The innovations in the Bitcoin realm are coming quickly. And since I last looked, they now discourage mining bitcoins on your own. And also since I looked, there are now physical Bitcoins! I just read an article asking whether they might be considered illegal.  These things look great and help push their acceptance forward.

So I finally installed the Bitcoin app and have a Bitcoin address for you to send me some:

1NTsbjZH4HnqeQKK5dpFzfjJvGjr61N1ps

Not to bribe you or anything, but I figure if I can get a couple of coins from my (diminishing) audience, I would be encouraged enough to do another MMM show.

There should only be a 3 Fund portfolio comprised of the following (and the %’s vary for individual investors):

40% Vanguard Total Stock Market Index Fund (VTSMX)
20% Vanguard Total International (VGTSX)
40% Vanguard Total Bond Market (VBMFX)

I will correct this in future portfolio analysis updates.

One thing that is particularly striking is that PRPFX took a much sharper dip so far in September than the pure Harry Browne 4xETF portfolios.  I suspect this is partly due to the fact that PRPFX owns some silver (down very sharply) and also some foreign currencies (down due to rising dollar).

Me still likey the Permanent Portfolio, even though what was once up about 12% for 2011 is now up (only) 6.5%.

Biggest Losers on the chart (caution, not rebalanced) were Dilbert (-1.9%) and Vanguard Windsor (-1.5%), and MMM Do It Yourself Funds (-0.7%). Glad I got out of that idea.

Use this link to subscribe in iTunes (copy and past it into iTunes using the Advanced -> Subscribe to Podcast… menu:

http://www.crawlingroad.com/podcasts/podcasts.xml

The game started one year ago. I asked people to create a buy and hold portfolio of index funds or ETFs that would exhibit the best return-to-risk ratio in 2008. This would be measured by “top-leftedness” on a plot of Return on the Y axis and Standard Deviation on the X axis. For positive returns, the Sharpe Ratio accomplishes this nicely. But when all returns are negative, the Sharpe Ratio gets screwy (a technical term) and I had to reset 0%  to be at -50% to make it work. Even when all returns are negative, we still want to be top left on the chart.

Winners were to be selected from each of three risk bands: 0% to 8%, 8% to 16%, and then 16%+. Funny how the game worked out. Last year was a RISKY year. Only one person had a portfolio with a Standard Deviation of less than 8%. Congratulations Cosmo, you had a STDEV of 3.5% and a return of 5.1% with your portfolio holding a single fund: the Vanguard Short-Term Bond Index (VBISX). You are the winner of Index Funds: The 12-Step Program for Active Investors by Mark Hebner. And if you actually had your net worth invested in that portfolio, you had a great 2008.

Next up, the medium risk band. As it turned out, nobody had a positive return here, as you can see in the following chart. Which one is top left? The one who lost the least amount is Ariel with a return of -12.6% and a STDEV of 8.2%. Ariel also put the entire net worth in one fund: Vanguard Wellesley Income Adm (VWIAX). Congratulations Ariel, you too are the winner of Index Funds: The 12-Step Program for Active Investors by Mark Hebner. 

Finally the guys who took great risk. This one is a littly silly because here you can gamble on something extremely risky and come out the winner if your number comes up. I should have limited it to something reasonable like 25% or something. Nonetheless, the winner is mudfud who invested in one fund: the China Bear 2X Fund (which was closed on November 14th by the way). Now who in their right mind would really put 100% of their portfolio in this fund? That wasn’t the idea behind this game. Still, if you could handle a risk of 56.1%!!!! OUCH!!! then you got a return of 42.4% for your gamble. Congratulations mudfud, you too are the winner of Index Funds: The 12-Step Program for Active Investors by Mark Hebner.

You can see all of the other entries at the Lazy Portfolio Smackdown page and you can see the portfolios of the so-called “Professionals” — those who make a living recommending portfolios to folks like us.

I’ll be talking more about the results on the Mad Money Machine podcast. Please load it into your iTunes or visit MadMoneyMachine.com to listen on your computer.

So I’m going to take a breather, do some exercising, clear my head, go to a Christmas party, take a step back, and reassess. Then try to pump out a show early next week. OBTW: Mad Money Machine will be celebrating its three year anniversary on the next show. Like I need that added challenge of doing something special.

http://video.google.com/videoplay?docid=-5827003748799795690

http://www.youtube.com/watch?v=1EQovKt0dSM

http://www.ifa.com/advisorcam/index.aspx?video=mb15

Strangely, you nominated it for the “Best Mobile Phone Formated [sic] Podcast”. I was kinda hoping for “Best Business Podcast” but I’ll take whatever I can get. Does seem like a typo though (or a categoryo).

Is the MMM really that good on a mobile phone? I know I like it on my iPhone, but I don’t put any special graphics in or anything. Perhaps it is because I work endlessly making the sound come out level? And that makes it easier to listen to on a phone? Anyone have any suggestions why, please email me.

Nonetheless, I am grateful. Thank you for nominating MMM. It will help me help you.

In the meantime, visit Ron Paul’s Campaign for Liberty and see what he has to say.

Also, visit IFA.com and read Mark Hebner’s sidebar called The Invisible Hand and Why Prices Change? 

• I read Letter from Ron: Time is Running Out
• I played the audio from Mark: Should you be worried?
• I talked about Cramer who says buy gold.

To get nominated is my reward for doing the show. Thanks for helping me.

But here are results at this point:

So nobody’s interested in soccer? C’mon dudes, it is the one true international sport. Get globalized (before it is too late). Anyway, you guys (and I do mean guys… see next chart) liked talk about money, inflation, index funds, ETFs, lazy portfolios, and Warren Buffet but sadly not Paul Boyer, XBOX, Libertarianism, iPhone, or Ron Paul. I guess this is an investing show after all.

When I say “dude” I really mean DUDE.

Folks generally aren’t interested in DEFINITELY subscribing to another podcast, but a daily, news-oriented one would be most considered.

Again, you listen for investing tips, economic insights (and a little humor thrown in). Mostly nobody is just listening to check out the competition (or will admit to it).

Hey, this isn’t a music show, so Paul please don’t play full songs.

Almost everybody makes over $50K a year.

The average age is 40. Wow, I had no idea you guys were so old. (Hahaha, me too.) But obviously these surveys are what they call “self-selecting” meaning that the results of the survey are skewed toward those who are willing to volunteer to take the survey. Maybe young people aren’t willing to volunteer to take it? Maybe really old folks aren’t willing to volunteer to take it? Maybe women don’t like to volunteer? Yeah, that’s it. And where are all the teenagers? Oh, playing DS.

But I like that Age vs. Index Portfolio chart. It kinda shows the general tendency to take less risk as one gets older, doesn’t it? The chosen Index Portfolio is on the left axis with Portfolio 100 at the top. Age gets higher going from left to right. Nobody will admit to a less than 25 index portfolio.

Well, do it then! And tell them Paul Douglas Boyer from the Mad Money Machine sent you!

I have more results from the survey that aren’t as easily shown on a graph, such as what you are doing while listening and the general comments question. I’ll try to cover some of these on upcoming shows. I do want to thank you for all the kind words and even for the critical words. Doing this show is great fun for me. If you want to see everyone else’s entries, click on the survey link again and they are at the bottom of the page.

Thank you for taking the survey!

Whether your work commute involves driving, riding the bus, biking, or running (like me), it’s a great chance to improve your investing know-how through podcasts. You’re a captive audience, after all. Below are podcasts that cover investing from 10 unique perspectives:

and then goes on to include Mad Money Machine as one of the Top 10. (I think she should have included Sound Investing there also.)

Thanks Katy for recognizing the MMM! And I hope you especially like the Couch to 5K episode while you are running.

CLICK HERE TO TAKE THE MMM SURVEY NOW!

Thank you. You can click the link again at any time to view continuous results that other people have posted.

I kinda forgot to finish my answer to his question about “what got me to this revelation about passive investing and don’t I have the urge to do active trading?” I went on about the recent credit crisis and forgot to mention that at that time I did sell some of my ETFs and mutual funds. I’ve kept track of how much those funds have gone up since I sold them and it isn’t pretty. But thanks Nick for the interview.

The article mentions a group called Citizens for Retiring the Penny but their website doesn’t seem all that active.

I reiterate that I propose not only eliminating the penny but also the nickel and quarter as well and then moving to use only one decimal place in prices. And to those who think that getting 9 dimes back in change is bad, ever heard of the "Leave a Dime, Take a Dime" tray next to the cash register? Oh wait, that was for pennies. But anyway…

Metal prices as of today according to coinflation.com:
1909-1982 Cent: 2.57 cents
1982-2008 Cent: .72 cents
1946-2008 Nickel: 7.02 cents
1965-2008 Quarter: 5.9 cents

Americans for Common Cents,

I disagree with your stance to keep the penny, for the following reasons:

1) They are costing us taxpayers too much money to produce.
2) We will not suffer "rounding-up" if we instead simply drop a decimal place in prices from, say, $14.95 to $14.9. Thus we can also eliminate the nickel and quarter.
3) Charities will gain because excess pennies will be donated to charities since it would take ten of them to make any purchase. Also, nickels and quarters would be more likely to be donated as well.
4) We can overcome lost nostalgia for Lincoln and Jefferson and Washington by making new dimes with their images on them.
5) Simplifying to one coin, the dime, would make it much easier to calculate and store change from our purchases.

I hope you will agree and join me in calling for Dimes Only.

Paul Douglas Boyer
Host, MadMoneyMachine.com podcast

Please join me in asking our government to eliminate production of pennies, nickels, and quarters.

But in this age of MySpace and Facebook hysteria, it’s odd that Morningstar let so many eyeballs go their own way. In the end, it’s turned out to be a blessing in disguise for investors. The revamped Diehards.org is better organized, easier to navigate and much more intelligently moderated than the older version.

And it’s becoming a true social networking site. There are meet-up groups forming and getting together all the time around the country (something that started over at Morningstar). The Diehards even have their own convention each year, something that IU believes has become a truly major event in the indexing community.

I’ve praised the Diehards forum many times on the show and I still go there and learn new things all the time. There is no place better on the net for the do-it-yourself investor.

January 25, 2008 4:44 pm EST

ARLINGTON, VIRGINIA – Newly appointed Ron Paul economic advisor, Peter Schiff, issued the following statement about Dr. Paul’s proposed comprehensive economic revitalization plan:

“We need a plan that stimulates savings and production not more of the reckless borrowing and consumption that got us into this mess in the first place.  Ron Paul’s plan is the only one that amounts to a step in the right direction.  If you want meaningful change – for the better that is – Ron Paul is the only candidate capable of delivering it.  The others merely promise to continue the failed policies that are at the root of our current economic problems.”

Peter Schiff is president of Euro Pacific Capital Inc, and a frequent guest on CNBC, Fox News, and Bloomberg Television.  He is often quoted in major financial publications and is the author of the book Crash Proof.

In the past Peter Schiff said the following of Dr. Paul: “Ron Paul is the real deal, a true statesmen and citizen politician in the traditions envisioned by the framers of our Republic.”

Mr. Schiff is available for interviews regarding Congressman Paul’s economic policies.

Congressman Paul’s comprehensive economic revitalization plan can be found online at: www.RonPaul2008.com/Prosperity

You’ll definitely want to click on that last link and read Ron Paul’s Four-Point Plan for economic revitalization. Please tell me, dear reader, what’s not to like in this list? Comment below if you find something. Otherwise, please support the man!

hat tip to CrossingWallStreet.com

Even though I don’t like their system, since it is free, I created it anyway. Have fun. It runs through 2009 this time instead of just one year. And you get $1,000,000 in play money instead of just $100,000. And you can only trade 10% of a stock’s volume instead of 100%. And no shorting. Have fun.

In 2006 we had a portfolio smackdown between a portfolio of Cramer’s recommended stocks that I selected vs. a basket of ETFs I bought and held. The ETFs won. In 2007 we featured a portfolio smackdown between Cramer’s recommended stocks that 20 volunteers selected vs. the IFA Indexfolio 100. It is neck and neck, meaning being lazy must win, right? So next year in 2008 I would like to create a new competition I’ll call the Mad Money Machine Lazy Portfolio Smackdown in which we pit all the various lazy portfolios against one another. We will be judging not only on return but also risk, as measured by standard deviation. The Mad Money Machine Lazy Portfolio Smackdown will of course feature the IFA Indexfolios, which are the gold standard of reward vs. risk portfolios. We will also include the other lazy portfolios that I have mentioned here previously. But also to make this fun and community-involved, I will include YOUR suggested lazy portfolio.

The rules are simple:
1. Create a portfolio of ETFs or Mutual funds (not individual stocks!) and indicate the percentage holding of each fund. Please limit the number of funds to 15 or fewer as anything more than that is not lazy.
2. Email the ticker symbols and percentages to me at Feedback AT MadMoneyMachine dot com.
3. I will calculate on a weekly basis the YTD return of the portfolio and the YTD standard deviation.
4. I may also try to go back in time with the portfolio to show its historical annualized return and annualized risk. Obviously, most ETFs don’t have any long history, so I may use substitute funds.
5. Three winning portfolios will be selected based upon closing prices December 31 2008 and will be the ones that have the highest reward vs. lowest risk for the year in each of three deciles: 0% to 8% risk, 8% to 16% risk, and 16+% risk.
6. Winners will receive a copy of Index Funds: The 12-Step Program for Active Investors by Mark Hebner of Index Funds Advisors at IFA.com, will be crowned Lazy Portfolio Manager of the Year, and other valuable awards to be determined!
7. Entries must be received before 2 January 2008 so act quickly.

Jim Cramer, if you are sincere about wishing Ron Paul the best of luck, will you please help? Would you throw your endorsement behind him and use the power of your pulpit to give him the recognition he deserves?

Nonetheless, I took it upon myself to do a word count of each candidate from the CNN transcript. Here are the results:

And for a comparison to the IFA IndexFolio 100′s Risk and Return for the same period, here’s a handy graph:

Oh, but hey, he got MATK right!

If you don’t want to see December 2007 on the calendar, you can select rows 5 thru 9 and delete them. Let me be the first to say “Happy New Year.” Enjoy!

When I read Paul Farrell’s screed on MarketWatch the other day, the one where he listened to “Mad Money” once, it savaged me. He didn’t talk to me and wrote my show off as a waste of time at best and pernicious at worst. It reminded me how misunderstood both my show and my viewers really are.

Jim, if you are reminded about being misunderstood, what are you doing on your show to correct the misunderstanding?

…It’s certainly possible to make a lot of money trading actively, but, as anyone who’s watched the show a few times knows, I don’t encourage ordinary people to trade.

Really? I thought I heard “buy, buy, buy” or “sell, sell, sell”. Not exactly words from a buy-and-holder. More about buy-and-hold in a minute…

Believe it or not, my advice on “Mad Money” is for investors who are looking for stocks that will work over the next 12 to 18 months.

And I’d say that even trading within an 18 month time frame is still actively trading. More about buy-and-hold in a minute…

… Yes, I try to get people excited about stocks. Pardon me for encouraging people to own equities. It’s just that they’ve been proven to generate the best returns of any asset class over a 20-year period. I see and hear people all the time who thank me for getting them into stocks and enabling them to be a better client and a better investor. That’s what the show’s heart and soul is, and that’s evident from even a casual look-see.

Yes, but individuals shouldn’t own individual stocks. And even more imporantly, people shouldn’t get excited about stocks. Perhaps this is the biggest disconnect. Emotions work against one in investing.

I devote half of a broadcast to rigorously explaining what’s happening and what I expect to happen in the market, and then I load the show up with caveats, prohibitions, and the occasional warning that investors will lose money if they don’t do their homework or stick to fairly standard, widely accepted investing disciplines.

But your predictions about the market are no better than your predictions about any individual stock, which is slightly worse than market returns. For me, the best part of Mad Money is learning about the companies and what they do. I never knew about Turbo Chef or Sonic or TransOcean or Crystallex or many others until Jim mentioned them. Nonetheless, I’m not really all that better off for knowing about them. I shouldn’t be buying their stocks, so it actually tends to do more harm than good to get excited about their potential prospects.

Believe it or not, my advice on ‘Mad Money’ is for investors who are looking for stocks that will work over the next 12 to 18 months.

Here’s that 18 month time frame again. Jim, we need to think 18 YEARS not months!

When I say multiple times in every show that investors must do their homework, when I have devoted multiple broadcasts to explaining what that homework should entail, not to mention the book I wrote, “Mad Money: Watch TV, Get Rich,” to encourage and explain homework, I can’t imagine how anyone could think that this advice somehow gets lost in the din.

When we learn that picking individual stocks actually leads to poorer returns than just buying the whole market, we realize what a waste of time doing all this homework really is.

Every Wednesday, I play a game called “Am I Diversified?” to help viewers balance their portfolios. I can understand how someone who hasn’t really watched would miss all of the emphasis I place on such foundational and educational themes, but I can’t see why anyone would write a column about something without getting a little bit familiar with the subject at hand.

I’ve always thought this “Am I Diversified?” game was the silliest thing on the show. How in the world can you say owning 5 stocks is diversified? How about owning 16,000 stocks? Now we’re talking diversification!

… I have never before been criticized for telling investors to research the stocks they buy. If Farrell is to be believed, spending an hour per week researching each of the stocks you own is simply a waste of time. I am glad I didn’t listen to Farrell. I never would have made the hundreds of millions of dollars I made for myself and for my investors before I retired. And I am using the same skill sets now every night on my show.

Hmmm, you’re not really using the same skills as at your hedge fund. There, you traded on an intra-day basis and scraped to make a quarter of a point on each share. Really, how many stocks did you hold at your hedge fund for even 18 months?

Call me crazy if you want, but I just can’t accept that, all else equal, someone who diligently researches his or her stocks won’t make more money than someone who doesn’t.

Jim, please do some research into these lazy portfolios. Their risk vs. return over the long term blows away your stock picking technique. Visit IFA.com and do some reading.

If anything, buy and hold is a completely reckless and irresponsible strategy. This is why I have always preached “buy and homework.” There’s nothing wrong with buying a stock with the intention of owning it for years, as long as you’re willing to check up on that stock every week to make sure that your thesis for owning it hasn’t fallen apart.

Buy and hold of an individual stock as you are suggesting may be irresponsible. But buy and hold of a basket of index funds is genius. No taxes, no commissions, no bid-ask spread, no emotions, no homework.

Too often people regard buy and hold as a license to pay no attention to their investments and hide their heads in the sand when things turn sour. How many nuclear utility stocks did our parents own mindlessly with buy and hold? How many Enrons and WorldComs and Webvans and eToys.coms were bought and held? Don’t be silly, Mr. Farrell: You are the reckless one.

I can see that Farrell is talking apples and you are talking Microsofts. A misunderstanding of investment styles. We may have owned Enron, but only at 0.1% of our portfolio or less. Meanwhile we own all of the other companies that have done well by the good grace of capitalism. You are talking about buying one stock. Farrell is talking about buying ALL stocks. Farrell is talking Lazy Portfolios. You are talking Mad Money. We need a better dividing line between the two. Investing vs. Speculating. Buy and hold vs. Trading. Apples vs. MSFT. It is the misunderstanding you mention in your first paragraph and it is that misunderstanding you rely upon to entice more viewers, those who are looking to invest.

Having said all that, I’ve got a copy of your new book in which you talk about owning mutual funds. I’ll read and review soon.

How to submit a review in iTunes? Open the iTunes software, go to the iTunes Store. Click on the Podcasts category, then Business, then Investing. Find the Mad Money Machine podcast pictured. Click the picture. Click on Write a Review. You’ll of course need an iTunes account to write and submit a review. Email me your account name when you’re done to Feedback AT MadMoneyMachine DOT com.

Check out the book here or there:

And come back to this blog as I review the book over the Thanksgiving holiday.

I’ll be talking more about this on my show #86 to be released by 9 October. Subscribe via iTunes and get it as soon as it comes out. Or just come back to this website and listen through your computer.

Here was a snapshot of last night’s total quarterly giving since 1 Oct.

Here’s what it was when I made my contribution this morning:

And here’s an embedded view of the current tally:

Here’s an excellent, extended interview of Ron Paul hosted by Google at the Google campus.

Good luck to Manager Tools, I’m hoping that you actually WIN best business podcast for a 2nd straight year!

Thank you so very much. Keep the feedback coming. 206-734-4763

Then go to the bottom of the page and enter your name and correct email address and a comment about the show and click the “Submit” button at the right of the comments area.

Thank you so much!

I’ll talk some more about this on show 65. But a caller wanted to know how to compare the performance of his ETF that pays dividends against other investments. The charts lie, basically. Yahoo Finance and other charts are dumb and just plot the stock’s price. They don’t take into account reinvested dividends to give a more accurate representation of the investment’s performance in your portfolio.

Fortunately, StockCharts.com’s PerfChart comes to the rescue. See the difference on the Vanguard REIT ETF (VNQ) below:

This is the Yahoo Finance chart showing the gain in the STOCK PRICE ONLY.

This is the StockCharts.com PerfChart showing the gain in the INVESTMENT including reinvested dividends.

Anyone know of another stock chart site that gives the correct chart?

Second, Cramer’s feature article in New York magazine.

I’m working on show 65 to be released next Tuesday, June 5th. See you then.

But more importantly, I am working on a special feature for show 61. It is all about “SWR” which some refer to as Safe Withdrawal Rate and others as Sustainable Withdrawal Rate. But either way, it is all about how much you can take out of your investments annually and still keep enough in your account for all the other years you need to take out money too. When you consider factors such as the stocks vs. bonds mix, the rate of return on stocks, the inflation rate, the maximum drawdown, starting time and your longevity, etc, the SWR turns out to be much more complicated than simply saying “4%.”

For folks approaching or in retirement, the SWR is a critical piece of info to know in order to not run out of money and end up eating dry cat food (see below).

Even if you are nowhere near retirement, contemplating your SWR is a worthwhile exercise because, as Steven Covey of the 7 Habits of Highly Effective People fame puts it, we should “begin with the end in mind”. Young folks will understand the importance of saving and investing in concrete terms when they can figure their SWR. It can be a shocking exercise.

And finally, I will be taking our cat to the vet today to be, how shall I say, retired from his life on this earth. He has been with us for almost 15 years and in recent months has gone from being overweight to underweight; from being well trained in the scatological arts to being poorly behaved; from being frisky and athletic to being lethargic and crippled. He has been a good companion for us and we will miss him.

The Boyer Cat three years ago.
The Boyer Cat today

I assume a portfolio equal-weighted with each security. Starting with $100,000, this means $11,111.11 invested in each stock.The prices paid for these stocks were the opening prices on the day following his mention of them on his Mad Money TV show. Value stocks were bought Jan 4, Growth stocks Jan 5, and Speculation stocks Jan 8th. All prices as of mid-day Monday April 23rd and according to Yahoo! Finance.

The most extensive interview, lasting roughly an hour, was the April 9th interview on EconTalk. Some show notes are posted at the website.

Next up is The Index Investing Show‘s April 15th podcast release. Or here.

And finally, there is The Investing Revolution from March 23rd. Note that their most recent interview was with Eugene Fama. But, sadly, the interview cuts off after only a couple of minutes.

If you are a big follower of John Bogle or have read one or more of his books you may not learn much new from these interviews, but it is still fun to hear some Common Sense Investing from the master’s voice.

Also check out the March 23rd edition of Consuelo Mack WealthTrack.

Then there’s always his own blog.