Bob Carlson

July 6, 2015

Relocating for Retirement

Filed under: Housing — Bob @ 5:20 pm

There’s a new survey prepared for Merrill Lynch by Age Wave that demolishes traditional myths about retirement. I’ve pointed out for a long time that the stereotype of the American retiree moving to Florida or Arizona described only a minority of American retirees. This study reiterates that finding. It also found that of those who do move in retirement, about half move to a larger home or one of the same size. Only about half downsize in retirement. Read the full survey for more interesting information about how people choose to live in retirement.

A portrait of where pre-retirees want to live in retirement provides a glimpse into how America may be reshaped in the coming years. Most pre-retirees (60%) anticipate staying in the same state or region, while four in ten see retirement as a chance to try living in a new part of the country. To a large degree, where pre-retirees say they want to stay or move to in retirement mirrors where today’s retirees say they are happiest. For instance, roughly four in five pre-retirees living in both the South Atlantic (80%) and Pacific (77%) regions say they want to continue living there in retirement.

Cutting Seniors’ Benefits in Japan

Filed under: Retirement - General — Bob @ 12:20 pm

Japan probably is the oldest developed nation, demographically, and it has fairly generous benefits for its senior citizens. Because of its long depression, the country also has fiscal problems. One proposed solution to the fiscal problems is to reduce benefits for senior citizens. Some people think the ideas won’t make it past the proposal stage, because cutting seniors’ benefits is politically dangerous. Others think it is the country’s best chance to improve its fiscal situation.

“At the beginning of the 2020s, the baby boomers will start to reach late old age and social security costs will rise again,” a separate panel headed by LDP policy chief Tomomi Inada wrote in a report that she handed to Abe on June 16. “If we do nothing, the system will clearly become unsustainable in 10-20 years. We must take this last chance to deal with it.”

This proposal has been reflected in a draft report by the government’s key economic panel, which will guide economic policy over the next five years.

The government is encouraging people to work longer, and with some degree of success. About 40 percent of Japanese aged 65-69 were working in 2014, compared with 34 percent in 2003.

Writing a Letter to Yourself

Filed under: Estate Planning,Retirement - General — Bob @ 8:32 am

Tennis star Pete Sampras recently wrote a letter to his younger self, mostly as a guide to youngsters. Take a look at it, and consider writing something similar for those in your family and perhaps your business.

It’s the people in your life — people like Tim — that will shape you. Appreciate them.

Appreciate your friend John Black. When he gives you the number of that pretty girl named Bridgette you see on the movie screen, thank him, and call her. I know, it’s not like you to put yourself out there like that. It’s bizarre. But do it — call her. And later on, when she becomes your wife, appreciate her. Every day — appreciate her.

Appreciate your sisters, Stella and Marion, and your brother Gus. Listen to them. They have good advice. And know that they will always support you no matter what.

Appreciate your parents. They give you the coaching you need. They always support you. They let you be your own man. And now that you’re ready to go pro, appreciate that they’ve given you as much of a normal childhood as possible. They never have and never will put too much pressure on you. Those are things you can’t see as a 16-year-old — the sacrifices your parents make.

July 2, 2015

Ending the Pursuit of Why

Filed under: Investing — Bob @ 5:20 pm

A common mistake investors make is to try to develop a narrative or story about what’s happening in the markets or why something is going to happen. There are people who do that successfully (though they’re wrong at least a third of the time), but most people can’t do it well. Instead, they fall for stories and narratives that aren’t profitable. In the meantime they fail to respond to what’s actually happening in the markets. Here’s a good post that explains why most investors should stop asking “why?”.

Some of the most brilliant people I’ve met are terrible investors because they’re constantly seeking out ways to explain why things happen the way they do in the markets. Even when you’re right about the way something transpires in the macro picture, you may come to the wrong conclusion about how the markets will react to that event.

When you’re constantly looking for a catalyst to explain every single move in the markets you start to see signals and correlations that just don’t exist. Most of the time we won’t know exactly why the markets moved a certain way until much later. Sometimes even with the benefit of perfect hindsight, investors still can’t agree on the specifics of the cause and effect. But to some the ‘why’ in the markets will always seem easy after the fact, so they keep searching for the answers.

Another Best-Places-to-Retire List

Filed under: Housing,Retirement - General — Bob @ 12:18 pm

LPL Research, part of LPL Financial, compiled what it calls a holistic ranking of the best places for retirement and applying its Retirement Index to each state. I generally advise a lot of caution in using such rankings. LPL at least up front says that the ranking of a state for an individual will differ based on the individual’s priorities. The ranking gives “D” grades to retirement havens such as Florida, Arizona, and South Carolina. The ratings include some hard-to-measure items such as “Community quality of life” and wellness. Another major caution is that the report gives one ranking for an entire state instead of different rankings for different regions or communities. Be sure to read the methodology at the end of the report to see how these and other measures were determined.

Perspective on the Greece Situation

Filed under: Financial crisis — Bob @ 8:20 am

George Friedman of has some unique thoughts and comments on what he calls the Greek situation. He says both sides have made all the compromises they can and it is time to end the games of pretend and extend, as it is called in the U.S. His focus is on Germany’s role in the situation and especially its goals in the eventual resolution. The way Friedman paints the situation, there isn’t a good resolution left, especially if other financially troubled members of the European Union decide to follow the Greek example.

A Greek withdrawal from the eurozone would make sense. It would create havoc in Greece for a while, but it would allow the Greeks to negotiate with Europe on equal terms. They would pay Europe back in drachmas priced at what the Greek Central Bank determines, and they could unilaterally determine the payments. The financial markets would be closed to them, but the Greeks would have the power to enact currency controls as well as trade regulations, turning their attention from selling to Europe, for example, to buying from and selling to Russia or the Middle East. This is not a promising future, but neither is the one Greece is heading toward now.

Many have made a claim that a Greek exit could lead the euro to collapse. This claim seems baffling at first. After all, Greece is a small country, and there is no reason why its actions would have such far-reaching effects on the shared currency. But then we remember Germany’s primordial fear: that Greece could set a precedent for the rest of Europe.

July 1, 2015

Wages vs. Benefits

Filed under: Economy — Bob @ 5:20 pm

Wage growth has been slow throughout this economic recovery. But that doesn’t tell the full story. Companies have been increasing the amounts they pay in worker benefits to attract and retain workers, according to a new report. Included in benefits are flexible work schedules, which are prizes by many workers these days. At some point, of course, workers need to pay the bills and things that can’t be paid through benefits, such as housing.

The more attractive vacation and wellness offerings come at the expense of salary increases, as wages remain stagnant. The survey suggested that employees are promoting that trend. “Research has shown that many job seekers frequently place greater importance on health care coverage, flexible work schedules and other benefits rather than on their base salaries,” the report said. Indeed, research, including an oft-cited Ernst and Young survey has shown that workers, especially the coveted millennial segment, prize flexibility.

But most research, including SHRM’s own findings, have found that higher pay still trumps flexibility and other young person workplace demands, such as working at a mission-based company with a fun culture.

Housing in Perspective

Filed under: Housing — Bob @ 1:42 pm

Bill McBride of Calculated Risk blog has a good take on the latest housing data. McBride looks at housing prices over the long term, not month to month, and also looks at prices adjusted for inflation and compared to rents. It’s a good analysis that you don’t see many places. The bottom line is that McBride remains optimistic about the housing recovery.

As I’ve noted before, I think most of the slowdown on a YoY basis is now behind us (I don’t expect price to go negative this year). This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%).  That is why the second graph below is important – this shows ”real” prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.6% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Keeping Exercise (and Other) Commitments

Filed under: Cash Management,Retirement - General — Bob @ 12:20 pm

Most people join gyms with good intentions and a lot of promises to themselves. They rarely follow through. This article explains how economists say you can improve the odds of keeping your commitment to work out regularly.

How can you counteract the forces repelling you from the gym? Economists have a solution. They know that people are really bad at prioritizing long-term benefits: It’s much harder to go to the gym right now than it is to say you’ll go two weeks from now. Keeping this in mind, one solution economists recommend is to sign another contract—one with yourself.

The basic idea is that you set a goal—say, to go to the gym three times a week—and give money to a friend with some instructions: If you meet your goal, your friend will give it back. But if you don’t, your friend will donate it to charity, or spend it. Going back on your commitment, then, comes with a financial penalty.

June 30, 2015

Avoiding Corporate Fraud

Filed under: Investing — Bob @ 5:41 pm

Corporate fraud happens, and most investors are aware of it. But do individual nonprofessional investors take the right steps to avoid fraud? With all the publicity about corporate fraud, they should be able to. But a new study find that nonprofessionals are very bad at avoiding fraud. Most of them don’t look for the right early warning signs and don’t do the right research.

The survey also found that most nonprofessional investors are not diversified and hold shares in only five to 10 companies at a time. “That means these investors are more likely to get hurt if they hold shares in a fraudulent company,” Brazel says.

“We also found that 25 percent of all survey respondents had been burned by fraudulent companies,” he added. “But investors who had been burned by fraud in the past were no more likely than other investors to now use fraud red flags. That was surprising.”

Another surprise was that investors who were concerned about fraud were relying on late-stage red flags, such as an SEC investigation. The stock may already have dropped in value by the time these red flags appear.

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