12/28/10 Bond Yields, Patience, and Detachment

'I'd to set the IRA on autopilot to retirement. I'm looking for 7-8% yields without getting too deep into junk or relying on equity positions.'

Tbolt- Man, you're speaking for an entire generation of boomers! This will be a long-winded reply, because I'm really just trying to organize my thoughts. In no particular order.

(a) By the time we see 7-8% yields, inflation (at least with regard to cost-of-living for most of us) will of course also be higher.

(b) One way to capitalize on the low yields that currently prevail is to refinance an existing mortgage.

(c) I-bonds and TIPS. What are we talking about today, 2%? That doesn't do it for me.

(d) Bonds in general. The entire asset class needs to correct. I just can't see 'bonds' and 'autopilot' in the same sentence right now. Whereas it's relatively easy to use 'bonds' and 'crash' in the same sentence.

(e) Stocks. I really think a pretty simple timing system might do it. Buy into an AZ (late August 2010 comes to mind), sell into a DZ (last week). Right. It's never that easy. 'Letting prices come to you' requires enormous patience (and detachment). 'Letting winners run' requires even more. But it's not impossible. I don't have a lot of patience, but I was able to 'Sell in May' this year and (aside from day trading) basically stay in cash until August- less successful at allowing positions to run.

(f) Hard assets. Real estate will rebound at some point. The trick will be weighing declining home prices against rising interest rates. All I can say is I think I'll recognize the ideal situation (at least, in my local area) when I see it.

(g) Let someone else manage the portfolio. Realistically, that's the only way to detach yourself from market madness and achieve autopilot nirvana.

All of the above is just another way of saying it's never easy to make money.