Hermes, Merry Christmas!

I was waiting for your reply to this thread and that pie chart. I didn't think you would agree but I wanted to hear it from you.

Hermes, would you believe me if I told you the asset allocation of that pie chart represents a firm with $50,170,000,000 dollars of Invested Assets?

Spelled out that's:
FIFTY BILLION - ONE HUNDRED SEVENTY MILLION DOLLARS!

The money is managed by Professional Investors.

September 30, 2007 (in Millions)

a Cash and Cash Equivalents 10% $5,160
b Fixed Income 78% 38,952
c Equity Securities 0% 61
d Mortgage Loans 8% 4,174
f Investments Options 1% 543
g Loans to Affiliates 1% 727
h Real Estate 1% 329
i Other Invested Assets 1% 224

Total 100% $50,170,000,000

Hermes, just for some Internet fun, I'm curious as to how you would allocate $50 billion dollars of invested assets?

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Happy New Year, Gary.

I am not impressed by the facts. Here is my question:

What are their returns on that portfolio?

Whatever the answer may be I probably won't like it because the majority is fixed-income which means low returns. Dollar figures are not relevant, percentage returns are. I am quite sure that on a dollar base the returns will be greater then many companies given the amount of the total portfolio but that's why they don't matter. On a percentage base their returns will be lousy by any sound investment standard.

Their returns will be poor and they will argue that the risk is minmal or zero. I may even know what company you refer to.

I would hope that professional investors would manage such an amount of money or should I say mis-manage it.

If you like that allocation mix and think you ROI that you will get is a great deal, go fo it. Personally, I think it is a joke but you already knew that.

__________________
It is not smart to play it safe but it is safe to play it smart.

The thing to remember with any fund, it is designed to minimize risk and loss, therefore it also must minimize gains. A large fund like the one above with professional management has many investors to answer to and if it does not meet expectations, their will be a new fund manager very soon. These are not designed for the mavericks, but rather the passive investor who is looking for some gains with little or no risk.

Right but the point I am making is that they manage risk where there is no risk to be managed. Global Equity Markets are not risky, but an entire industry is devoted to and trying to sell you the idea that they are risky and that they will work hard to minimize risk and loss.

Gains with little or no risk, go with a money market account. That's a passive investment.

That industry is pretty succesful when it comes to seeling the idea of risk which is why investors are willing to accept low returns.

Any fund should work to minimze loss but that does not mean that gains need to be minimized, it is just that the same industry that sells the idea of risk has no idea how to accomplish that. Their lack of knowledge is the explanation of why they sell the idea of risk and their lack of knowledge on how to accomplish good gains with limited risk explains their position on why they consider such an accomplishment as a risky investment.

Once again risk is the lack of knowledge. That is the reason why the professional management of the entire industry belongs to the worst profesional investors in today's market place.

In the end it comes down to if you can accept those low returns and if you can qualify them as a good investment. Personally, I think that it is nothing more than a bad joke.

__________________
It is not smart to play it safe but it is safe to play it smart.

Hermes a Happy New Year's to you too!

To answer your question:
"What are their returns on that portfolio?"

Probably no more than about 6% - 8% per year.

Now I've answered you question.

So now it's your turn to answer mine....

Second request:

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Seems like I forgot to answer your question. My appologies.

Without putting any thought into this here is a very short answer.

1. The majority will be in global equity markets.

2. The minority will be in real-estate.

3. The smallest amount will be allocated to cash.

__________________
It is not smart to play it safe but it is safe to play it smart.

Hermes, I absolutely enjoy reading your postings.

Such as;
and this;
The worst professional investors that MIS-manage that type of money industry wide have produced the results below for their clients WITHOUT one penny of their clients money at risk in "the market."




If you could have bought the best performing annuity on the first of each month in 2006 your 12 monthly returns would have averaged 11.2% in 2007.

The best and most consistent rate was earned by annuities using the monthly cap forward method with a 12 month low average of 7.8% and a high of 10.5%.

Annual point-to-point designs also did well with a high average of 9.7%.

Averaging products with good participation methods performed competitively returning 6.8% to 7.2%.

One point that needs to be stressed is the 6% to 10% earned on average on these annuities cannot be taken back. Most annuities credited at least 50% more interest than CDs for the period - many did much better - and no annuity owner has lost value due to the current mortgage mess.

An index fund investor may have been up 20% in a year period ending July 1st 2007, but the index annuity owners that were credited 10% to 13% in July have not been looking over their shoulder in the recent market decline.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Very funny. First it seems like you completely disagree with what I say or are amused by it and then you bring a few facts which, in my opinion, completely underline my statements.

Your facts show that those funds have been mis-managed unless you can qualify an annual return of 10% as good. If the answer is yes, then they have not mismanaged it.

I think it is a joke. I think 20% every year is a joke but if you think that they are great then that is fine. Like I always say, the individual needs to make that choice.

One thing I would ask you not to do is make back-ward looking statements such as if you would have done this a few yearsa go this would eb the result. I trust that you are smart enought that those type of statements are completely ridiculous. It always easy to look back after you know what happened and say this would have been great. Point is, you haven't done it.

It is vrey interesting that you have all the facts that show how bad the industry does, at least in my opinion, and still believe it is a good investment. It is similar to the person that has all the facts of why the price of oil will go up but never buys an oil or gas producer but rather complains about the rise in oil.

You are more then welcome to share all the facts that you have, I enjoy them, and it provides more evidence for me that the industry and its management teams belong to the worst in the entire investment spectrum.

Once again, that is just my personal opinion.

__________________
It is not smart to play it safe but it is safe to play it smart.

Hermes, have you ever run the actual numbers on what a person would have to earn to just keep even with any safe investment that was just limping along at 5% per year should they lose 25% or more of their capital?

The numbers are astonishing and are impossible to sustain.
Those are the facts of money.

For example, if one invested $100,000 and lost 25% they would have $75,000 at the end of year one. Had that same person invested in anything that was safe from loss of principal at 5% they would have $105,000 end of year one.

Simple math.

However, the person who LOST the 25% of their principal has to get a 47% Return On Investment the next year to just be even with the investor whose limping along at 5% per year.

The person whose just limping along at 5% per year by the end of year two has $110,250.

Simple math says $75,000 PLUS 47% equals $110,250.

So if you are scratching your head wondering why the Professional Investors of multi-billion dollar firms have the bulk of their invested assets in high quality bonds rather than "global equity markets" it's because they understand that one (1) bad year may take a decade or more to recover from.

And by "recover from" I mean to just break even with a safe investment that was just limping along averaging 5% per year with no risk of loss of principal.

__________________
Gary Spicuzza, *SAFE
Copyright 1956
No Rights Reserved
*Self Appointed Financial Expert

Gary,

here is a question for you:

If there is no risk why should you loose?

Listen, I completely understand where you come from. No, I don't wonder why the professional investors of the companies in the mutual fund industry 'mis-manage' their companies and their clients funds.

Your calculations are correct but those are not the facts of money. Your calculations make sense but only if you assume that there is risk in equity investments and assume that you will loose money on an annual base from time to time.

There is no reason at all for any fund-manager in any industry to post an annual loss and definately not a loss as you used in your example. An annual loss means that the fund manager made some serious mistakes which once again comes to a lack of knowledge and the belive that equity markets are risky.

Those 'assumption-games' that you like to 'play' are funny to read but that's about it.

Back to my question:

If there is no risk why do you assume that there will be a loss?

I also disagree that one bad year will take decades to recover. It may be true with the investment strategy/philosophy that you favor but since the professional investors in the entire industry belong to the worst in today's investment spectrum that fact does not surprise me.

You consider equity markets as risky investments and favor your 'safe' strategy. That is perfectly fine with me.

I know I repeat myself but so do you:

Equity markets are not risky, the lack of knowledge is. If you lack the knowledge, that is your problem but not the problem of the equity markets.

If you can't fly a plane that doesn't mean that it can't be done. It means that you can't do it but that is not the planes fault, it is yours. True, the majority drives cars and they will say to fly a plane is not possible/risky etc. but that doesn't mean that there is a smaller group, the pilots, which disagree with that. They can do it and they do it great.

__________________
It is not smart to play it safe but it is safe to play it smart.