Money, get away
Get a good job with more pay, and you're okay
Money, it's a gas
Grab that cash with both hands and make a stash
Why? Why would so many professional investors have so much allocated to cash? Why do you think? Cash doesn't get deployed when you believe the risk is greater than the potential reward. If the rewards are paltry, the risk just isn't worth taking. Emotional return. This business is a constant battle between risk and reward, a very delicate balancing act. While its nice to seek reward, sometimes its just not there. Now is one of those times.
In our Global Tactical Asset Allocation portfolios we are now at 41% cash equivalents. About 25% of my net worth is in GTAA portfolios.
My personal asset allocation looks something like this:
Real Estate 20%
Municipal Bonds 15%
Bonds 15%
Gold 10%
US Equities 5%
Int'l Equities 5%
Commodities 5%
Cash 25%
That's a pretty defensive asset allocation, but when the reward isn't there, why take the risk.
Untwisting the Twist:
So the Bernanke decides to get his groove on with a little portfolio shifting & twisting. This was accomplished by not renewing his commitment to the short-end of the curve, and instead focusing on buying treasuries in the 6 to 30 year range. The goal here is bring down long-term rates to make things like mortgages more affordable. Job accomplished. Yields on treasuries plummet to record lows. The 30 year bond yields 2.8% and the 10 year yields 1.7%. It also means banks will be less profitable since their spreads narrow. (Bank of America trades at lowest level since March of 2009).
Unfortunately the Bernanke also said that the economy sucks (my words), and that the Fed really can't do much about it (again my words). The equity markets throw a two day hissy fit, falling over 5%. Throw in a growth slowdown in China, and a pending Greek default, and you get liquidations in everything that can be sold. Can you smell that whiff of deflation in the air? Hedge funds caught precariously on the wrong side of the inflation/deflation seesaw run to liquidate anything they can. Gold has its worst week in 25 years, down 10%, silver drops 25%, and copper falls to nearly two year lows.
Cash is king, even if its denominated in US dollars.
Wake up Call For Pension Plans:
Jim Leach, head of Ontario's Teachers Pension Plan said, "To expect more than 3.25% or 3.50% growth, you have to be smoking something."
The average pension plan is still using a return assumption of 8%! With 10 year treasuries returning 1.7%, and stocks returning ?? how do you get to 8%?
This failure to embrace reality will lead to significantly higher funding demands paid for by you the tax payer.
What are they smoking?
"Money, it's a crime
Share it fairly, but don't take a slice of my pie"
Mr. Buffett and President Obama are partially right. It is an injustice that Warren pays 17% of his income in taxes, and his secretary pays over 20%. But the remedy is not to increase Warren's tax but instead to lower his secretary's. Before we go any further lets get our facts straight. Warren Buffett is an anomaly, even for rich people. He only pays himself $100,000, and takes the vast amount of his income from capital gains on his billions of Berkshire Hathaway stock. Here are the actual facts from the IRS on who pays what (after deductions & exclusions).
Those families making more than $1 million in annual taxable income (235,000 hard working Americans) paid taxes at a rate of 28.9% on average.
Those other rich folks making between $200,000 and $500,000 paid taxes at a rate of 24.6%.
Those making between $50,000 and $75,000 paid taxes at a rate of 11.6%.
Those making under $35,000 (about 46% of the population) paid no taxes on average.
These are the facts from actual IRS returns. You can dig into it here - Tax Stats at a Glance
Now on to the bigger question, "Who deserves our money?" Us or the Government? You see, America was founded on the principal that individual human rights come first, not the governments rights. Now of course we live in a collective society, and there is a minimum level of public services that we need. We as citizens get to decide what those services are and how much money the government will have to accomplish their task. The government does not "deserve" anything, they get what we as citizens have determined they need to accomplish our goals, not theirs. When the government starts determining how much of our money we "deserve", then we have lost our freedom.
When it comes to tax fairness, the only system that even comes close is a flat tax. Eliminate all deductions, exclusions, and loopholes, and charge everyone the same rate, say 17%. The guy who makes $1 million pays $170,000, and the guy who makes $35,000 pays $5,950. That is simple and fair, and of course it will never happen. The reason it will never happen is that it will take power out of the politicians hands. No longer will they be able to trade tax dollars for votes. If they can't trade someone else's tax dollars for someone else's votes, what platform would they run on?
"Money, so they say
Is the root of all evil today"