WSJ: Creating your own pension

WSJ: New Ways to Create a Gold-Plated Pension

The new strategies often mean heftier helpings of bonds and inflation-fighting investments like real estate and commodities. While bigger bond holdings can mean lower returns, the approach also can give investors the confidence to stick with the more volatile stock investments in other parts of their portfolio, advisers say—reducing the chance they will sell shares at a market bottom.

Here’s a recommending allocation model from the article:

Does Stewart’s ‘Common Sense’ approach really make money?

WSJ: How to Time The Market by James B. Stewart. Interesting read, but does it really work?

Here is how the system works: When the market is dropping, I buy stocks at intervals of 10% declines from the most recent peak. When it is rising, I sell at intervals of 25% gains from the most recent low.

Several comments with the column doubt how well the strategy works. He has advocated it before and others have also reviewed the strategy in the past.

CXO Advisory: Analysis of James Stewart’s “Common Sense” Stock Market Timing Strategy

In summary, the Common Sense buy-low/sell-high strategy appears not to be an effective asset allocation approach because it is somewhat out of phase with momentum and value return horizons.

Stwart’s Common Sense column also appears in Smart Money.

Regardless, it is a good weekend read.

Salary Happiness: $75,000

From The Wealth Report by Robert Frank at Wall Street Journal: The Perfect Salary for Happiness: $75,000

Also fodder for another survey:

The results are fascinating, especially in this conflicted age of materialism. But I wonder how they would differ by region or city. Would $75,000 mark the ultimate day-to-day contentment in such high-cost cities as New York City, Los Angeles or San Francisco? I doubt it. Perhaps the salary number would be lower in South Dakota or Mississippi.

Scenarios for Social Security cuts or delays of benefits

WSJ: chart on retirement ages by country

WSJ: chart on retirement ages by country

WSJ: Stressed States Are Forcing Workers to Retire Later

Lawmakers in at least 10 states have voted this year to require many new government employees to work longer before retiring with a full pension, or have increased penalties for early retirement.

New York Times: Social Security Jitters? Better Prepare Now

Obama administration is expected to receive a report in December on recommendations to shore up Social Security.

Increasing transparency in the bond market

Micheal Lewis "The Big Short"One interesting conclusion in reading Micheal Lewis’ “The Big Short: Inside the Doomsday Machine” is that bonds markets should be more transparent so that both buyers and sellers can have better ideas on what bond prices are.

Knowledge of prices is a key tenant in pure capitalism, and one supplier like to avoid. Have an object become a commodity moves into a low-margin business, because a competitor’s product can easily be substituted.  Buyers are big winners in transparent markets.

The equity markets has become more transparent and open in recent decades as discount brokers grew. Present a choice, buyer happily dropped the “research” and personalized advice that full-service brokers offered. Maybe it was the difference in commissions, and the ease that technologies, such as telephone trading and later internet trading.

Lewis maintained in his book that one reason Wall Street firms moved to quickly in the sub-prime and CDO market was the commissions on selling these products was so much higher than the ever-shrinking commissions in the equity markets.

A public market similar to the stock market is growing in more areas of the bond market, especially in the public sector, but it’s still a long way from being as accessible as equity markets.