ITA Wealth Management

The classical music recommendation for this week is “The Late Piano Sonatas Opus 90, 101, 106, 109, 110 & 111. This is a Philips CD featuring Alfred Brendel.  It is a two CD collection.  If you enjoy soothing piano music composed by Beethoven, this CD comes with my highest recommendation.

No. 15

Lowell Herr

Photograph: “Pride of America” cruise ship in Hawaian waters.

The AA-Mosaic Portfolio is outperforming its VTSMX benchmark, -2.9% to -8.9%.  While we are not enamored with a negative IRR, at least this asset allocation based portfolio is performing much better than its index.  The AA-Mosaic is a young portfolio with only eight months of data.  All the details and access to the spreadsheet are available via Premium Content.

Lowell Herr

The “Top Ten Stocks” for the week of August 29th and access to the “Creme & Sour” lists are available through Premium Content.  There are several changes this week included a new stock that leaped to the top of the list.

Now that August is nearly over, MVO data and portfolio updates will begin to show up over the next ten days.  In addition, look for a new Power Point presentation on Asset Allocation.  This is presentation I will be giving at a Blue Plate Special on September 4th.

Premium Content available for $6.99 per month.

Lowell Herr

Photograph:  Northern edge of Kauai, Hawaii

• Homeless families
• Adults with mental, cognitive or physical disabilities
• Oregon Department of Human Services (DHS) participants
• Temporary Aid to Needy Families (TANF) recipients
• Men and Women who are incarcerated
• Seniors
• Children with specialized developmental impairments

Daily, Shangri-La changes lives. Shangri-La services reflect the unique individualized needs of those they serve and their community. Shangri-La employs nearly 450 people in the Mid-Willamette Valley and on the Oregon Central Coast. Approximately 150 employees have significant barriers to employment including various disabilities. People gain job skills, become employed and involved as active members in their communities. For some, this allows an increase of independence, while for others our services mean assistance with 24/7 daily living.

With over 80 service locations throughout 8 Oregon Counties, Shangri-La’s efforts continue to engage, inspire, and create the vision of Many Lives, One Community. Learn more about this innovative organization at www.shangrilaoregon.org.

Shares of the Lehman TIPS was added to the Mosaic2 Portfolio.  All the details can be found on the Premium Content side of the blog.

Look for the “Creme List” to produce some changes this week if all the data holds over the next few hours.  It looks like we will have a new top stock this week.

Lowell Herr

Premium Content access available for $6.99 per month.

Photograph:  Central Oregon on the Big Deschutes River

Talking Pennsylvanian

Once a Pennsylvanian, ALWAYS a Pennsylvanian!
About Pennsylvanians:
You’ve never referred to Philadelphia as anything
but ‘Philly’ and New Jersey has always been ‘ Jersey ‘
You refer to Pennsylvania as ‘PA’ (pronounced
Pee-ay). How many other states do that?
‘You guys’ is a perfectly acceptable reference to
a group of men and women
You know how to respond to the question
‘Djeetyet?’
(Did you eat yet?)
You learned to pronounce Bryn Mawr, Wilkes-Barre ,
Schuylkill , the Pocono’s, Tamaqua, Tunkannock, Bala
Cynwyd, Duquesne and Monongahela.
And we know Lancaster is pronounced Lank aster,
not Lan kaster.
You know what a ‘Mummer’ is, and are disappointed
if you can’t catch at least highlights of the parade.
You know what ‘ Punxsutawney Phil’ is, and what it
means if he sees his shadow.
The first day of buck and the first day of
doe season are school holidays.
At least five people on your block have electric
‘candles’ in all or most of their windows all year long .
You know what a ‘State Store’ is, and your
out-of-state friends find it incredulous that you
can’t purchase liquor at the mini-mart.
Words like ’scrapple,’ ‘pig souse,’ ‘crullers,’ ‘hoagie,’ ‘crick,’ ‘chipped ham,’ ‘dippy eggs’,
’sticky buns,’ ’shoo-fly pie,’ ‘lemon sponge pie’, ‘pierogies’
and ‘pocketbook’ actually mean something to you.
That’s PA slang for purse!
You can eat cold pizza (even for breakfast) and know
others who do the same. Those from NY find this ‘barbaric.’
You not only have heard of Birch Beer,
but you know it comes in several colors.
You know the difference between a cheese steak and
a pizza steak sandwich, and know that you can’t get a really
good one outside PA,
except Atlantic City on the boardwalk.
You live for summer, when street and county fairs
signal the beginning
of funnel cake season.
You know that Blue Ball, Intercourse, Paradise , Climax,
Bird-in-Hand, Beaver, Moon, Virginville, Mars,
and Slippery Rock are PA towns.
(and the first three were consecutive stops on the Reading RR).

You identify yourself as being from a specific county such as Blair County.

You know what a township, borough, and commonwealth is.
You can identify drivers from New York, New Jersey, Maryland
or other neighboring states by their
unique and irritating driving habits.
A traffic jam is 10 cars waiting to pass a horse-drawn
carriage on the highway
in Lancaster County .
You know several people who have hit deer more than once.
You carry jumper cables in your car and your female passengers
know how to use them.
Driving is always better in winter because the
potholes are filled with snow.
As a kid you built snow forts and leaf piles that were
taller than you were.
You know beer doesn’t grow in a garden,
but you know where to find a beer garden.

You know how to turn the lights out and it means something to say the dog jumped the fence over.
You also know someone who lives ‘down the lane’.
You actually understand all this and send it on
to other Pennsylvanians for former Pennsylvanians!
YEAH! THAT’S ‘PA’ AND WE LOVE IT
And send it to people that never lived in PA
and confuse Them
Because Nice Matters

If you were to advise your grandchildren on investing, what wisdom would you pass on as sage advice?  My very first words of advice is what I call “The Golden Rule of Investing” and it is, ‘Save as much as you can as early as you can.’ This requires discipline, long-range planning, denial of immediate gratification, and an understanding of the mathematics of compound interest.

When we look at the savings rate of the average American, we know they just don’t get it.  Instead of self-denial of material goods, Americans go into debt to purchase things they don’t need and do it on a credit card.  Paying high credit card interest rates is a sure way to dig a financial hole that is almost impossible to escape.  The credit card issue will need to wait for a later piece of investment advice.

Spend a little time with a spreadsheet working out how a small investment each month will add up to be significant dollars forty or fifty years in the future.  Saving is the most important factor when it comes to building a portfolio.  Do it now.

Lowell Herr

Photograph: Racers and holders at Alpenrose Velodrome.

Much attention is given to market indicies as they are used to convey information as to how well a stock market is performing.  If someone says, the market is up or the market is down, they are generally referring to the Dow Jones Industrial Average (DJIA), an index that goes back to the late 1800s.

For our benchmark, we use the VTSMX index fund as it covers a wider range of investments than does the DJIA 30 stocks.  Rob Arnott writes in “The Fundamental Index” that “an index is a portfolio that is objective, formulaic, transparent, historically replicable, and has low turnover.”  The VTSMX meets the Arnott standard.

In addition to the VTSMX, the Mosaic spreadsheets also include the S&P 500 under the guise of VFINX.  You will also see something I call the “Blend Index,” an effort to see how closely the portfolio is tracking the ETFs and stocks that make up the portfolio.

Lowell Herr

Photograph:  U.S. time trials at Alpenrose - Portland, OR.

This information is available on the Premium Content side of this blog.  Cost is $6.99 per month.

On the Premium Content side of the blog I posted the first of several entries on knowing when a possible entry point is merited.  It no longer seems prudent to buy as soon as possible, as advocated during the 1982-1999 bull market.

The Premium Content is available for $6.99 per month.

The following portfolio information was sent to me by someone I’ve corresponded with over a number of years. The following portfolio is a testimony to the benefits of following an asset allocation policy. - Lowell Herr

History of a Passive Portfolio

This portfolio is funded by profits derived from a part-time publishing business with three principals. The pension plan is a money purchase plan that uses Vanguard Fiduciary as the Trustee. Over the years it has varied between quarterly and annual contributions. Currently it receives $375 per quarter and is distributed in such way as to try to maintain balance in the various allocations. When I first started corresponding with Lowell (2001?) we had met on the NAIC e-mail list where Lowell was trying to interest people in the AA vs. stock selection debate. I decided this small portfolio would be a good test vehicle and in 1/2002 redistributed the existing fund allocations, Asset Allocation Fund, Health Care Fund and Growth Fund into Vanguard’s Large Value, Large Growth, Mid-cap Blend, Small-cap Value, Small-cap Growth, REIT, International Total Stock and Short Term Government Bond Index funds. The table below shows the allocations at the end of each year.

My newest target allocations goals are LV – 14%, LG – 7%, MV – 14%, MG – 7%, SV – 14%, SG – 7%, Inter – 18%, Emerge – 9%, REIT 10%. The mid-cap has evolved because when I began, Vanguard did not offer separate value and growth funds in this cap category. As you can see, 2008 has hit this portfolio as hard as others. Lowell convinced me not to hold a bond allocation after discussing the concept of a virtual allocation behind SS benefits and any other defined benefit pension income.

Current IRR 8.8%, S&P 500 4.1%