question about your last newsletter

[Daniel Rohde]

In the news letter you mentioned that

"We are completing our walk through th
e bear market which began in March 2000. If you pressed me to make a SWAG,
I’d say we have at least 5-7 years remaining which will include some sharp drops and great up-trends"

The sharp drops you are referring to 10% 20% 30% drop then equal return. I know it is all about hunch and gut feeling. What would not surprise you?

Dan

[USPFA Team]

Dan,
Thanks.
..........................

What I like the most:

The opportunity to help a great group of guys (and gals).
The opportunity to express what I think. It forces me to take it from thoughts to writing.
Having fun along the way.
Reminding us all that wealth is more than money. There are other things in life far more valuable than money.
Getting to know hundreds of you guys over the past 13 years.

What I like the least:

Having to self-censor (often) when I know a related and important matter will be taken as politics and not for what it is and end up being a distraction to the main point. I try to write it anyway. I truly think both parties suck. I'm registered as an independent, so I am an equal opportunity abuser of those who wield power. But in the end, government decisions affect your wealth. They should be discussed by adults.

The occasional, but still rare pilot who calls and is short or abusive to any of our staff who are trying to help. I add them to the two strike list. Everyone can have one bad day. Two is a trend. After strike two, they are refunded and barred from membership in the future, unless they convince me of an amazing reason and life transformation. You have a no fly list for the person in the seat next to you. I do too. 🙂

The limited fund selection, the sometimes silly restrictions in the plans, and the arbitrary way the custodians circumvent their own rules. This whole thing should be about the pilots in the plan. Typically, it is about the custodian and fund companies and their profits.

What is happening with the government control and destruction of the worldwide economy that makes investing less about earnings and more about speculation. It will not end well.

.....................

All told, not a bad trade!

I like my tribe here.

Dave

[USPFA Team]

Dan,
Thanks! If I ever decide to write frequently, I will let you know.
Dave

[Jeff Clark]

Dave,

After looking at the three different newsletters that you prepare for the three airlines, I noticed that the Models for the FedEx 401(k) plan are decidedly more conservative (even the Aggressive Model is in MM, Bonds and Inflation-protected Secs). Could you please educate me on the reason for the apparent differences between the pilot group models?

Thanks so much!

Jeff

[USPFA Team]

Jeff,

Thanks for reaching out with your question.

As you know, we rank all of the funds in a plan relative to the funds in that particular plan. We generate a velocity score for each fund and then rank those funds in descending order, and use the 4 highest ranked funds.

So, how does a Fund get a high ranking? The system scans all of the funds in a plan and applies a proprietary screening process to identify those funds that have the greatest potential for an increase in price with the least amount of risk. We are looking for funds that have had a short term pull back in price or a bottom as we refer to it, and are steadily increasing in price. In order to qualify for a short term bottom there are criteria that have to be met. These criteria were triggered in other plans to trigger fund changes but in Fidelity they were not.

The answer really comes from looking “under the hood” at the funds in the plans. FedEx uses manly Vanguard indexed funds where the other plans use mainly actively managed funds. Among many differences, one difference is, in indexed funds it’s usually a smoother less volatile price movement where as in actively managed funds you get what we call “choppy” price action.

The end result is, although we did see some bottoming in the Fed Ex funds it just wasn’t enough for the system to make a change.

I hope this answers your question.

Regards,

Charlie

[David Lucca]

" I know it is all about hunch and gut feeling. What would not surprise you? "

1. The bear market lasting a very longer time than 5-7 years. The actions of the Fed will have to be unwound now, along with the over-leveraging that occurred before 2008, which must unwind and was not allowed to dramatically correct.

2. Worldwide financial crisis that erupts overseas and spreads systematically across the earth over a period of 1-4 years. This would include the "Cyprusization" of banking systems abroad and here.

3. Another -50% decline in the markets - would be our third in this bear market - and why we have a defensive strategy.

4. Severe deflation as a result of credit contraction. While the blogosphere is focused on hyperinflation, I am telling you that I believe there will not be hyperinflation anytime soon. The threat of deflation is a greater threat in my assessment and if or when it happens, you will wish for inflation.

... is that enough? 🙂

I've continued to right that the worldwide economic system has more systemic risk than at any time in our lives. These are possibilities, not guarantees. They are the largest potential dangers that we must be aware of and help guard against. There are of course, others.

At this point in our history, recency bias in the minds of the average guy on the street prohibits him from objectively assessing these risks as potential risks. They are outside his frame of reference. He will be hardest hit.

There will be opportunities that each danger will create, if or when they unfold.

Keep your powder dry,
Dave

• This reply was modified 10 years, 6 months ago by David Lucca.

[Daniel Rohde]

there are 2 things I enjoy when i read your writing.

1st your sense of humor and fun level of sarcasm.

2nd is the education and the fresh perspective you bring to the table.

I would thoroughly enjoy reading more your thoughts and opinions more frequently. If you ever get a daily blog i would love to sign up.

Thank you

Dan

• This reply was modified 10 years, 6 months ago by Daniel Rohde. Reason: spell check needs more coffee

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