6...that is, you can get 6 times the yield of the S&P 500 in Triple-A bonds. Stocks have been cut off from their stream-of-income roots. They've become popular sensations whose prices depend completely on investors' willingness to buy them. Like celebrities who are only famous for being famous, these sensational stocks are only valuable as long as people think they are valuable. - Bill Bonner
Unfortunately, current thinking looks askance at only rising consumer prices, while trumpeting the virtues of the rising asset prices and imports.... consumer price inflation is the least dangerous form of credit inflation as it is easily rectified by strong monetary tightening from the central bank. Moreover, it is most critical to recognize that asset inflation is powerfully seductive.... and of much greater danger to the soundness of an economy and stability of its financial system. With asset inflation having a broad and determined constituency including the general public, bankers, Wall Street, corporate America and politicians, the resulting damage is allowed to unfold over long periods, while hardly even garnering the attention of central bankers. As such, this week's [early September] report that spending expanded at double the rate of income growth, while the savings rate went negative, is clear evidence of asset inflation fostering a severely dysfunctional economic and financial environment. Yet, current bullish "New Paradigm" thinking has turned sound analysis on its head. Instead of understanding that a negative savings rate is indicative of a severely distorted bubble economy, the bullish consensus sees the continued borrowing and spending binge as evidence of a sound and stable prosperity. - Doug Noland
Today, the total GDP of the U.S. equals about $10 trillion. But debt has risen to $26 trillion. The ratio, 2.6, is almost twice the historical norm...and means that there is about $12 trillion more in debt in the system than there would be if the debt ratio had remained constant. Where did that $12 trillion go? Of course, a lot of it went to buy the running shoes and videos. Some went to buy new cars...and new houses. But we know that the GDP has increased only modestly. Consumer spending would show up in the GDP figures. What doesn't show in the GDP figures is investment spending. And we know the prices of certain assets - conspicuously, dollar-based equities - have skyrocketed. Could there be, say, trillions of dollars worth of debt capital speculating on in U.S. assets? In very rough numbers, the S&P currently has a P/E of 29. Its average is around 12. Getting down from 29 to 12 would mean a loss of about 60%. The current capital value of the NYSE and Nasdaq combined is about $16.3 trillion. A 60% loss would be nearly $10 Trillion - not too far from the $12 trillion of extra debt in the system. In other words, a return to normal debt levels would parallel a return to normal stock prices. - Bill Bonner
In a free-market economy there are relationships between savings, investment, the cost of capital (interest rates and stock prices), the return on capital (interest rates, stock prices, the return on active business investment), productivity, economic growth and other factors. It is those relationships that have produced the general level of stock prices we have seen in the past. Those relationships can and often are temporarily short-circuited by an overly easy or tight monetary policy in combination with the two emotions that rule all of investment - fear and greed. The 1990s was a period of almost constant easy money, bailouts of reckless vested financial interests, hype, and general wealth transfer from the public to Wall Street, options-holding executives, and other connected parties. There are surely downsides and heightened risks to all this recklessness and easy credit. It remains to be seen what the ultimate impact will be on the economy and business in general when we get the almost inevitable sharp correction. History suggests that it won't be pleasant for either Wall Street or Main Street. Most periods like this have ended very badly and unexpectedly. For that reason I believe that most investors are still better off holding higher than average cash balances despite the apparent values. A tsunami washes everything out to sea. - Wayne Crimi
Imagine that there were no stock market and no collective thinking about stock investing. Who would pay $450 billion to buy Cisco? The average P/E for the Nasdaq back in March was 260. Imagine that there were no Nasdaq...no CNBC...no analysts...no Wall Street. Who - left to his own analysis and own brain power - would pay 260 times earning for ANY company? Why would volume on the Nasdaq go up 10 times over the last decade? And why would average P/Es go up 7 or 8 times? Why would any compos mentis person think a dollar of earnings in the year 2000 is worth 8 times as much as a dollar of earnings in 1990? ....victory in investing cannot be had by collective action. When everyone rushes to buy a particular investment - it is soon overpriced, like today's Big Techs. Collective action turns into a disaster. - Bill Bonner
You'd never know there was a crisis on Wall Street. Like the rest of America, the investment community thinks the high price of energy is just temporary. Prices are not going to come down. In fact, they are going to continue to soar. - Stephen Leeb [editor, Personal Finance]
As we dined on exquisite roasted lamb and crispy rice with yogurt, I learned from my well-connected hosts that Saddam has vowed to get big-time revenge on the disco-dancing Kuwaitis. He's just waiting for the right moment. A very nasty plan is already in the works, it seems.... [you] may recall that an enraged Saddam invaded Kuwait after its rude Crown Prince told the Iraqi leader to `kiss my camel's hump,' or something similar. - Eric Margolis
Paying employee wages mostly in non-qualified stock options: This removes the cost of labor from the financial statements and overstates earnings because these wages for options exercised, unlike cash wages, are not included as a charge to earnings.... these non-qualified options are not meant to reward employees but are rather a scheme to generate cash through non-payment of federal income tax. Incentive stock options.... are the genuine way to reward employees because they are taxed at the capital gains rate when the stock is sold yet.... do not provide the company with a tax deduction. Cisco Systems and Microsoft led the conversion from incentive to non-qualified options because they wanted to generate cash from the tax deductions, thereby selling out their very own employees, and offloading their entire corporate tax burden. Employees at times pay a combined rate of 60 percent when they exercise non-qualified options, even if they do not sell the stock. Neither Microsoft nor Cisco Systems now pay any federal income tax. - Bill Parish
Dems typically raise taxes to cover social spending, then paper over it with monetary promiscuity. The wealthy capitalize on the easy money via asset leveraging, whether it's real estate, stocks, or whatever. The middle and lower class don't have the same access to capital and leverage, so their incomes sag. - Bill King
....government intervention seems to be very popular for now. David Ignatius wrote in the Washington Post: "Whom would you trust most in a financial crisis? The Gore team, which shares the Clinton legacy of prudent, market-friendly management of economic policy? Or the Bush team, with its talk of massive tax cuts and "teach 'em a lesson" monetary policy?" This quote was one of the more mind-numbing ones that I have seen in a long time, which is why I held on to it. Manipulation and intervention are now seen as posi-tives. Why not have the government just run the stock market outright? Hmmm...better not say that because that could just be the next step. - Marc Sexton
As you know, the government claims computer prices are coming down - which they really aren't - because today you can buy a more powerful machine at the same price that a weaker one cost last year. That, in the land of bureaucracy, is a price decrease. And even if you don't happen to be buying a computer, it's supposed to bring down the effect of inflation on you. And you might also be surprised to learn that other products - like video cameras - will also be treated to these same kind of magical price reductions in future government numbers. So, technically, if you stop eating, drinking, driving and became a nudist you'd really make a dollar stretch, if you filled you home with electronic equipment. - John Crudele
Is there really that much of a divergence between backward,
sclerotic Europe and its dynamic New World counterpart? In our
view, the answer is no. A more plausible alternative explanation
for the divergences in economic performance relates largely to
the manner in which productivity statistics are calculated in
Euroland and the United States. We have already indicated our
belief that there exists a strong body of respectable economic
research (much of it done by consultants to the Fed) which argues
that the productivity miracle is a myth created by changes in
statistical procedures and transitory events. In particular, the
introduction of the hedonic deflator for computers in the US has
significantly exaggerated American productivity gains since
1995. The European economies have thus far not introduced this
hedonic style indexing; therefore, the comparisons between the
relative rates of productivity and GDP growth are invariably
skewed in favour of America.... But this is not simply a case of
the market acting on the basis of imperfect information. For in
explicitly conferring legitimacy on highly contentious data, the
Federal Reserve is playing a role in reinforcing this belief, as
well as unduly accommodating the potentially inflationary impact
of higher energy prices. The latter element was a mistake made by
the Burns and Miller Federal Reserves in the 1970s in the aftermath of the two OPEC-induced oil shocks. - Marshall Auerback
"Besides proving they can lead, today's Presidential candidates must prove they can laugh and tell jokes," says political scientist George Harleigh. "It's all part of a plan to show that these guys are human and just one of the boys." Let's see. Bill Clinton played sax on Arsenio Hall eight years ago and proved he was one of the boys. Later, he would prove even more that he was one of the boys by sticking the First Penis in a White House intern's mouth. Bush and Gore are following the example of two questionable role models: Bill Clinton, an admitted adulterer and perjurer who belongs in jail; and Ross Perot, a known fruitcake who belongs in a padded room. Some advice to Alvie and Dubya: Stop pandering to your handlers. Bag the talk shows and stick to the issues (if indeed there are any issues defining this Presidential circus). I don't give a damn how long Al Gore can kiss his wife or if George W. Bush likes peanut butter and jelly sandwiches on white bread. But I would like to know what, if anything, either one of these clowns is going to do to really lead this country out of the moral mess that Bill Clinton has given us. - Doug Thompson
Well, there he goes again -- ruling by decree. President Clinton is going to tap the Strategic Petroleum Reserve. You say he can't do that? You say the president's authority to tap the SPR expired on March 31, 2000? So what? Ever since Congress failed to remove him from office, this rogue has been ruling by decree. Even if the president's authority to tap the SPR hadn't expired, he couldn't -- legally -- use it to drive down the price of heating oil in the Northeast. The SPR can only be tapped in the event -- or likelihood -- of a "severe supply interruption." No one has suggested that there is going to be a severe supply interruption any time soon. But maybe the Clintons and Al Gore know something we don't know. - Gordon Prather
You would have been indicted, and I would have been indicted for the financial fraud that Hillary Clinton got away with.... an investigation by the Federal Deposit Insurance Corp., dated Sept. 20, 1996.... has to do with the purchase of Industrial Development Corp. by Madison Guaranty S&L through a company owned by Seth Ward, the father of Webster Hubbell. Mrs. Clinton was the attorney on the deal but her law firm records were misplaced for years. Report, page ii: "... entries in the billing materials and other evidence suggests that former Rose Law Firm partners Hillary Rodham Clinton and Webster L. Hubbell performed work that appears to have facilitated the payment of substantial commissions to Ward, who acted as a straw buyer for Madison Financial in the IDC transaction. The method of payment of the commissions evaded regulations designed to protect the safety and soundness of the institution, and violated the integrity of its books and records." In other words, the government found that the Arkansas gang committed fraud - a pretty sloppy fraud. The FDIC goes on for pages and pages about how Mrs. Clinton was instrumental in this, with footnotes on exact phone calls and memos. The evidence may not have proved criminality "beyond a reasonable doubt," but Hillary is a very lucky lady. - John Crudele
The key phrase in Independent Counsel Robert Ray's conclusion about the myriad accusations of wrongdoing by Bill and Hillary Clinton -- from their years in Arkansas to their years in Washington -- is that "the evidence was insufficient to prove to a jury that they had committed any crime." This is far from exoneration. This is a tribute (depending on the meaning one wishes to give the word) to perhaps the most successful, widespread cover up in our history. It worked because -- unlike the Watergate cover-up, which fell apart once the conspirators got cold feet and started copping pleas -- not a single Clinton co-conspirator ratted. Unbelievably, Susan McDougal and Webster Hubbell were willing to go to jail for the Clintons, though they received little in return for their misplaced loyalty.... Clinton made sure he hired people who shared his amorality or destroyed the few who threatened to expose him as a crook and a sexual harasser. - Cal Thomas
I will not sit by while those in power come down like a ton of
bricks on one woman fighting alone. I will go to court to seek
redress.... My children have been threatened, my government files
have been released and my life's innermost secrets have been
dragged through the press. I am only one private citizen and he
is the president, but that is why we have courts - to protect
people like me from abuses from people like him. - Kathleen
Willey Schwicker
Looking further ahead, it's beginning to look like the bear market will be deflationary, as in the 1930s and in Japan in the 1990s, rather than inflationary as in the 1970s. Even though the price of oil has soared (and will make this an expensive winter to heat your home, if you live in a cold climate), leading inflation indicators are pointing to a peaking of consumer prices in the spring of 2001, with slower increases, or maybe even declining prices, thereafter. Leading economic indicators also point to the economy being in recession by mid-2001, which the stock market should be seriously discounting by early 2001, if not earlier.
Of course, the risk is that the asset deflation, which will go hand-in-hand with the stock bear, might get out of control and lead to a 1930s-style collapse. In an age of rubber currencies, that's not as sure a thing as it was in the 1930s (paper money can hide a multitude of financial sins.... for awhile), but I feel you should allow for that possibility in your financial plans, even if you don't expect it.
A deflationary bear means we should have a really good buying opportunity in bonds, and I expect that opportunity is not very far away, probably sometime between the election and next spring. With rising prices on everybody's minds, inflation-indexed bonds (currently around half of my retirement portfolio) are not a bad place to be, as such bonds typically move higher as investors raise higher their expectations of future prices. When the deflation begins to take hold (and when the Fed eases to try to slow and/or reverse the economic decline), conventional investment grade bonds will perform much better.
Stocks? Well, if they crash soon, there might be a playable
bounce; otherwise, I think you will have a few years' wait until
they reach favorably-priced levels.
Original cost (adjusted): $ 4,998.21
Present value: $ 3,893.74
Increase: $-1,104.47 [-22.10%]
The performance of this portfolio and its predecessors ("Hedger's Delight", "Present and Future Income", "Crapshooter's Folly") from January 1987 to the present is -11.76%, for a compound annual rate of return of -0.88%. COMMENT on "Phoenix": There is no change from the last issue. Under consideration for purchase with the little cash remaining is Franco-Nevada Mining Corp., a Canadian gold-mining stock.
B. "Professors' Investment Group (PIG)" - investment club portfolio.
SUMMARY - "PIG":
Original cost: $ 9,024.00
Present value: $16,009.17
Increase: $ 6,985.17 [+77.41%]
COMMENT on "PIG": At the September meeting, which I missed, the
PIGs decided to sell the remaining shares of Alexion. (Let the
money managers have it! We made our big bucks.) More or less
inadvertently, the PIGs portfolio is well-positioned for the bear
market.... most of the funds being in cash, bear funds, or gold
or oil. This is not my doing.... really.... unlike me, the majority of PIGs remain bullish, but are spooked by the tech selloff.
The PIGs' Web page is at
http://www.assumption.edu/HTML/Faculty/Kantar/WPigs.html
C. Roth rollover IRA - real portfolio, includes commissions:
SUMMARY - IRA:
Original (1983-86) cost: $ 8,326.19
Present value: $10,130.44
Increase: $ 1,804.25 [+21.67%]
The performance of this portfolio (including its predecessors)
from January 1, 1987 to the present is -7.63%, for a compound
annual rate of return of -0.56%.
D. CREF Pension plan; I switch between indexed stock/bond/money funds:
Date Sold Bought
13Mar1992 stock @ 56.65 MM @ 13.41
29Apr1992 MM @ 13.48 bond @ 31.19
19Jun1992 bond @ 32.14 MM @ 13.55
29Jun1992 MM @ 13.57 stock @ 56.74
24Jul1992 stock @ 56.76 MM @ 13.61
29Oct1992 MM @ 13.72 stock @ 58.61
23Dec1992 stock @ 61.48 MM @ 13.78
16Jan1995 MM @ 14.83 equity-index @ 26.44
20Jan1995 eq-index @ 26.19 MM @ 14.84
30Oct1997 MM@ 17.24 bond@47.56 (27.17%)
30Oct1997 MM@ 17.24 i-i bond@26.12 (27.17%)
11Feb1998 bond@ 48.84 MM@17.52 (27.17%)
11Feb1998 I-I bond@ 26.23 MM@17.52(27.17%)
16Jun1998 MM@ 17.84 TIAA Traditional (45.87%)
23Sep1999 MM@18.99 I-I bond@27.56 (53.32%)
17-18May2000 rate adjustment to 7.25% in SRA
12-13Jul2000 rate adjustment to 7.5% in SRA
Values, 29Sep2000: stock, 204.54; MM, 20.16; bond, 55.46; inflation-indexed bond, 30.04; TIAA current yield in SRA, 7.5%
Gain, 1988: 18.91%; 1989: 14.48%; 1990: 8.28%; 1991: 27.93%; 1992: 10.20%; 1993: 3.08%; 1994: 4.07%; 1995: 4.80%; 1996: 5.28%; 1997: 5.38%; 1998: 5.72%; 1999: 5.12%
Gain, January 1 through June 30, 2000: 4.990% (10.04%
annual rate of return)
Total gain since January 1, 1988 (12.5 years): 202.42%
Compound annual rate of return: 9.26%
(My long-term target: in excess of 15%)
Gain shown excludes the impact of additional monthly cash contributions.
Buying CREF stock on January 1, 1988 and holding it gained
558.86%, for a compound annual rate of return of 16.28%.
COMMENT on NYSE "Timer's Trend":
We're now on a SELL signal given
September 18, with essentially no profit made if you would have
decided to "play" the last buy/sell pair.
____________________________ NYSE TIMER'S TREND _______________________________
Mon 20 Mar 00 . & . |10680.24 |-. *
Tue 21 Mar 00 . I #. |10907.34 |+. *
Wed 22 Mar 00 . | #. |10866.70 |+. *
Thu 23 Mar 00 . | .# |11119.86 |+. *
Fri 24 Mar 00 . | #. |11112.72 | + *
Mon 27 Mar 00 . |# . |11025.85 | + *
Tue 28 Mar 00 . #I . |10936.11 |+. *
Wed 29 Mar 00 . # . |11018.72 |+. *
Thu 30 Mar 00 . |# . |10980.25 + . *
Fri 31 Mar 00 . | #. |10921.92 + . *
Mon 3 Apr 00 . | #. |11221.93 +~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Tue 4 Apr 00 .# I . |11164.84 + . *
Wed 5 Apr 00 .# | . |11033.92 + . *
Thu 6 Apr 00 . | # |11114.27 + . *
Fri 7 Apr 00 . |# . |11111.48 + . *
Mon 10 Apr 00 . |# . |11186.56 + . *
Tue 11 Apr 00 . # . |11287.08 + . *
Wed 12 Apr 00 . |# . |11125.13 |+. *
Thu 13 Apr 00 # | . |10923.55 + . *
Fri 14 Apr 00 # . I . |10305.77 |~-~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 17 Apr 00 # I . |10582.51 | .- *
Tue 18 Apr 00 . & . |10767.42 | .- *
Wed 19 Apr 00 . #I . |10674.96 | .- *
Thu 20 Apr 00 . & . |10844.05 | .- *
Mon 24 Apr 00 .# I . |10906.10 |~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 25 Apr 00 . | #. |11124.82 |-. *
Wed 26 Apr 00 . # . |10945.50 |-. *
Thu 27 Apr 00 . #I . |10888.10 |-. *
Fri 28 Apr 00 . # . |10733.91 |-. *
Mon 1 May 00 . | .# |10811.78 |+. *
Tue 2 May 00 . #| . |10731.12 + . *
Wed 3 May 00 # . I . |10480.13 |-.~~*~~~~~~~~~~~~~~~~~~~~~~~
Thu 4 May 00 . #I . |10412.49 |-. *
Fri 5 May 00 . I #. |10577.86 |-. *
Mon 8 May 00 . I# . |10603.63 |-. *
Tue 9 May 00 .# I . |10536.75 |-. *
Wed 10 May 00 #. I . |10367.78 |-. *
Thu 11 May 00 . I #. |10545.97 |-. *
Fri 12 May 00 . I #. |10609.37 |-. *
Mon 15 May 00 . I .# |10807.78 + . *
Tue 16 May 00 . |# . |10934.57 |+. *
Wed 17 May 00 # I . |10769.74 |+. *
Thu 18 May 00 . #I . |10777.28 + . *
Fri 19 May 00 # . I . |10626.85 |-. *
Mon 22 May 00 #. I . |10542.55 | .- *
Tue 23 May 00 # I . |10422.27 | . - *
Wed 24 May 00 .# I . |10535.35 | . - *
Thu 25 May 00 # I . |10323.92 | . - *
Fri 26 May 00 .# I . |10299.24 | .- *
Tue 30 May 00 . I #. |10527.13 | - *
Wed 31 May 00 . I #. |10522.33 |-. *
Thu 1 Jun 00 . | .# |10652.20 +. *
Fri 2 Jun 00 . | . # }|10794.76 |+ *
Mon 5 Jun 00 . |# . |10815.30 |+ *
Tue 6 Jun 00 . |# . |10735.57 |+ *
Wed 7 Jun 00 . | #. |10812.86 |+ *
Thu 8 Jun 00 . #| . |10668.72 |+. *
Fri 9 Jun 00 . |# . |10614.06 +. *
Mon 12 Jun 00 . # . |10564.21 +. *
Tue 13 Jun 00 . | #. |10621.84 +. *
Wed 14 Jun 00 . | # |10687.95 |+. *
Thu 15 Jun 00 . # . |10714.82 |+. *
Fri 16 Jun 00 . #| . |10449.30 +. *
Mon 19 Jun 00 . |# . |10557.84 |+. *
Tue 20 Jun 00 . #| . |10435.16 +. *
Wed 21 Jun 00 . # . |10497.74 |-. *
Thu 22 Jun 00 . #I . {|10376.12 |-. *
Fri 23 Jun 00 # I . |10401.75 |-. *
Mon 26 Jun 00 . & . |10452.99 |-. *
Tue 27 Jun 00 . I# . |10524.46 |-. *
Wed 28 Jun 00 . |# . }|10527.29 |-. *
Thu 29 Jun 00 . |# . |10398.04 +. *
Fri 30 Jun 00 . #| . |10447.89 +. *
Mon 3 Jul 00 . | . # |10560.67 |+. *
Wed 5 Jul 00 . | #. |10483.60 |+. *
Thu 6 Jul 00 . | #. |10481.47 |+. *
Fri 7 Jul 00 . | .# |10635.98 | + *
Mon 10 Jul 00 . | .# |10646.58 | .+ *
Tue 11 Jul 00 . | # |10727.19 | .+ *
Wed 12 Jul 00 . | # |10783.41 | .+ *
Thu 13 Jul 00 . | # |10788.71 | .+ *
Fri 14 Jul 00 . | # |10812.75 | .+ *
Mon 17 Jul 00 . | #. |10804.27 | + *
Tue 18 Jul 00 . #| . |10739.92 | + *
Wed 19 Jul 00 . # . |10696.08 |+. *
Thu 20 Jul 00 . |# . |10843.87 |+. *
Fri 21 Jul 00 . # . |10733.56 + . *
Mon 24 Jul 00 . & . |10685.12 + . *
Tue 25 Jul 00 . I# . |10699.97 + . *
Wed 26 Jul 00 . #I . |10516.48 + . *
Thu 27 Jul 00 . I# . |10586.13 + . *
Fri 28 Jul 00 # I . {|10511.17 |-. *
Mon 31 Jul 00 . I #. |10521.98 + . *
Tue 1 Aug 00 . I .# ]|10606.95 + . *
Wed 2 Aug 00 . I # |10687.53 |+. *
Thu 3 Aug 00 . & . |10706.58 |+. *
Fri 4 Aug 00 . | # }|10767.75 | + *
Mon 7 Aug 00 . | . # |10867.01 | .+ *
Tue 8 Aug 00 . | .# |10976.89 | .+ *
Wed 9 Aug 00 . | #. |10905.83 | + *
Thu 10 Aug 00 . | # |10908.76 | .+ *
Fri 11 Aug 00 . | .# |11027.80 | .+ *
Mon 14 Aug 00 . | . # |11176.14 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 15 Aug 00 . | #. |11067.00 | .+ *
Wed 16 Aug 00 . | #. |11008.39 | .+ *
Thu 17 Aug 00 . | . # |11055.64 | .+ *
Fri 18 Aug 00 . #| . |11046.48 | + *
Mon 21 Aug 00 . | #. |11079.81 | + *
Tue 22 Aug 00 . | #. |11139.15 | + *
Wed 23 Aug 00 . |# . |11144.65 |+. *
Thu 24 Aug 00 . | #. |11182.74 |+. *
Fri 25 Aug 00 . | #. |11192.63 |+. *
Mon 28 Aug 00 . | .# |11252.84 | + *
Tue 29 Aug 00 . |# . |11215.10 | + *
Wed 30 Aug 00 . | #. |11103.01 | + *
Thu 31 Aug 00 . | .# |11215.10 | + *
Fri 1 Sep 00 . | .# |11238.78 | .+ *
Tue 5 Sep 00 . | # |11260.61 | + *
Wed 6 Sep 00 . | .# |11310.64 | .+ *
Thu 7 Sep 00 . | # |11259.87 | .+ *
Fri 8 Sep 00 . | #. |11220.65 | .+ *
Mon 11 Sep 00 . | .# |11195.49 | .+ *
Tue 12 Sep 00 . | #. |11233.23 | .+ *
Wed 13 Sep 00 . | #. |11182.18 | + *
Thu 14 Sep 00 . | #. |11087.47 | + *
Fri 15 Sep 00 . & . |10927.00 | + *
Mon 18 Sep 00 # I . {|10808.52 + . *
Tue 19 Sep 00 .# I . |10789.29 |-. *
Wed 20 Sep 00 # . I . |10687.92 |~-*~~~~~~~~~~~~~~~~~~~~~~~~~
Thu 21 Sep 00 # I . |10765.52 | .- *
Fri 22 Sep 00 .# I . |10847.37 | .- *
Mon 25 Sep 00 . #I . |10808.15 | .- *
Tue 26 Sep 00 .# I . |10631.32 | .- *
Wed 27 Sep 00 . & . |10628.36 | - *
Thu 28 Sep 00 . I .# |10824.06 |-. *
Fri 29 Sep 00 . I# . |10650.92 + . *
========================================================================
Comment on NASDAQ "Timer's Trend": The trend continues down since I began tracking this
on February 28, 2000. (Bear market, anyone?)
____________________________ NASDAQ TIMER'S TREND ____________________________ Mon 3 Apr 00 # . I . | 4223.68 |~*~~-~~~~~~~~~~~~~~~~~~~~~~~ Tue 4 Apr 00 # . I . | 4148.89 @| . - * Wed 5 Apr 00 #. I . | 4169.22 @| . - * Thu 6 Apr 00 . I# . | 4267.56 | . - * Fri 7 Apr 00 . I #. | 4446.45 | .- * Tue 11 Apr 00 # . I . | 4055.90 | .- * Wed 12 Apr 00 # . I . | 3769.63 |~.-~~~~~~~~~~~~~~~~~~~~~~~~~ Thu 13 Apr 00 # . I . | 3676.78 | . - * Fri 14 Apr 00 # . I . | 3321.29 @|~.~~~-~~~~~~~~~~~~~~~~~~~~~~ Mon 17 Apr 00 #. I . | 3539.16 @| . - * Tue 18 Apr 00 . & . | 3793.57 @|~.~~~-~~~~~~~~~~~~~~~~~~~~~~~~~~ Wed 19 Apr 00 #. I . | 3706.41 | . - * Thu 20 Apr 00 # . I . | 3643.88 | . - * Mon 24 Apr 00 # . I . | 3482.48 |~*~-~~~~~~~~~~~~~~~~~~~~~~~~ Tue 25 Apr 00 . I #. | 3711.23 | .- * Wed 26 Apr 00 # I . | 3630.09 | . - * Thu 27 Apr 00 . #I . | 3774.03 | .- * Fri 28 Apr 00 . I# . | 3860.66 |~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Mon 1 May 00 . I #. | 3958.08 + . * Tue 2 May 00 #. I . | 3785.45 |-. * Wed 3 May 00 # . I . | 3707.31 | - * Thu 4 May 00 .# I . | 3720.24 | - * Fri 5 May 00 . & . | 3816.82 | .- * Mon 8 May 00 #. I . | 3669.38 | . - * Tue 9 May 00 # . I . | 3585.01 |~.~*~~~~~~~~~~~~~~~~~~~~~~~~ Wed 10 May 00 # . I . | 3384.73 |~.~*~~~~~~~~~~~~~~~~~~~~~~~~ Thu 11 May 00 . #I . | 3499.58 | . - * Fri 12 May 00 . #I . | 3529.06 | . - * Mon 15 May 00 . & . | 3607.65 | .- * Tue 16 May 00 . I # | 3717.57 | - * Wed 17 May 00 # . I . | 3644.96 |-. * Thu 18 May 00 #. I . | 3538.71 | - * Fri 19 May 00 # . I . | 3390.40 | .- * Mon 22 May 00 # . I . | 3364.21 | . - * Tue 23 May 00 # . I . | 3164.55 @|~.*~~~-~~~~~~~~~~~~~~~~~~~~~ Wed 24 May 00 #. I . | 3270.61 @| . - * Thu 25 May 00 # . I . | 3205.35 @| . - * Fri 26 May 00 # . I . | 3205.11 @| . - * Tue 30 May 00 . I# . | 3459.48 | . - * Wed 31 May 00 # I . | 3400.91 | . - * Thu 1 Jun 00 . I # | 3582.50 |~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Fri 2 Jun 00 . I . # | 3813.38 +. * Mon 5 Jun 00 . I# . | 3821.76 |+. * Tue 6 Jun 00 . & . | 3756.37 |+. * Wed 7 Jun 00 . |# . | 3839.26 |+ * Thu 8 Jun 00 . & . | 3825.56 |+. * Fri 9 Jun 00 . | # | 3874.84 |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Mon 12 Jun 00 .# I . | 3767.91 +. * Tue 13 Jun 00 . & . | 3851.06 +. * Wed 14 Jun 00 . #I . | 3797.41 +. * Thu 15 Jun 00 . #I . | 3845.64 |-. * Fri 16 Jun 00 . & . | 3860.56 |-. * Mon 19 Jun 00 . I# . | 3989.83 |-. * Tue 20 Jun 00 . I# . | 4013.36 +. * Wed 21 Jun 00 . I# . | 4064.01 +. * Thu 22 Jun 00 . & . | 3936.84 +. * Fri 23 Jun 00 # . I . | 3845.34 |-. * Mon 26 Jun 00 . & . | 3912.12 |-. * Tue 27 Jun 00 .# I . | 3858.96 |- * Wed 28 Jun 00 . I #. | 3940.34 |-. * Thu 29 Jun 00 # I . | 3877.23 |- * Fri 30 Jun 00 . I #. | 3966.11 |-. * Mon 3 Jul 00 . I #. | 3991.93 + . * Wed 5 Jul 00 .# I . | 3863.10 + . * Thu 6 Jul 00 . I #. | 3960.57 + . * Fri 7 Jul 00 . I #. | 4023.20 |+. * Mon 10 Jul 00 . & . | 3980.29 + . * Tue 11 Jul 00 . & . | 3956.42 + . * Wed 12 Jul 00 . I . # | 4099.59 |+. * Thu 13 Jul 00 . I .# | 4174.86 |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Fri 14 Jul 00 . | . # | 4246.18 | + * Mon 17 Jul 00 . | # | 4274.67 | .+ * Tue 18 Jul 00 . #I . | 4177.17 | .+ * Wed 19 Jul 00 # I . | 4055.63 |+. * Thu 20 Jul 00 . I # | 4184.56 |+. * Fri 21 Jul 00 .# I . | 4094.45 + . * Mon 24 Jul 00 #. I . | 3981.57 | - * Tue 25 Jul 00 . #I . | 4029.57 | - * Wed 26 Jul 00 #. I . | 3987.72 | - * Thu 27 Jul 00 # . I . | 3842.23 |*.~-~~~~~~~~~~~~~~~~~~~~~~~~ Fri 28 Jul 00 # . I . | 3663.00 |~.~~*~~~~~~~~~~~~~~~~~~~~~~~ Mon 31 Jul 00 . #I . | 3766.99 | . - * Tue 1 Aug 00 #. I . | 3685.52 | . - *> Wed 2 Aug 00 # I . | 3658.46 | . - * Thu 3 Aug 00 # I . | 3759.88 | . - * Fri 4 Aug 00 . & . | 3787.36 | .- * Mon 7 Aug 00 . I #. | 3862.99 | - * Tue 8 Aug 00 . #I . | 3848.55 |-. * Wed 9 Aug 00 . & . | 3853.50 |-. * Thu 10 Aug 00 #. I . | 3759.99 |-. * Fri 11 Aug 00 .# I . | 3789.47 |-. * Mon 14 Aug 00 . & . | 3849.69 | - * Tue 15 Aug 00 . #I . | 3851.66 | - * Wed 16 Aug 00 . #I . | 3861.20 | - * Thu 17 Aug 00 . I# . | 3940.87 |-. * Fri 18 Aug 00 . I #. | 3930.34 + . * Mon 21 Aug 00 . I# . | 3953.15 + . * Tue 22 Aug 00 . I# . | 3958.21 + . * Wed 23 Aug 00 . I# . | 4011.01 |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~~* Thu 24 Aug 00 . I# . | 4053.28 |+. * Fri 25 Aug 00 . I# . | 4042.68 |+. * Mon 28 Aug 00 . I .# | 4070.59 |+. * Tue 29 Aug 00 . I #. | 4082.17 |+. * Wed 30 Aug 00 . I # | 4103.81 | + * Thu 31 Aug 00 . | . # | 4206.35 | .+ * Fri 1 Sep 00 . | # | 4234.33 | .+ * Fri 1 Sep 00 . | # | 4234.33 | .+ * Tue 5 Sep 00 . |# . | 4143.18 | + * Wed 6 Sep 00 . #I . | 4013.34 | + * Thu 7 Sep 00 . | .# | 4098.35 | + * Fri 8 Sep 00 . #I . | 3978.41 |+. * Mon 11 Sep 00 .# I . | 3896.35 + . * Tue 12 Sep 00 . #I . | 3849.51 |-. * Wed 13 Sep 00 . I# . | 3893.89 + . * Thu 14 Sep 00 . I # | 3913.86 + . * Fri 15 Sep 00 # I . | 3835.23 |-. * Mon 18 Sep 00 # . I . | 3726.52 |-.*~~~~~~~~~~~~~~~~~~~~~~~~~ Tue 19 Sep 00 . & . | 3865.64 |-. * Wed 20 Sep 00 .# I . | 3897.44 | - * Thu 21 Sep 00 #. I . | 3828.87 | .- * Fri 22 Sep 00 #. I . | 3803.76 | .- * Mon 25 Sep 00 .# I . | 3741.22 | .- * Tue 26 Sep 00 #. I . | 3689.10 | . - * Wed 27 Sep 00 #. I . | 3656.30 | . - * Thu 28 Sep 00 . I #. | 3778.32 | .- * Fri 29 Sep 00 .# I . | 3672.82 | - * ========================================================================"Timer's Trend" is based on 4% and 10% exponential moving averages of the New York Stock Exchange or NASDAQ advance/decline lines (that is, the ratio of advancing to declining stocks). There are many symbols shown above, but the ones that count are the braces:
NEXT ISSUE - will appear about October 30.
/Nick Chase