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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (119090)	8/11/2009 10:39:20 AM
From: Knighty Tin	1 Recommendation Read Replies (1) \| Respond to of 132070

T, we also have to keep in mind that TIAA-CREF has outperformed most money managers, so this scenario can be even uglier for other professions with less successful managers. One of the problems has long been what I call the "Morningstarzation" of the investment industry. (We could use Frank Russell or some other proponent of buy and hold, But MS is more famous now.) I have seen my financial planner friends gather data from clients, put them into the computer and then shake and bake the answer. "You should be 64.2% in equities, 12.8% in bonds, 6% in foreign stocks, 3% in commodities and 14% in cash." O.K., I can kind of live with that as their best opinion. But then they will say, "that mix will bring you an average return of 8.4% with a beta of 0.67." And, even worse, they would say, this stock fund will return 350% over 20 years, while the S&P will only return 270%" or some such nonsense. There used to be a law against predicting future returns, but, for awhile there, these guys projected the past like it was a roadmap for the future. And they weren't lying. They BELIEVED it, because that is what they'd been taught. Of course, it is tough not to predict the future because the client wants to know exactly how much money he will have at retirement. For most of them, if you put them in a fixed annuity (even if you can find some insurance company financially solvent enough that their guaranty means something. A few years ago, I would have said State Farm, Northwest Life or AIG. Wrong on at least one of those. <G>), they will be able to retire when they are 111 years old. I figure the long term answer is Swine or Bird Flu or a monster tsunami that will leave enough money for the 25% who survive, but, somehow, that doesn't sound like a pleasant result. <G>