Smart Money by Bruce Williams

[jodi]

Anyone know anything about this guy? I started getting a daily e-mail from him when my other newsletter (might have been Mary Hunt?) stopped - they said in an e-mail that Bruce's newsletter would replace it. I've had a few of those "things that make you go 'huh?'" moments when reading his advice (such as when he said "dollar cost averaging? Whatever that is" in resopnse to a question about it), but here's the latest:

SMART MONEY
By Bruce Williams

DEAR BRUCE: The recent ups and downs in the market have made me question whether I have enough money in cash. Conventional wisdom used to recommend keeping an emergency nest egg of cash equal to six months of living expenses. As someone with a relatively low risk tolerance, I am wondering whether my current 5.2 percent money-market account for my rainy-day fund would be a good place to park more money. What percentage of a portfolio should be kept in cash? Where are the best yields and returns to be found for that cash? My husband and I hope to retire in 15 years.
--L.R., e-mail

DEAR L.R.: Let's address the rainy-day-fund idea. You observe correctly that it was a common notion to keep about six months' cash on hand for emergencies. That idea has somewhat outlived its usefulness, given the availability of instant credit. Put another way: Why have money sitting around for a possibility (and, in most cases, not a probability) at a low interest rate when you can get a higher rate and arrange for a line of credit to provide that instant rainy-day money if needed? The instant loan, credit card, line of credit, etc., can be paid back almost immediately by converting other investments into cash. That said, this notion is somewhat tempered because of your low risk tolerance. You clearly are aware of the fluctuations in the market, which would give many investors a stomachache. At this writing, if you had ridden it out, you would be more than OK. There are many institutions across the nation that are FDIC-insured and that are paying about 5 percent, with absolutely no risk. Your money market has little risk and is paying about the same. There's nothing wrong with a low risk tolerance, but it does, in essence, condemn you to a low return on your savings. If you're retiring in 15 years, I'm guessing your age is late 40s, early 50s. If so, I suggest you increase your risk tolerance, because you do have the time to overcome the ups and downs of the marketplace.
(end of article)

It sounds like he's advocating the absence of an EF due to the presence of instant credit! Anyone else think he's off base here, or do you think things have things changed?
(Personally, I think I'll be unsubscribing to him)

[sweeps]

Yup, poor advice. His strategy works fine as long as times are good... but sometimes people suffer a job loss, an illness, a disability, an expensive house or car repair, a stock market loss, or some combination of these. The last thing you want is to get buried in debt and spend years trying to recover.

[Broken Arrow]

Well, when I consider my "portfolio", I include my emergency/rainy day fund. It resides in my conservative investment category. Looking at it that way, my EF not only earns interest, but it allows me to pursue an aggressive investment strategy elsewhere. The fact that he considers them separate makes no sense to me.

That and I prefer the adage, "Better to have it and not need it than to need it and not have it." or worse "need it and have to pay interest for it".

[cptacek]

Originally Posted by Broken Arrow

"Better to have it and not need it than to need it and not have it."

Did you get that from the movie Lonesome Dove?

[Broken Arrow]

Never heard of that movie. Is it good?

I don't remember where I first heard it. Probably on the internet when someone else quoted it.

[cptacek]

It was a great western. It was actually a 6 hour mini-series in 1989. We have bought my dad the videos twice because he watched them so much they wore out.

[Jaun22]

I heard of that series. Never seen it myself though.

[jIM_Ohio]

Originally Posted by jodi

Anyone know anything about this guy? I started getting a daily e-mail from him when my other newsletter (might have been Mary Hunt?) stopped - they said in an e-mail that Bruce's newsletter would replace it. I've had a few of those "things that make you go 'huh?'" moments when reading his advice (such as when he said "dollar cost averaging? Whatever that is" in resopnse to a question about it), but here's the latest:

SMART MONEY
By Bruce Williams

DEAR BRUCE: The recent ups and downs in the market have made me question whether I have enough money in cash. Conventional wisdom used to recommend keeping an emergency nest egg of cash equal to six months of living expenses. As someone with a relatively low risk tolerance, I am wondering whether my current 5.2 percent money-market account for my rainy-day fund would be a good place to park more money. What percentage of a portfolio should be kept in cash? Where are the best yields and returns to be found for that cash? My husband and I hope to retire in 15 years.
--L.R., e-mail

DEAR L.R.: Let's address the rainy-day-fund idea. You observe correctly that it was a common notion to keep about six months' cash on hand for emergencies. That idea has somewhat outlived its usefulness, given the availability of instant credit. Put another way: Why have money sitting around for a possibility (and, in most cases, not a probability) at a low interest rate when you can get a higher rate and arrange for a line of credit to provide that instant rainy-day money if needed? The instant loan, credit card, line of credit, etc., can be paid back almost immediately by converting other investments into cash. That said, this notion is somewhat tempered because of your low risk tolerance. You clearly are aware of the fluctuations in the market, which would give many investors a stomachache. At this writing, if you had ridden it out, you would be more than OK. There are many institutions across the nation that are FDIC-insured and that are paying about 5 percent, with absolutely no risk. Your money market has little risk and is paying about the same. There's nothing wrong with a low risk tolerance, but it does, in essence, condemn you to a low return on your savings. If you're retiring in 15 years, I'm guessing your age is late 40s, early 50s. If so, I suggest you increase your risk tolerance, because you do have the time to overcome the ups and downs of the marketplace.
(end of article)

It sounds like he's advocating the absence of an EF due to the presence of instant credit! Anyone else think he's off base here, or do you think things have things changed?
(Personally, I think I'll be unsubscribing to him)

Two issues, the writer needs to understand personal finance and understand premise of an EF.

The second issue is the person which asked the question includes his EF in his asset allocation. Unless a person liquidates the EF when the market goes down (to buy more on a dip) then this premise is entirely off base.

The primary issue is the person asking the question is taking on too much risk. He should liquidate equity positions and create a bond or cash position. In addition, when the market does go down, this cash position should be liquidated to buy on the dip. If person is not comfortable with this, they need to create a larger cash position to begin with, and read up on asset allocation and rebalancing.

[Allie]

I subscribe to his daily question and answer. Some of his answers are WRONG. In todays column he suggests to an older lady to have her daughter put on her bank accounts rather then have power of attorney papers drawn up. THIS IS CRAZY AND HAS NO PROTECTION FOR THE MOTHER. If the daugher was sued or lost her house etc the mothers funds would be in jeapordy. It also would not protect the mom from elder abuse and from the daughter stealing the money. NOT SURE IF THIS GUY IS CREDIBLE.

[bjl584]

I've never heard of this gentleman, but I disagree with his premise to rely on credit as opposed to an EF.

[Joan.of.the.Arch]

The original post here is nearly 3 years old, so advice would be colored by the times--pre-recession. Still, it is not the advice I'd give, though I did in the past consider credit card a back up for emergency. I still do, though I've managed money so that I've never been backed into the credit card corner for an emergency. Actually, much less even is an emergency if your budget and savings are sufficient.

Bruce Williams has been on the air since I was in high school, and I'm now in my fifties! I listened to him in my early twenties; can't recall whether I listened to him while in high school. I always found his advice a little , eh, too full of self-important bravado or something. He ridiculed callers sometimes and spoke to them contemptuously. One recurrent piece of advice I recall to people inquiring about starting their own business or needing capital for an existing one was that if they were not willing to [2nd] mortgage their house for the dollars, then they were not dedicated enough to their proposal. So as I see it he was advising people to take more risk, to risk their family's living place.

Peculiarly I remember a phone call he got: A woman asking something about how to get the seller of a house to include window treatments in the purchase. He asked what window treatments were. She told him curtains, blinds, drapes. He made some scornful noises and told her not to bring such petty things into a real estate negotiation. Well, excuse me, but those window treatments could easily add up to as much as the kitchen appliances which are often negotiated in purchase. Big houses have big windows. Quality big house tend to have quality big window treatments, perhaps hundreds of dollars per window. After the caller hung up, he continued making fun of her.

He also recommended not negotiating prices when buying a new car! That, too, was petty. He figured by paying full price the dealership would appreciate him and give him better service. WTH?

He just had a bull in a china shop approach. Crash, grab, push, ignore other people. And he did not seem good at understanding personal finances on a level lower than his own.

[bjl584]

Is this like the newest spammer tactic or something? Lately posters have been resurrecting threads from years ago and commenting on them.

[bjl584]

Originally Posted by Joan.of.the.Arch

The original post here is nearly 3 years old, so advice would be colored by the times--pre-recession. Still, it is not the advice I'd give, though I did in the past consider credit card a back up for emergency. I still do, though I've managed money so that I've never been backed into the credit card corner for an emergency. Actually, much less even is an emergency if your budget and savings are sufficient.

Bruce Williams has been on the air since I was in high school, and I'm now in my fifties! I listened to him in my early twenties; can't recall whether I listened to him while in high school. I always found his advice a little , eh, too full of self-important bravado or something. He ridiculed callers sometimes and spoke to them contemptuously. One recurrent piece of advice I recall to people inquiring about starting their own business or needing capital for an existing one was that if they were not willing to [2nd] mortgage their house for the dollars, then they were not dedicated enough to their proposal. So as I see it he was advising people to take more risk, to risk their family's living place.

Peculiarly I remember a phone call he got: A woman asking something about how to get the seller of a house to include window treatments in the purchase. He asked what window treatments were. She told him curtains, blinds, drapes. He made some scornful noises and told her not to bring such petty things into a real estate negotiation. Well, excuse me, but those window treatments could easily add up to as much as the kitchen appliances which are often negotiated in purchase. Big houses have big windows. Quality big house tend to have quality big window treatments, perhaps hundreds of dollars per window. After the caller hung up, he continued making fun of her.

He also recommended not negotiating prices when buying a new car! That, too, was petty. He figured by paying full price the dealership would appreciate him and give him better service. WTH?

He just had a bull in a china shop approach. Crash, grab, push, ignore other people. And he did not seem good at understanding personal finances on a level lower than his own.

This sounds like the prevailing method in most radio programs today. The more of a jerk you are, the louder you are, and the more belittling you are, the more people think you are some kind of expert.