Avoid Target Date Funds

I'm a conservative investor, coming out on the side of "wealth preservation" versus "gambling".  But I was pretty lucky when I read an article and decided that "Indexing" was for me, plowing the vast majority of my equity investments into Index funds over 20 years ago.  It has been a great wealth builder, but whether this was because of John Boggle, who came with the concept of Indexing at Vanguard, or because everyone else on the planet piled into them over the past two decades is up for debate.

One investment where I wasn't so lucky was my kid's 529 college fund.  It didn't offer much except Target Date funds.  For those of you not familiar with the concept these are funds that invest in a mix of stocks and bond FUNDS with a target date in mind (for 529 the date they would start college, for retirement funds the year you retire).  The further out the target, the more stocks funds it holds to capture a higher risk/reward over time, the closer in the date the more bond MUTUAL FUNDS it holds.

And the "MUTUAL FUNDS" part of the bond investment is the main problem with these instruments.  Bond funds are risky!  I lost $10,000 in one week in a "safe" US bond fund when the Fed raised interest rates.  Sure, people made a ton when they lowered them due to ZIRP (Zero Interest Rate Policy), but bond funds have duration risk, which means that they will move up and down with more sensitivity the longer out the bond (or group of bonds) mature.

This is a long way to say that my kid's 529 invested over 18 years in a Target Date fund was a lousy investment due to duration risk.  It basically was invested in stocks when they went down, then investment into bounds right before interest rates went up since it was on autopilot.  That is not to say it appreciated some, but it could have done a lot better either actively managed, or if it had held bonds to maturity, not "bond funds".

Holding individual bonds - never bond funds - is now what I do with my personal assets.  Lesson learned.

My personal experience is reflected in a recent Barron's article, which had me nodding the entire time.  It is behind a paywall, but basically restates my folksy experience in a more professional manner.

Some say that many target-date funds are too heavily invested in a slice of the fixed-income market—investment-grade bonds—and that can leave portfolios overexposed to U.S. interest rates. They say investors could get higher returns over time and less volatility during periods of rising rates by owning a broader mix of fixed-income assets...or being actively managed.

Comission Changes in the Real Estate Market

Like most people I have a love-hate relationship with realtors.  I know a few personally, including family members who dabble, but my experience with realtors has been mostly negative because they either sucked or worked against my interests (realtors I knew always worked outside the state or region where I was buying so could never use a friend or relative).

That main problem with realtors - working against my interests - was when I was on the buying side because when you buy a house, you are not the client!  The realtor is being paid by the seller as a percentage of the sales price, so the realtor's interest is not aligned to the buyer, but to the seller with the highest priced house with the highest commission.  A realtor would rather put you in a $1M house with a 3% sellers commission, and not even show you the $800K one offering 2% to the selling agent.

This dynamic played out in my current home, which I found had all sorts of issues after I moved in.  The inspection report, from an inspector recommended by "my" agent, had outright lies, and my theory is the two agents paid off the inspector to give the house a clean bill of health so they would each collect their 3% from the seller.  By the time I figured this out the inspector had shut down his business, so I couldn't go after him, and the hassle of a lawsuit against the realtors or sellers was not worth it as it would take a lot of money and take a couple of years.  I ended up having to do a lot of work and spend a lot of money to fix problems that should have been called out in the inspection report. 

So besides declaring to never again trust a realtor to use "an inspector I've known for years who is great!", the other thing I decided that moving forward I would find a "buyers agent" that I would hire, and get out of the situation of the seller paying "my" realtor.  That way the person helping me with the house would be aligned to me, then I would find my own inspectors and any other third parties related to the sale.  But that model was actually hard to set up, until now.

Thanks to a settled lawsuit, my preferred model is what the real estate industry will start moving towards this summer:

Under the current rules, buyers typically don’t pay their own agents out of pocket. Going forward under the new system, buyers might have to foot the bill if they want an agent to represent them.

Starting in the summer, the new rules will require most home buyers to sign agreements detailing how much their agents will be paid for their services. If home sellers are unwilling to cover the cost of the buyer’s agent, these agreements would likely require the buyer to pay the agent directly.

The counter-arguments that buyers have to come out of pocket or can't roll the fees into the house financing run into the saying used for social media: if a service is "free" you are the product!  Basically the real estate industry has been ripping off buyers for years by aligning agents to only the sell-side of the street, so this this settlement is a welcome change to the industry dynamics, and look forward to using for my next real estate transaction.

My Reverse Bucket List

I was already using the term "Reverse Bucket List" before a saw an article of the same name making the rounds (now can't find the link).  In this article the term meant something you wouldn't do again, but in my case it is a list of places I hope to die before ever having to go to:

1. Anywhere in Africa (before killing tourists became popular I would have seen Egypt).

2. India.  I guy I knew had to go to India on a technical project and brought a giant jar of peanut butter and box of crackers, and ate only that for three days.  He was okay and everyone else got violently ill.  And ask anyone who has been there about all the beggars.

3. China again.  The one exception to the list where I have been a few times, and outside the major cities it's $&%-hole.

4. New Jersey

As for things I would still like to see, I can't say I have an official bucket list.  I have been to a couple dozen countries, and have seen and done amazing things.  There is nothing left where I am thinking "I gotta do THAT".   But things that might interest me would be like a reboot of the show Booze Traveler:

1. Port tasting in Portugal

2. Scotch tasting in Scotland

3. Vodka tasting in Russia - I would like to see the Kremlin and St. Petersburg, but don't think tourism will open back up there for another decade or two, so a question of when Russian tourism will return versus my longevity.

Short Term T-Bills As a Good Investment

Wolfstreet confirms my investment strategy for the last six months of parking lots of cash into short term treasuries (T-Bills), or money markets that hold them and pay about the same.

I never bought into inflation coming down (I can see it with my own eyes), nor the Fed lowering interest rates multiple times this year (not for economic reasons anyway, politically they will be pressured to do one in an election year).  So I have lots of money in a ladder at 5.1-5.3% where one matures every month, which I just put it back into another T-Bill earning 5.1% or better.  Note I am in a high tax state so it would take a CD earning 5.5% or better to match a T-Bill.

The risk here is if I get caught with lowering interest rates then end up having to re-invest at a lower rate than if I had locked in a longer duration.  I am betting my own money that inflation isn't going anywhere and rates are not coming down.

My run-on sentence comment there:

I’ve been keeping a large pile in short terms and money markets that buy them since I never bought into the rate cut mania. I’ll make 5+ risk free all this year, just a question on when I lengthen duration, but won’t buy anything less than 5%, which I expect to happen further out the yield curve since inflation isn’t cooling and government spending keeps going through the roof.

So What Do I Do With My Old Blog?

Way back in 2003 I was working at a job with nothing to do (hence the term "Window Manager", from a Japanese phrase) and I was bored out of my mind.  Blogging was a New Thing 21 years ago, and I spent a lot of my spare time wandering around the Blogosphere.

One day I decided "I can do that!" and started my blog, naming it after how I was spending my time.

I really enjoyed it the first several years, and it became a part of my daily routine.   I posted mostly on business, economics, tech (where I work), and started wandering into politics.  I also put a lot of personal stories and details on the blog since most of my friends and family read it (remember this was before Facebook).  At its peak in the mid 2000s I had quite a bit of traffic, with hundreds of unique readers a day. I kept things mostly anonymous, but maybe someone with a lot of effort could figure out who I was. 

Several things lead me to ramp down and abandon it for years at a time.  Part of it of course was the rise of social media like Facebook and Twitter, which killed traditional blogging.  I also got busy with other things in life, and like many hobbies my interest simply waned.

A strong under-current was the rising Cancel Culture, and although I don't think I ever posted anything controversial to a normal person, one never knows what the HR gate keepers at potential employers might think.  So although I had abandoned the blog for years at a time, I did take the effort to delete most personal related posts.  Except the rant against Rice University stays public forever, the woke *%#$ers.   

Although my blog laid fallow I still read and commented at traditional blogs using the moniker "whatever" (yeah, whatever).  These blogs are getting fewer and narrower as more readers abandon long-form blogging for the quick dopamine fix of Twitter (sigh, I mean "X") and Facebook.  But I really enjoy (and of course don't always agree) with blogs listed on the right like The Z Man (alt right), The New Neo (moderate right), WolfStreet (economic, libertarian) and Mish (economic, left-center).  I also read daily but don't comment at Instapundit (a bit of everything from the moderate right), Ace (more of everything, further to the right) and Zero Hedge (economic with a dash of conspiracy theory).  Sadly American Digest will have no more posts, its talented writer Gerard Van der Leun passing away last year.

But starting by blog back up, my main question is: who would read it and why?  I don't think I have anything particularly new to say as every opinion can be found on the internet, even as repression has vastly increased.  I suppose I could be on the few people blogging about tinnitus?

I suppose "how" something is said can be different or more entertaining in a blog.  And some blogs have incredibly interesting comment communities, which are often more compelling than the original blog post.  I don't expect much commenting here, but will keep commenting at my usual locations and now link back and copy here if the comment is interesting or pertinent.

Fundamentally, however, I think a blog exists for the writer.  Even if no one ever reads it, it is an outlet for the author, basically a hobby.  And I think I need another one of those these days.