Pension funds going all in

An interesting, and slightly disturbing piece, about changing pension funds investment strategies. Pension funds are increasingly using investments such as real estate, hedge funds, and private equity funds. While all the above are valid investments, they can be quite a bit more risky than traditional pension fund investments. While I'd imagine these represent a very small portion of a typical pension fund portfolio, I'd hope it stays that way.

http://www.nytimes.com/2012/04/02/business/pension-funds-making-alternative-bets-struggle-to-keep-up.html?pagewanted=1&_r=1&hp

Interesting Infographic

Interesting infographic breaking down how the average household spends their income. If you are reading this and looking at the chart and have no idea how you compare to this average, it may be a good idea to sit down one evening and see where your income goes.

The curse of the magazine cover

For quite some time I've thought one of the last places you want to be seen is on the cover of a major magazine, particularly in finance. Usually it's because you did something horribly wrong. But often it's because the general public has realized your achievements, be them perceived or real. And when everyone is in agreement, it typically marks the end of an era. If a movie has been number 1 in the box office for 5 weeks in a row, it's a pretty safe bet it'll be dethroned as everyone who would want to see it already has. (Sure there are the occasional Titanics and Star Wars out there.)

Take for example the infamous Business Week 'Death of Equities' cover in late 1979. Within a couple years after it's publication the largest, longest Bull market in US history would kick off. Or the Economist cover on Goldman Sachs in late 2006 declaring Goldman was 'On top of the World.' The piece spoke about how it was clear sailing for the world's premier financial firm. We all know what was around the corner.

 

Now the Atlantic has Ben Bernancke on it's latest cover simply stating "The Hero." In fairness to the Atlantic, it also asks 'so why does everyone hate him.' Perhaps that last small print line is protection against the curse? While I'm as happy as anyone with recent stock market returns, it's covers like this that keep me on alert. 

Hope for the housing market

We all know, particularly those of us in the Bay Area, that the housing market relies heavily on location so much it's difficult to generalize, but there are some encouraging signs we may be close to a bottom. This link has some interesting charts which suggest the bubble may have finally deflated enough:

http://soberlook.com/2012/03/us-housing-relative-value-benchmarks.html

The chart not shown is a chart of the historical housing prices outside of the bubble years. In short if the housing market had never had a bubble, prices would be right around where they're at today:

http://www.jparsons.net/housingbubble/

This may not mean happy times are here again, but there's a chance we're past the worst of it. 

What's in a coffee?

I was reading an article yesterday that believed current estimates retirement amounts will need to be revised upwards in the coming years…by a lot.  Sadly this figure is never revised down, and as time goes on they seem to take on a fantastic quality. Will it take a million, 1.5, 3 million? 

It can be sobering, to put it lightly, to think about these figures. I think it may be better to focus on the smaller things.

Consider a weakness of mine, the Starbucks Frappachino. The difference between a small and large is $1.05.  Sure not that much, but when you consider many of us drink one each workday, over the course of the year it adds up. In the case of my frappachino it adds up to the tune of $273.

If one were to switch from a large to a small, and invest the difference, over 16 years and growing at 5%, they would have saved over $10,000. Not to mention the calories saved over that same time period equates to 261 lbs!

Now then nobody is retiring on $10,000. And this demonstration assumes a few variables.  But I think the general idea is clear, even the small things can make a big difference.

Start there.