Sunday Soul - You'll Never Find Another Love Like Mine

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goodbye my lover
You'll never find another love like mineSomeone who needs you like I doYou'll never see what you've found in meYou'll keep searching and searching your whole life throughWhoa, I don't wish you no bad luck, babyBut there's no ifs and buts or maybes
You're gonna, You're gonna miss (miss my lovin')You're gonna miss my lovin' (you're gonna miss my lovin')I know you're gonna my lovin' (you're gonna miss my lovin')You're gonna miss, you're gonna miss my lo-o-ove


Lou Rawls - You'll Never Find Another Love Like Mine : You'll Never Find Another Love Like Mine 7"
Lou Rawls - Let's Fall In Love All Over Again : You'll Never Find Another Love Like Mine 7" B-side
Find them both on All Things In Time.

Doin' It Again

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So the one or two of you still reading might have noticed that after nearly four months absence, MISB has resurfaced, at least temporarily, for a gasp of air. It is by far the longest I've gone without sharing a song or two since it began almost six years ago (yikes, that's something like the equivalent of the Triassic period in blog years I think). Asking a magic 8 ball about its survival would reveal an answer such as "reply hazy, try again," which is to say I'm not so certain of it myself. In the meantime though, it's got a new look and a new short-term lease on life.

I settled upon a few New Year's resolutions for 2012, and when sharing them with others I prefaced them with a quote from one of my favorite authors, Henry David Thoreau: "The mass of men lead lives of quiet desperation and go to the grave with the song still in them."

I suppose I still have a few songs left in me to share. Happy New Years.

Christmas with Taleb!

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Over the weekend Barry Ritholtz linked to this profile of Nassim Taleb at The Chronicle of Higher Education. I have mentioned Taleb many times over the years and he has contributed to how I think about certain things both related to the task of portfolio construction and more broadly to life in general.

As the linked profile above alludes, Taleb has become in some ways a caricature of himself. We all have our quirks and these quirks often become more pronounced as we get older and that is what I think is going on with Taleb. His latest book is called Antifragile: Things That Gain From Disorder but the writer for the profile said the book "feels like a compendium of people and things that Taleb doesn't like." I got a good laugh from that one.

The profile goes on to say he doesn't like academics, sociologists, doctors, Harvard B-school, bankers and economists among many others. He also has specific ideas for what fruit he will and won't eat and footwear. Assuming the article is correct about these things, it paints an eccentric picture.

The earlier posts on this blog about his ideas targeted things that I felt added value and I still think those ideas add value but as a function of his fame we are learning more about him and the value of his contribution might be diluting. As an example, most of what he said in the above article offered no critical value (just entertainment value) but there was something. He said "You cannot rely on external confirmation and have a happy life, I don't rely on external confirmation, and I have a happy life."

There was a comment or two questioning whether he really is happy. While that is a good question, I have no basis to doubt him but the idea is interesting from a self awareness point of view. Increased self awareness can help with portfolio management. Too many people are not self aware enough to know what is really important to them and they waste time on things that turn out to be unimportant.

There was also a funny bit in the article pointing out that Taleb might be a lot of the things he doesn't like; he's a part time professor who publishes articles in journals but he says he does not publish for advancement (personal gain) they are only "technical addenda" for his books. The funny part was that the article identified as the flipside to what Taleb does; blogging in cabin somewhere which is a remark that I resemble.

Here are a couple of other links (here and here) that really hit on how eccentric he either was all along or has become. There is still value in some of his commentary but it appears as though it will be more difficult to find.

Totally unrelated, I've tried a few times to find a list of Mr. Burns' (as in the Simpsons) stock portfolio. This was in one episode many years ago but I have never been able to find the list. I remember it was very funny but didn't remember the names. At some point along the way someone put up the site Simpsons Wikia which includes a page devoted to Mr. Burns and it mentions his portfolio which consists of Confederated Slaveholdings, Transatlantic Zeppelin, Amalgamated Spats, Congreve's Inflammable Powder, U.S. Hay and Baltimore Opera Hat Company. Hysterical.

Merry Christmas.

Stay On Your Own Mat

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Over the years I have posted a couple of tag lines or other little sayings related to the task of investing. Conceptually I don't think any of them are original but that doesn't make them any less useful. Barry Ritholtz found a short blog post at the NY Times that hit on a couple of these types of things I have been writing about over the years.

One of my tag lines has been stay on your own mat which is a yoga reference about not worrying about how the person next to you in the class does the poses. Ideally a yoga student is focusing on their breathing and trying to make progress at their own pace with the positions.

So it is with investing for both do it yourselfers and professionals. We all have our own skill sets, interest levels and only so much time available to spend on the task. You may know someone who routinely makes a killing on three and four legged option combos but that doesn't make the trades right for you. In this vein the linked article talked about Harvard Management Company buying a dairy farm in New Zealand.

Also related (and in the article too) is defining and sticking to your goals not someone else's. One example from the article was recent Standford MBA grad's who go 100% equities (not sure if this was a made up example) which might be right for a 25 year old making a lot of money right out of the chute but that is not going to be the right allocation for the typical 50 year old.

Another concept picked up in the article that is covered here regularly was "most of what we hear about investing isn’t right or wrong. It’s a matter of applying what we hear to our own situation"  which is of course a different way of saying take little bits of process from various places to create your own process.

There are others we've talked about here about not panicking, about adequate savings rates but really this all boils down to the need to learn about ourselves first and then devise the right financial plan (either by yourself or by hiring someone) for our particular situation taking into account all of our quirks.

Speaking of long running themes of this blog, one of them is one off expenses that cannot be budgeted for and for us this month that is tires on the other car (we needed tires for one vehicle a few months ago).

The Right Tool vs The Wrong Tool

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We live in an area with steep, winding, unpaved roads which become very difficult to drive on in the snow. That difficulty doesn't prevent people from coming up here in their two wheel drive cars and other unsuitable vehicles and trying. The first picture was taken yesterday at the "100 Mail Boxes" and would be an example of the wrong tool. The Pinzgauer picture was not taken here, I just found it on the internet and think it is neat but that would be an example of the right tool. There are probably several investing metaphors that would work here.

Last Day of the Year

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Jason Zweig had a writeup over the weekend about dividends that covered a lot of ground including an interesting point of view from the CEO of Diamond Offshore (DO) who talked about the extent to which dividends reward shareholders (we've all heard that one before) as opposed to stock buybacks which he said rewards the people selling which is a different way to articulate it. There is of course some benefit to existing shareholders from stock buybacks but this particular CEO seems to really care about how shareholders are treated.

Dividends of course play a huge role in the long term success of a portfolio. There are various statistics floating around about how much of the total return of equities comes from dividends, the numbers are big but I have seen several numbers that vary widely so you can do your own digging here and pick the number and time frame you think makes sense.

As we have gone over many times before, dividends are not the top priority here versus protecting the bottom line number of the portfolio but dividends are still very high on the list of things we care about.

My thinking here is that adding an extra 100-200 basis points in dividends versus the benchmark means the rest of the portfolio may not have to work as hard (meaning not take on as much risk or volatility) but there comes a point where too much yield means more risk is being taken. That line in the sand is not something that someone else can define for you although in my opinion above 7-8% for the entire portfolio would be past the point of more risk and really I would not want to be at 5-6% for the entire portfolio. I have hard time getting to 4% while still maintaining what I think of as being a properly diversified portfolio. These days there are a lot of stocks with yields in the threes but not the fours. We have some with 5-6% yields but we also have some with little to no yield. A 4% yielding portfolio can be built, it would just not be as diversified as I would like.

In 2012 dividend stocks as measured by dividend ETFs lagged regular market cap weighted indexes. The iShares Dividend ETF (DVY) is up 4.95% on a price basis so far this year versus 11.58% for SPY. DVY out yields SPY by 154 basis points (according to Google Finance) which of course doesn't come close making up the difference.

I don't cite that example to make the case that dividend investing is bad but it is an interesting development because of how popular dividend investing has become. Related, I've been leaning toward the current stock market and economic cycles ending in 2013 or early 2014 as a function of normal cycle longevity. One market behavior that would support this as a leading indicator would be quality doing better. This usually means large cap outperforming small cap although the difference between SPY and IWM in 2012 has been negligible. It will be interesting to see whether this general idea will have relevance between large cap and dividend indexes. All of this might be saying that the cycle will not end in 2013; 2014 would be well within the realm of normal.

Obviously the current events in Washington have the potential to be the most important determinant of what happens in 2013.

A New Year

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2012 is over and like most years there was good and bad to it. Domestic equity prices clearly had a good year and the US political system had a lousy year. The economy is not dead but it is nowhere near where it should be coming out of a trough and probably not where the Fed thought it would be when the first set rates to zero.

My thoughts for 2012 were that the market would start the year with a big rally (mostly right on that one), there would be a correction such that most of the gain was given back (this occurred in April and May) and that the year would finish up a little (wrong about this point). Whether 2012 was up a lot is open to debate but up a little was definitely wrong. I've gotten pretty close with this sort of thing several times since I started the blog but not 2012.

For 2013 I think there is a high probability of the economic and stock market cycles ending. From the  bottom up we certainly could continue to muddle economically and stocks continue to do well but the cycles now are old. Bespoke cites the current bull market as the ninth longest out of what is counts as 26 bull markets since 1927. Of course my base case for the cycles ending in 2013 could be wrong which would be a good thing but it is always worth pointing out that all expansions and bull markets end, it is normal and will happen again. This is not cause for an emotion response but more of a tactical response when the time comes regardless of whether anyone's predicted timeline is correct or not.

On a personal level 2012 was a good year professionally, personally, for the Fire Department and for United Animal Friends (the rescue my wife volunteers with). As a glass half full person I am likely to always think a year went well but two people very close to us got very sick this year.

In terms of looking back on a year, so it makes sense to look forward to the next year. Part of this process can be a self assessment related to saving and investing; a sort of check up.

This takes me to an article at Seeking Alpha by a blogger who goes by the anonymous handle of Regarded Solutions. He and I don't often draw similar conclusions but the linked post was effective in conveying two points that I try to touch on here. One was about how saving money works in your favor in terms of compounding and this article also sought to get readers to think about how much they really need in retirement. This is all about asking yourself the right questions and sorting out what you find important.


The significance here is that when you figure out what is actually important you will be able to devise a more suitable financial plan and investment policy (pertains whether you hire someone or do it yourself). For example maybe when you were 25 you thought you were Ferrari guy (or aspired to be one) and then maybe at some point down the road you realized a Ferrari (the picture is of a Ferrari believe it or not) is not what you need.

I'll invoke a quote from our friend Bill here in Walker that I have shared many times before; you can figure it out now or you can figure it out later but if you can figure it out now you'll be much happier. That works on many levels.

While everyone's priorities are different, the Woody Allen quote applies; there is no situation where having more money made it worse. So in that light, may you save more money, live below your means and have a happy, safe and healthy New Year.