MMM-089: A Dynamically-Adjusted Risk Capacity?
Free markets at work. Feeling risk-averse? How about adjusting your risk capacity? Santa Claus rally. Really cheap portfolios. Time to buy silver coins? MMM: it’s delicious! Guru on impending catastrophes. Tool on what to read next. Cramer book giveaway.
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Topics in this week’s show include:
- An example of the difference between centralized planning and free markets
- Winter’s first snow
- Thank you for commenting in iTunes!
- Please use the widget at the right to vote for your Presidential choice. Let me know who my audience wants. No personal info required. (Pity the poor fool that wins!)
- Get your MMM 2008 Compact Calendar
- Let’s talk about risk. How do we protect ourselves from a potential dollar crisis? If you invested right now, would you still put everything in stocks or would you diversify into bonds and suffer a smaller drop at the expense of lower long-term gains?
- Bogle says to be risk-averse in 2008. But if you are genuinely fearful of impending disasters, doesn’t at mean your risk capacity is now lower? Is Risk Capacity dynamically adjustable?
- Mark Hulbert talks about the Santa Claus rally.
- The 13.65 basis point portfolio. Includes a commodities fund. The SMILER portfolio comes in at 22.7 basis points. Cheap!
- An Exchange Traded Note (ETN) is backed by the company. You have to have faith in the company that created the ETN not to go bankrupt.
- I’ve taken the Red Pill: Federal Reserve -> Dollar Crisis -> Buy Gold -> Survivalists -> stock up on canned goods. Be ready for when the SHTF.
- Our Guru says we need to be ready for four impending catastrophes.
- This week’s Tool helps you figure out what to read next.
- Take a look at my new del.icio.us bookmarks. Enter the show number for sites I’ve tagged for past or upcoming shows.
- Check out the Current Melt Value of Coins at coinflation.com. (I just love Mercury Dimes!)
- We continue talking with Mark Hebner about Step 11: Risk Exposure in which he explains the value of diversification. He says you should make an attempt to measure the risk of your current portfolio (see a recent Tool of mine!).
- I give away two CD sets called An Audio Journey to Tradeless Nirvana and I give away one copy of Cramer’s new book.
- I want to give away ANOTHER of Jim Cramer’s new book Stay Mad for Life on show 91. All you need to do is refer to MadMoneyMachine.com in some other web page, forum, or blog comment. You may enter more than once!
Music from music.podshow.com:
ALTA PLAZA – XRAY DOGS
Dokken – Santa Clause Is Coming To Town – Monster Ballads Xmas
Runaway Train – Under Feather
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Could the IFA 100 lose? If so, then what?
I think the Law of Diminishing Marginal Utility is the singe biggest factor in the individual’s Risk Capacity which changes dynamically with perception of wealth and life events and correlates well to the individual’s age. So naturally the emotion of pending 2008 recession would cause someone to change their risk capacity. However this tempation shoul be avoided as short term “noise”. If you could graph an individuals risk capacity over time, I would guess the result might be like a reverse S&P 500 index with lots of volatility and short term noise but long term trend of lowering risk like the IFA portfolios choices provide. I wonder if IFA recommends when, how often, and what circumstances should an individual re-take and change their risk capacity survey.
Great show to think about a very complex topic. Keep them coming
“Dynamically adjusting risk capacity” is a fancy word for plain old market timing. Maybe it sounds better, or feels like something more sophisticated but that is what it is.