OT Bank relaxes security. Acceptable?

[Kurt Ullman]

This particular bank brought down just the state one. That was the reason it took so long to get the money.

It was recapitalized immediately so that the money from the Federally guaranteed funds continued. More or less unabated.

The one-company standard is only if you are talking about a single business (be it Facebook or Enron). A single provider of mutual funds (assuming they offer enough different types of fund is not as bad. Mutual funds (at least in theory) give you a lot of diversity within a specific type of stock (they might own Ford, GE, Apple, and other similar companies in the Big Cap fund for instance) and owning different types of MF (a little big cap, a smidgen of small cap, a touch of foreign and a bit of bund funds) covers that kind of diversity.

[Kurt Ullman]

Bond funds are especially tricky since they are priced according to the current price of the bonds. So, when interest rates uptick, the price goes down and the bond itself pays less than current rates. If you hold the bonds yourself, this is less of a concern because you are most likely to keep it until it matures so the loss of price is largely theoretical. Both of the newsletters I subscribe to (FWIW) are saying still own inidividual bonds, but keep them 5-7 durations as the hit on prices will be less and you will lose less to inflation should it rear its ugly head again.

[(PeteCresswell)]

Per Kurt Ullman:

That's another prevailing fact that I have a problem with.

Pundit-after-pundit says that we have been and continue to be in a period with no inflation above-and-beyond the "Normal" values.

Each time I hear that I wonder if the guy actually shops for food and/or pays his own bills.

My own experience is that people on fixed incomes are and have been for some years being slowly inflated into poverty. I base that on local tax amounts, local service fees (like sewer), food prices at the local supermarkets, and devices that I have purchased for the second or third time and know the price for each purchase.

Something is missing here. The first thing that comes to mind is that the people citing low inflation are citing numbers that are not related to the real-world costs of daily life. And the cynic in me says that it tends to be in the interest of The Powers That Be to minimize the "inflation" numbers - whatever they may be. For instance the CPI not including fuel or food.....

[micky]

Nonetheless. There's always a reason. If you have your money in two places, when one fails the other will probably still be running.

Or if the IRS freezes your account for some reason, they'll only freeze enough accounts to pay what they think you owe. If that one account contains everything you own, you'll be stuck until you work things out with the IRS.

It still failed which is what I said. If it were to have failed this year, it might take months for such a law to get passed. Look at the Import Export bank, etc.

Of course the funds can be diverse. That wasn't what I was objecting to. I was objecting to it being the same company handling the funds. See my point about the IRS, and as I said, I plan to get back to you, but it's only been an hour.

[J0HNS0N]

Or the market could reverse and go north. Because you were unable to sell during the panic you might actually have made money when you again got access to your account.

No argument there. Investing itself can have consequences. Even holding cash in a bank can have consequences.

[J0HNS0N]

I remember when inflation was 10+ percent/year. These are GOOD times.

[J0HNS0N]

There are funds that include real estate.

And P may have a defined pension plan and just supplements it with investing. Unless you know all the facts it's hard to criticize a mans investing choices.

My folks took all their money out of an insured bank account and put it in an uninsured savings and loan to get a promotional free toaster and a higher interest rate. The savings and loan failed shortly thereafter and they lost it all.

Point taken. I am the proud owner of a GM stock certificate that is now quite worthless. Whoever thought GM would fail??

I disagree with you that P doesn't have a balanced portfolio. A fund can be a balanced portfolio. I don't know about Ps though. Many people are overstocked (pun intended) on funds which doesn't improve diversity, is counter productive, and just increases fees.

I've had my Vanguard fund for over 20 years now, including 2008. Never lost a dime. (Actually made quite a few dimes.)

Dunno. I've never used a financial advisor. They are really just sales people in disguise.

[(PeteCresswell)]

Per J0HNS0N:

Relative to 10%, yes - total agreement.

But I question the idea that we are not already experiencing significant "inflation" - quotes because I am not sure what the technical definition is.

In fact I do not even know if there is a number that purports to reflect real-world living expenses for us common people. Certainly CPI does not because it does not include fuel or food.

[(PeteCresswell)]

Per J0HNS0N:

Some years back, their cash fund "broke the buck" - i.e. actually had a negative return. Vanguard made up the diff internally, so users did not lose any money.

[J0HNS0N]

Fuel is way cheaper than it has been in several years. Food is going up here too. Wages are still stagnant though. When they take off that will accelerate inflation because companies will just pass it on. Maybe I can get on at McDonalds when the get their $15/hour raise.

[J0HNS0N]

It was to their advantage to do so. Avoiding the bad publicity was likely worth it.