The Retiree Portfolio - Location Review

One slight problem with the previous allocation is that the retiree historically prefers making, at minimum, an annual contribution into the Roth IRA account. Now, ideally, the next best place for contribution is the traditional IRA, but it seldom occurs. Whatever fund I put into the Roth IRA must be one whose allocation in the total Retiree Portfolio can increase, even slightly skewed from the original percentages, without veering too far from the general objective for the portfolio.

REIT would not be a good choice-- REIT's are recommended to only occupy 10% of the *equity* portion of an S&D portfolio.

VISVX (small value) could be a good choice-- for someone much younger than the retiree, like, say, me for instance. Inflating VISVX's share in the portfolio introduces more volatility risk.

Which leads me to the next best two choices: VTSMX (total US market) or VGTSX (total international). To me, VGTSX seems to be the better of the two choices. Why? I don't doubt that the ratio of international equities will increase in the face of US domestic equities considering the free market international trade occurring nowadays. Short of world courts coming down hard on alleged unfair Chinese government subsidization of imports and reversing the ballooning trade deficit (the largest single-country deficit ever in US history), curtailing dollar devaluation, and the like, international will only grow in proportion, with possible temporary hiccups, for the coming years.

Without further ado, here's the updated equity allocation scenario:

VTSMX - 25% - 100% (25% allocation of total portfolio) into the taxable account.
VISVX - 5% - 100% (5% allocation of total portfolio) into the traditional IRA account.
VGTSX - 25% - 60% (15% allocation of total portfolio) into the taxable account, 20% (5% allocation of total portfolio) into the Roth IRA account, the remainder 20% (5% allocation of total portfolio) in the traditional IRA account.
REIT - 5% (I *might* eliminate. Need further analysis.) - 100% (5% allocation of total portfolio) into the traditional IRA account.

The Retiree Portfolio- Execution

Today, in the traditional IRA account, I displaced VWELX positions to build up the fixed-income allocations for the Retiree Portfolio:

VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

As of today, VTSMX position is now up to 16% in the taxable mutual fund account.

Retiree Portfolio Next Step: Location

The Retiree whose Retiree Portfolio I'm helping construct owns the following types of long-term investment accounts:

56% of the assets are in a traditional IRA account.
4% of the assets are in a 2006-contributed Roth IRA.
The remaining 40% of ther assets are in a taxable account.

With that being said, the Retiree Portfolio's asset location is envisioned as follows:

VTSMX - 25% - 100% (25% allocation of total portfolio) into the taxable account.
VISVX - 5% - 100% (5% allocation of total portfolio) into the traditional IRA account.
VGTSX - 25% - 60% (15% allocation of total portfolio) into the trad. IRA account, the remaining 40% (10% allocation of total portfolio) into the taxable account.
REIT - 5% (I *might* eliminate. Need further analysis.) - 100% (5% allocation of total portfolio) into the Roth IRA account.

The majority of fixed-income assets will be placed in the traditional IRA account.
VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

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Last night, in the Retiree Portfolio's taxable account, I executed yet another order to exchange from the Prime Money Market Fund into VTSMX, further advancing their eventual VTSMX position defined above by 20%. To date, that means 16% of the total Retiree Portfolio is now in VTSMX. I'll continue flushing out the remaining 9% VTSMX position very soon.

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After some thinking, here's an asset location update for The Retiree Portfolio:

VTSMX - 25% - 100% (25% allocation of total portfolio) into the taxable account.
VISVX - 5% - 100% (5% allocation of total portfolio) into the traditional IRA account.
VGTSX - 25% - 60% (15% allocation of total portfolio) into the trad. IRA account, the remaining 40% (10% allocation of total portfolio) into the taxable account.
REIT - 5% (I *might* eliminate. Need further analysis.) - 100% (5% allocation of total portfolio) into the Roth IRA account.

The majority of fixed-income assets will be placed in the traditional IRA account.
VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

Mixing Passive- and Active-Managed Funds

My coworker posed the following question today:

"If one already owns a total market fund, why buy Wellington?"

OK-- this question might be completely oversimplistic. We need to understand what sometimes turns out to be a complex web of circumstances that would whittle this question down and give it more relevancy.

So, first of all: colleague and I had began reading up on various investment strategies and, at one point in time, I thought we were largely on the same page. Lately, I've noticed he's focusing questions on stock picks, which, I have to be honest with you, Dear Colleauge, it's already challenging enough defining our own core portfolio, let alone be worried about something that's infinitely more complex than asset allocation (with few exceptions).

We were relatively debt-ridden at the time. Now, what are we taught to correctly do with debt? Yes, pay it down first before anything else. We've been dealing with that ever since.

Colleague is starting their savings from scratch. Colleague is in their late-20's to early 30's.

Colleague has previously expressed keeping their core portfolio simple, containing at most 2-3 core funds. These would include a total market fund, a fixed-income fund, and something else. Hopefully, Colleague sticks with this.

Now, Colleague and I have previously reviewed various Vanguard funds, one such being Wellington. Wellington's attraction stems from its built-in equity to fixed-income ratio (roughly 60/40), its value tilt, a factor which has commanded a return premium over the years, its proven ability to ride out the most recent bear market, 2000-2002, without significant value decreases, its high dividend rate for investors interested in and income fund, its classification as a balanced fund, and, most importantly, its extremely low expense ratio, practically unheard of for being an active-managed mutual fund.

Wellington sounds like it *might* be for an aggressive retiree due to its aggressive value tilt, equity allocation, while providing income in the form of dividends.

If someone *only* owned a Total Market fund in their portfolio, they're viewed as very young, with many years of life and career (which will mean a long series of contributions ahead of them), and very aggressive, without the need for dividends.

I had the Retiree Portfolio often discussed in this blog temporarily park a significant portion of assets in the Wellington fund when I was unable to expeditiously define the asset allocation because of the following characteristics: its one-stop solution, its AA mix, its blend, along with its superior handling of market downturns.

A hypothetical 50/50 mix of Total Market fund / Wellington would exhibit the following characteristics:

Stock Style Diversification

31 31 20
5 4 4
2 2 2


0 100 0
0 0 0
0 0 0

Considering this mix, the only issue I see is that the portfolio's equity portion seems tilted towards large-cap with little exposure to mid and small-cap positions for an early saver. Also, there doesn't seem to be much diversification with the fixed-income portion: it's 100% intermediate-term. However, everything else seems OK: it's balanced, it's blended, and the fixed-income durations don't go beyond intermediate-terms.

So, not a bad mix, depending on an individual's needs and goals.

RETIREE PORTFOLIO DRAFT #2

After some consideration, Draft #1 was seen as "a bit too aggressive" for a portfolio aimed to generate and maintain income, quell volatility, reduce risk, and introduce value stabilization by *some* S&D and diversification (yet not be aggressively eager about this), while simultaneously being SIMPLE and ELEGANT.

In fact, I'm shifting the focus of the porfolio composition from a multi-asset S&D (slice and dice) makeup into a portfolio that consists of 3 core holdings, with some smaller side dishes. The 3 core holdings are VTSMX, VGTSX, and... um, fixed-income positions of some form.

The 60/40 equity/fixed-income makeup is still maintained.

I still plan to divide the equity allocation into 50/50 domestic/international. Here's where I disagree with critics of my portfolio, who believe that I'm internationally over-weighted. My rationale is I want my portfolio to reflect the WAP (world allocation portfolio) and the global economic integration that's steadily increased over the past many years.

To address all these points, I might eliminate the following assets:

- REITs
- Int'l small-cap stocks
- Emerging market stocks

I'm also reducing positions in the following:
- Domestic value stocks
- Possibly the high-yield corporate bonds

When taking into account all of these factors, here's Draft #2, showing the direction the retiree's portfolio is heading:


VTSMX - 25%
VISVX - 5%
VGTSX - 25% (Total International Fund)
REIT - 5% (Again, I *might* eliminate. Need further analysis.)

VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

Morningstar's X-Ray provided the following asset breakdown for the Draft #2 portfolio:

Asset Allocation

Portfolio
Cash 3.04
U.S. Stocks 34.70
Foreign Stocks 24.35
Bonds 37.20
Other 0.71
Not Classified 0.00


Stock Style Diversification



25 26 19
10 7 4
5 3 1

Not Classified 0.00%



65 35 0
0 0 0
0 0 0

Not Classified 0.00%

RETIREE PORTFOLIO DRAFT #01

I can breathe a *BIG* sigh of relief now that I've roughly hammered a crude version of The Retiree Portfolio. It's like a 6-month long project finally seeing the light of day! Pretty exciting. Yup, I ditched bar-hopping in Hollywood for this-- and it was, well, *almost* worth it, I guess.

The characteristics of this portfolio include the following:

- It contains a 60/40 equity/fixed-income ratio overall asset allocation. Equity = stocks. Fixed-income = bonds and other safe stuff. Every asset, however, is in the form of funds.

- The portfolio has a value tilt to it, meaning, I emphasize value funds over growth funds.

- The portfolio has a small-cap tilt in the US portion of equities.

- The equity portion is split 50/50 between US and International. You'll find that within International there's a small-cap tilt-- for now.

- I want to introduce a value tilt internationally speaking. I may revise the portfolio by replacing the small-cap International asset with a value International fund.

- The portfolio is reasonably sliced and diced. Honestly, it's probably S&D'ed a *taaaad* more than I'd like it to be. Every asset listed does provide some diversification benefit in some way, whether it's in the form of higher returns or reduced risk.

- According to Morningstar, none of the below bonds are long-term, which is exactly what I wanted.

Without further ado, in %-ages, here, finally, in rough-hewn form, I bring you Retiree Portfolio, Rough Draft #1!

Total Market VTSMX 7.5
US large-value stocks VIVAX 7.5
US small stocks NAESX 3.75
US small-value stocks VISVX 5.6
REITs VGSIX 5.6

Pac Rim-large - Vanguard Pac Stock Index - VPACX - 7.5
Europe-large - Vanguard European Stock Index - VEURX - 7.5
Small cap - Vanguard Int'l Explorer Fund - VINEX - 7.5
Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX) 7.5

Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) 13.3
Vanguard High-Yield Corporate Fund Investor Shares (VWEHX) 13.3
Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX) 13.3

Being as it is, the above portfolio's asset allocation looks like this:
Cash 2.65%
US Stocks 29.75%
Foreign Stocks 28.85%
Bonds 37.65%
Other 1.11%

Also, the heaviest valuations are Large Value and Large Blend / Core, by far.

The above portfolio has a superior expense ratio of only *0.26%*. Other comparable portfolios have an expense ratio of *1.36%*.

I think I'm pretty happy with my first shot at this. I'll spend the next couple of days finalizing the actual target assets and begin the next phase of this effort: planning the execution of it all.

Stay tuned.

Disspelling Warren Buffett

Here's an excerpt from Larry Swedroe about his thoughts regarding WB and BRK:

This is from my second book, What Wall Street Doesnt Want You to Know, published in 2000
Buffettology or Mythology?
I think it safe to say that if individual investors were asked to name the one money manager they would want to manage their assets, the overwhelming majority would choose Warren Buffett. Buffett clearly has earned his reputation by delivering superior returns over a very long time frame. Whenever I discuss the superior performance of passive investing over active management, the question that I am most asked is: “If that is true, how do you account for Warren Buffett (and/or Peter Lynch)?” In fact, I happened to be asked that question during a phone call on the morning of March 1, 2000. In responding, I try to be very careful because even questioning the possibility that Buffett was lucky is almost sacrilegious. The following is a summary of my usual response.

·First: it is certainly possible, if not likely, that given the length of his superior performance Buffett is fully deserving of his guru status.
·Second: we only know that Warren Buffett “won” after the fact. If skill is truly involved, with so many thousands of active managers trying to win, how come far fewer won than would be randomly expected? In mathematical terms, the following analogy is appropriate. If there were as many monkeys playing the game as there were active managers trying to outperform, how come we end up with more monkeys winning than active managers winning? In other words, the distribution of the performance of active managers falls to the left of what a random (bell curve) distribution looks like. Yes, some monkeys win, and some active managers win. But how do we know ahead of time which will be the winners? Just as important, how do we know that the past performance of the winning active managers is a predictor of future performance? Certainly, we can agree that the monkeys’ past performance would have no value as a predictor. In the case of active managers, all the evidence suggests that past performance is also a very poor predictor. Even Morningstar admits that their 4-star and 5-star funds underperform, after they are designated as superior performers. So how do we know for sure if Buffett was lucky or a true guru? As you will see, it may be harder to tell than you thought, and you will have to decide for yourself.
·Third: another possible explanation for Buffett’s superior performance may come from the fact that he is not like other money managers. Typically, Buffett does not just buy stock in a company and take a passive position. His more usual involvement is as an active investor. He often takes an influential management role, including a seat on the board of directors, in a company in which he invests. It is certainly possible that it is Buffett’s superior business skills that account for the superior performance of his investment portfolio. The recognition of his superior business management skills may also account for why Berkshire Hathaway’s stock (the vehicle investors have for investing the Buffett way) has often traded at a large premium to the underlying net asset value (NAV) of its portfolio. This would not be the case if Berkshire Hathaway were an open-ended mutual fund that would always trade at its NAV. Investors must believe that Buffett’s influence in the company will enhance their performance and investment returns.

At the end of this explanation I typically offer my own conclusion, which is that I am somewhat of an agnostic on the issue. Clearly you cannot ignore his superior track record. However, my own inclination is that the answer probably is some combination of all 3 possibilities. It is very hard to prove the guru or luck story. Mathematics might suggest luck, but logic might provide another answer. And I have learned you are not likely to ever convince people who have already come to a conclusion that they should change their mind. The best you can hope to do is to get them to consider another possibility.

After concluding my March 1 phone call, I remembered that whenever someone presents something that is stated as “generally accepted wisdom,” it pays to check the facts, or, as I like to say: “go to the videotape.” Out of pure curiosity I decided to check the performance of Berkshire Hathaway’s stock. I made the random decision to check its performance from the beginning of the 1990s right through the previous night’s close, February 29, 2000. That seemed to me to be a reasonable time frame for a couple of reasons. First, as I stated, you only “know” an active manager is great after he or she has delivered superior performance for some reasonable length of time. So we need to have some length of time to observe Berkshire’s performance before choosing Buffett as our standard-bearer. Second, I think that most people would consider that a decade is a sufficiently long time to consider (although I might suggest that the longer the better). Finally, the vast majority of money that is invested in the market today has come in since 1990. The result is that very few investment dollars benefited from any experience prior to 1990. (This is not to suggest in any way that returns prior to that should be ignored.)

Given the “generally accepted wisdom,” I fully expected that I would find that the performance of Berkshire’s stock would have far outperformed the S & P 500 Index (a good benchmark as most of Buffett’s investments have been large-cap stocks). Remember that we have chosen with hindsight not just a great investor but possibly the single greatest investor. The decade of the 1990s began with Berkshire’s stock at 8,675. It closed on February 29, 2000, at 44,000, an incredible gain of 407%. The compound growth rate was 17.3%. To my surprise, however, while that performance did allow the Buffett “faithful” to outperform the S & P 500 Index, it was just by 0.2% per annum. Certainly, 17.3% per annum returns were great and he did beat the Index, although not by much. Again, this slight outperformance comes from the one manager whom we know only with hindsight is considered by most to have been the single greatest investor. Most investors who placed their faith in other gurus fared far worse.

I tried some other time frames, admittedly performing a bit of intentional “data mining” (intentionally choosing specific data points to “prove” your point) in one case. It is important to note, however, that some investors in all likelihood actually experienced the returns shown in the following examples. We can certainly imagine the following scenario occurring. An individual investor comes into a large sum of money in June 1998 (through an inheritance, sale of a company, exercise of stock options, etc.). Lured by the sirens of superior performance, the investor decides to choose the active management approach. One logical candidate is Berkshire Hathaway, which has gone from 8,675 at the beginning of the decade to hit its all-time high of 80,900 (June 19, 1998). An investor unlikely (and unlucky) enough to invest on that particular date would have seen the value of his or her portfolio fall 46% between then and February 29, 2000. During the same period, the S & P 500 ran up from 1,101 to 1,366, an increase of 24%, not counting dividends. That would have been a very painful experience, possibly testing the individual’s faith in Buffett’s guru status. Some might begin to wonder if he had lost his “touch” or even question now was it luck in the first place. If you decided that you don’t want to invest with Buffett any longer, now what paradigm do you follow? Do you try again to find that great guru based on past performance, having just seen that “fail” miserably? Or do you switch to passive investing? If you decide to stay with Buffett and he continues to underperform, when do you know it is time to “throw in the towel?” What will your criteria be for making that decision? You can see the dilemma. Again, I admit, I created a carefully chosen example, but one probably experienced by some investors.

I went back for a somewhat longer and less biased look, again, covering a period that was probably experienced by many investors. If you look at the 4-year period 1996–1999, Berkshire rose from 32,100 to 56,100. Every dollar invested grew by about 75%. The only problem was that every dollar invested in the S & P 500 Index grew by about 155%. Again, I want to make clear that neither this example, nor the other two, prove the Buffettology or Mythology case. It does, however, at least in my mind, open the issue to questioning. Only time can provide the answer. Even then we may very well be left to speculate.

Retiree Portfolio Update

Now that I've made, or at least set into motion, a few pivotal decisions, finally have I found a smidgen of time to resume constructing "The Retiree Portfolio."

Meanwhile, while I was slammed with other, more pressing life obligations, to stave off any issues of having the portfolio lose out on any market gains, while simultaneously softening any disastrous blows that could come from sharp market declines, here's what I did:

The total portfolio is split roughly 50/50 between a traditional IRA account and a regular mutual fund account.

As of March, 2007, the retiree also contributed into a new Roth IRA account.

(Speaking of Roth IRA's, one significant mistake we'd made months ago was, in our mad frenzy to consolidate all of the retiree's Roth accounts, more than 5 total accounts-- and I lost count, we'd pulled all Roth IRA funds out and held it in the retiree's usual bank checking account. This was withdrawn without penalty. Even so, HUGE mistake. What we should've instead done was taken the time to combine all of several Roth IRA accounts into simply one Roth IRA account. Oh, well.)

The default, universal rule was to let all of the assets, regardless of account or intention, sit in the highest-yield, least-riskiest fund by default. That default was Vanguard's Prime Money Market Fund (VMMXX) with a yield of 5.09% (IIRC). Being a California resident, we calculated the tax equivalent yield between the California Tax-Exempt Money Market Fund offered (which is exempt from federal *and* state income tax) and the Prime Money Market. We found the Prime Money Market offered superior returns, for the retiree's tax bracket.

For the traditional IRA, 100% of the amount has been sitting in a blend fund, the Vanguard Wellington Fund (VWELX). Here's a rundown of the fund's strategy and policy:

Investment strategy

The fund invests 60% to 70% of its assets in dividend-paying, and, to a lesser extent, non-dividend-paying common stocks of established medium-size and large companies. In choosing these companies, the advisor seeks those that appear to be undervalued but to have prospects for improvement. These stocks are commonly referred to as value stocks. The remaining 30% to 40% of fund assets are invested mainly in investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, as well as mortgage-backed securities.


Investment policy

Although the fund typically does not make significant investments in foreign securities, it reserves the right to invest up to 20% of its assets this way. Such securities are subject to country and currency risks.
The fund may invest in securities that are convertible into common stocks, as well as invest modestly in collateralized mortgage obligations (CMOs).
The fund may invest, to a very limited extent, in derivatives. The fund will not use derivatives for speculative purposes or as leveraged investments for the purpose of magnifying losses or gains.

What I like about this fund as a temporary stopgap because I was very short on time, but high on responsibility, for constructing the portfolio is that its makeup contains most of the vital characteristics that form the foundation of my future portfolio:

- It contains a roughly 60/40 ratio of equity and fixed income.
- Its expense ratio is very low for an actively managed fund: Expense ratio as of 11/30/2006 0.30%.
- It seems to focus on value equity.
- VWELX performed remarkably well, essentially experiencing minimal value depreciation, during the years 2000-2002 bear market.

For the regular mutual fund portion of the retiree portfolio, 20% of this portion was invested in VWELX as well. Another 20% was used to purchase Vanguard Total Stock Market Index Fund (VTSMX) on 2/23/2007. On 3/2/2007, after the recent significant 1-day stock market correction, I used another 2% of this portion to purchase more VTSMX shares.

The remainder of the regular mutual fund portion sits in VMMXX.

Now, what does my ultimate composition for the retiree portfolio look like? I don't have the final answers yet as I (hopefully) wrap up the final breakdown by this weekend, but it'll have the following characteristics:

- It will attempt to achieve a 60/40 equity/fixed-income ratio.
- It will be value tilted, but not as significantly as some other portfolios I've seen on the 'Net.
- It will loosely comply with the total world allocation portfolio, which breaks down the whole world's equity worth by country. Very roughly, I believe that ratio is close to a 50/50 US/Int'l ratio. What this means is I want the eventual portfolio to try to achieve a 50/50 US/Int'l equity ratio as closely as possible.
- I hope ultimately I'll be able to slice-and-dice the international equity portion of the portfolio.
- The fixed-income portion will contain no bonds > 5 years in maturation.
- The portfolio will be sliced-and-diced as much as reasonably possible.
- The portfolio will only be rebalanced once annually.
- Equity index funds will go into the taxable account, whereas fixed-income / bonds will reside in the IRA.
- REIT's will compose at most 10% of the whole portfolio.
- I'm still debating whether to include commodities or not.

So, for now, what does the retiree portfolio, constructed in the laziest of ways, look like overall?

Short-term reserves: 34.9%
Bonds: 19.6%
Stocks: 45.5%

The basic asset allocation isn't actually too far off from what I ultimately want to achieve. Not too shabby for, say, 30 minutes' worth of work, 2 months ago.

How has it done? Anecdotally and generally speaking:

- After the market correction @ the beginning of March 2007, I believe the portfolio only decreased by half the percentage that the S&P500 declined by.

Not bad at all. All that's left is to fine-tune percentages, pick the ideal funds, define an entrance strategy (shotgun, DCA, or VA?), and execute.

To be continued...

Damage of a Full-Service Broker

Here's an article about why the traditional "full-service broker" can be your retirement's worst enemy:

Bad Broker!

Political Investments

The following articles intrigued me as the public spotlight on political figures cast a glance at their investment savviness.

Check out Barack Obama's investments here.

And how about Chief Justice John Roberts' portfolio quagmire as discussed here?

I'm trying to find another Justice's portfolio, I believe that of Antonin Scalia, who was judged (pun intended) to have a sound, well-diversified low-cost asset allocated portfolio.

Just Plain Deluged Lately (plus some Retiree's Portfolio Update)

I've been utterly swamped lately, thus the lack of updates.

But, interesting how just when all the so-called analysts and experts exclaimed that stability had returned to the markets, the markets oh-so-subtly continue their plunge.

*Very* quick rundown because I'm severely lacking sleep:

1) As of today, my personal debt decreased from 5 to 4 digits. Right on schedule, and a "good job" to me!

2) The day after the first 4% market plunge of 2007, I took advantage of the situation to help The Retiree purchase $1K of VTSMX from their money market fund.

3) Similarly, today, after market close, I exchanged another $1K from the money market fund into VTSMX. This activity reflects a mix of DCA (dollar-cost averaging), or even value-averaging, plus that evil investing thing called "market timing." Nothing wrong with buying on the down, though.

4) Considering selling off current car because repair / maintenance cost projections make absolutely no sense at all, and have been shopping around for what I hope turns into the ultimate replacement-- the ultimate compromise car (according to my criteria). I chalk up my lessons learned here to simply not trusting my once-trustworthy BMW mechanic anymore. I view my situation partly as a result of being lied to, and partly as my lack of utmost due diligence by not getting a second PPI performed by a different certified BMW technician. Water under the bridge now.


I'm still very far from developing a hard strategy for constructing the retiree's portfolio, let alone defining methods of entry into their positions. Meanwhile, I feel it's safe to say that their eventual total stock market equity position is far off as well-- so these recent purchases shouldn't cause issue with their eventual asset allocation.

That's all for now.

Bye bye bye, Sub Prime.

The Beginning of the End of Subprime Lending.

Anyone old enough to read and understand this stuff remembers well enough the junk bond fiasco of the late 80's, and the technology bubble of the late 90's.

We're just about near the late 2000's, and here we are again, with "junk" loans.

This is the beginning of the end. This is exciting times. I can't wait for the bloodshed to ensue.

Of course, I only say this after having gotten out of the market myself.

What's the highest rate CD you've seen?

This weekend, I and my parents capitalized on a special CD offer from Wescom, a NCUA-backed credit union based in Southern California. The terms are a maximum deposit of $7000, with a 7% APY, for a term of 7 months. That's basically a gain of $285.83 due on term.

Although Wescom probably promoted this as a marketing scheme to lure customers in, I won't complain about receiving 7% even if there are limits on the deposit, even though it's in a fully taxable account. That money was earmarked for short-term cash reserves anyway, and has no effect on my long-term investment asset allocation.

Unfortunately, the deal ended with Wescom's month-long promotion of expanding branch hours to 5pm on Saturdays, and open on *Sundays from 10am - 4pm.*

Other developments:

I'm very close to gathering all my docs and numbers for my CPA, after doing bookkeeping all last week, and finally meeting up with her yesterday afternoon. For my S-corp, the situation doesn't look too dandy. However, for me as an individual, I stand to potentially score a pretty fat refund check. If this is the case, I'm going to have to modify some models of homeownership benefits vs. consequences. Hey, forgive me, I'm new to all this, so live and learn for me.

Overall, I might've not done too badly last year. Once I reconcile the last bit of statements and figures with my CPA, I'm eager to receive the refund check.

If the refund check falls within my expected amount range, it could be my 6-month emergency cash reserve right there. Then, I'll simply invest and accumulate aggressively with the remainder of my short-term reserve. I can finally see the light at the end of the dark tunnel of 2006.

Additionally, I've begun shopping for what I hope shapes up to be my last car swap for years-- hopefully *tens* of years. I realized that my usual BMW shop is, ultimately (pun intended), a business, and its interest is in keeping the business open and profitable. It took me a while to realize this, as I kept tossing around various incidents, contradictions, and moments of frustration around in my head. So, I'm interested in selling off my newly acquired 1998 BMW M3 sedan already-- after only a little more than 2 months' of ownership.

Its replacement seems to possibly be a 2005 Subaru Legacy GT, a great compromise car. This car has all the salient features-- great handling, ample power, 4-doors, lightweight, cream of the crop of safety ratings, all around, no bells and whistles (such as sunroof, or power / heated seats) but replete with sufficient modern-day comforts-- along with the bonus of being newer, under warranty, much lower mileage, projected significantly lesser maintenance / repair costs because it's from a reputable JAPANESE brand, and already experiencing hefty residual reduction, thus lowering my cost to entry. Because the intent is to own the car for a very, very long-term, value depreciation doesn't concern me much.

I'll update with a cost-benefit comparative analysis between keeping my current car and going for the Subie as, at the least, I'll benefit from the clarity in the numbers.