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Ray,

Your questions got me to wondering if my numbers were right about the buying I’ve done this year. So I looked at my spreadsheet of positions, and I need to make some corrections.

Since Jan 1, I’ve only done 69 buys ($246k face, at a cost of $164k). The figure I gave was from a different time-frame, Jul ‘10- to Aug ’11. From Jan ‘09 to present, I’ve done 195 buys, or roughly just 1.4 buys per week, or roughly 5 per month, which is hardly a frantic pace of buying. Gross face purchased during that time frame was $461k, at a cost of $314k, or a very modest expenditure of about $10,000 per month. That’s no more petty cash for many investors, who run far bigger portfolios than me.

Yes, I realize that “average investors” work with less money, but, also, their goals are different than mine. For me, a portfolio is a long-term insurance policy which I intend to never draw-down. It’s not a piggy-bank to be robbed on a whim. Unlike the average investor, my intention is that my portfolio will still be showing year-over year increases at my death, instead of having been spent down to nothingness. That model --accumulate and then distribute-- I regard as risky, reckless, and irresponsible, the financial equivalent of eating one’s seed corn. In other words, I expect to draw against my portfolio as the occasion arises, and if I need to spend all of it, I will. But my preferred plan is to spend only the money my money makes, never the principal which has to be increased each year, due to inflation. In other words, I am very serious about the term, “conservative investor” unlike Lokicious, my nemesis in this forum, who talked "conservative" but was merely excessively fearful and whose likely under-performance over the past three years, as CD rates crashed, is the reason for his disappearance from these discussions of how best to achieve a viable retirement-income from fixed-income vehicles.

Do I despise the CD crowd? No, because I count myself as one of them. What I do despise and find despicable is confusing a "savings strategy" (aka, a cash-management strategy) with an "investing strategy" and trying to make the former do the work of the latter. For a brief period in market history, truly fat rates of return were offered to those who bought principal-protected instruments. The rates were so good, and real inflation was so low, that a favorable rate of return could be obtained, so much so, the naive came to believe that this anomaly would persist, that they would be able to retire and live forever on their CDs and TIPS alone. Well, where is the 10-year note trading today? What is the real rate of inflation today? Under what set of circumstances will risk-free money ever again offer the rates of return it did for the briefest of times?

That's why I invest how I do, so that I can survive the coming bear market and come out the other side of it with enough of my trading account intact that I can rebuild. Them? The supposed "safe crowd"? They'll still be in the bread lines and on the dole for failing to have learned how to invest when markets were benign and they had the opportunity to recover from the mistakes that learning to invest requires. For trying to be near-term safe, they will end up being long-term risky. Their choice; their problem.

Charlie
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