Weekend Musings: Language and $2 million

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Since most of the MacroBusiness crew are under the weather, I thought I’d stick my oar in this weekend with some quiet musings. Two things to consider in this post: the notion of sound economic language, and how would you allocate $2 million for your retirement?

Language is for the Birds
Houses and Holes recently created an MacroBusiness official glossary (although I still wait for a permalinked separate page that we can update!) A recent article by Business Insider, with a great Australian spin by Marcus Padley at Business Day covers the other side – mainstream economic terms – or “standard phrasebook to reach for when you don’t know what’s going on”.

I may be guilty of using some of these terms (e.g “bargain hunters bidding up the market mid way through a correction”, or selling into strength – although this one is my core profit taking strategy when I’m trading) and sometimes I need to say something when I do my “Trading Day” daily stock market reports (although I try to be agnostic).

“Cash on the sidelines” Myth
Alan Kohler recently wrote about the end of QE2 and the inevitable bailout of Greece last week. An interesting article, but his last comment had me scratching my head:

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The global bear market is far from over but China is undergoing the greatest industrialisation the world has ever seen. Australia is going to get very rich indeed but the investment markets will underperform.

And then sometime in the next 12 months, Australians will wake up to the greatest buying opportunity they have ever seen because the world will realise what we have, and so will we. The cash that has been on the sidelines for two years will flood back into assets.

Readers not familiar with arithmetic need to know that when a share is bought it requires cash (or margin), and whoever sold the stock gets the same amount of cash in return. Hence, no change in cash. Hence, no cash on sidelines – ever. For a better take on the Cash on Sidelines myth and reasoning behind QE, here’s Mish Shedlock and John Hussman explaining “The Iron Law of Equilibrium”.

Trying to explain what is mainly random forces amongst the irrational behaviour of financial markets with pithy one-liners is the bread and butter of financial media and you’ve probably got so used to hearing them everyday (at least on the nightly news).

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So MB readers, if you can recall any other corkers (even from us) we’d like to hear them.

Here’s the Official MacroBusiness Glossary (OMG):

Politico-housing complex The great public/private partnership of the Australian housing quango that has virtually nothing in common with either capitalism or a “market”.

Invisopower! The myterious fog that surrounds the details of Australian banks’ offshore borrowing. A cloak deployed by regulators.

Bullhawk A half housing bull, half interest rate hawk. Examples include Christopher Joye, Adam Carr and Paul Bloxham

Disleveraging The idea that falling credit growth can be sustained forever without ever tipping into outright debt-deflation.

Futureboom! The concept of an ever expanding future mining boom that gets bigger the worse immediate data becomes.

Boganomics The strange nexus between anti-comptitive corporations and gullible but patriotic battlers.

Gittins! The Fairfax commentator with whom I have most in common yet cannot abide owing to an appalling generational gulf.

Business Hysteria My pet name for Business Spectator when it gets righteous in defence of vested interests.

MacroBation: furtive adoption of views expressed at Macrobusiness by MSM (via 3d1k)

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And here’s an unofficial list of readers suggestions:

Cashtration (n.): The act of buying a house, which renders the subject financially impotent for an indefinite period of time. (h/t The Nod)
Intaxicaton: Euphoria at getting a tax refund, which lasts until you realise it was your money to start with. (h/t The Nod)
Bubbleblind: A condition where the subject is of sound mind, and with functioning senses, but suffers from a complete inability to make out bubbles in his or her environment. (h/t jousting sticks)
Ruddprime: Transfer of peak housing prices to low LVR first home buyers (h/t Dennis)
Judas-Journo: Acts of deceit and betrayal by a financial non-MB journalist misleading the sheeple towards financial Armageddon. (h/t The Nod)
Sinocism: having a skeptical view of China’s economy. (h/t 3d1k)

$2 million for Retirement
On the back of my Asset Allocation for Superannuation articles (that I’m slowly building up into the definitive “this is how to do it” post, to be published next week), I thought I’d pose a couple interesting questions for you:

Q1: How would you allocate $2 million in your super, given you’ve just retired (at age 65), you don’t want to manage the capital yourself, but you want to have some input? Assume you are married/defacto (whatever the PC term is these days), house is paid off, but no other assets.

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Q2: How did I come up with the figure of $2 million (in 2011 dollars)? Is this a likely figure or pie in the sky for most?

Q3: Is this “comfortably” enough for retirement? Have you thought about “what is enough”? Try this calculator and see if it helps.

Give it some thought – I’d like to hear your answers (regardless of your age or situation) and have a good weekend, whilst the MB Team keep up the cold-flu tablets and chicken soup.

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