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Re: Why a million may not be enough

Dividend yield + Bond yield is always safe, everything over that is a risk/reward tradeoff. How much chance of going broke is comfortable for you compared to being too miserly and leaving money on the table?
by Clearly_Irrational
Wed Apr 23, 2014 12:38 pm
 
Forum: Personal Finance (Not Investing)
Topic: Why a million may not be enough
Replies: 33
Views: 4554

Re: Real Estate Investing

ralph124cf wrote:Most real estate fortunes are built on borrowed money.


This.

Head to head a market portfolio beats real estate easily. Leveraged real estate on the other hand crushes it. That's not a free lunch though, just adequate payment for additional risk.
by Clearly_Irrational
Tue Apr 22, 2014 1:29 pm
 
Forum: Investing - Theory, News & General
Topic: Real Estate Investing
Replies: 11
Views: 907

Re: Savings Rate what do you include?

Personally I wouldn't consider car maintenance a one time cost. Look at your last several years worth of maintenance records and add the average monthly value into your budget.
by Clearly_Irrational
Mon Apr 21, 2014 5:36 pm
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 49
Views: 2615

Re: The dangers of backtesting and overfitting data - paper

Leeraar wrote: Even mathematical notions like distributions and probabilities are suspect when applied to finance, because there is no fundamental bedrock theory.


I'm not sure I agree with that. It seems like it's mostly just a more complicated version of the gumball jar problem.
by Clearly_Irrational
Mon Apr 21, 2014 2:43 pm
 
Forum: Investing - Theory, News & General
Topic: The dangers of backtesting and overfitting data - paper
Replies: 31
Views: 1777

Re: Monte Carlo Software

"all models are wrong, but some are useful" --George Box Monte Carlo simulations allow you to explore what are the prime drivers of your portfolio and how it will respond to various situations. One of the versions I like is using chunks of real sequence of return data. It's by no means per...
by Clearly_Irrational
Mon Apr 21, 2014 1:45 pm
 
Forum: Investing - Theory, News & General
Topic: Monte Carlo Software
Replies: 13
Views: 1197

Re: Stress-test your portfolio

Wait, can I laugh myself sick that his global stock crash scenario only produces a 17.1% decline?
by Clearly_Irrational
Mon Apr 21, 2014 1:39 pm
 
Forum: Investing - Theory, News & General
Topic: Stress-test your portfolio
Replies: 5
Views: 682

Re: Gold vs. Bonds as an Asset Allocation Hedge

I also find it relevant that over time periods longer than stocks or bonds existed, gold has been valuable world-wide throughout several thousand years. Except that that's not true. There are many arguments against gold, but I don't see how this is one of them. Even if we ignore all other uses, gol...
by Clearly_Irrational
Fri Apr 18, 2014 7:51 pm
 
Forum: Investing - Theory, News & General
Topic: Gold vs. Bonds as an Asset Allocation Hedge
Replies: 24
Views: 1976

Re: The dangers of backtesting and overfitting data - paper

I was thinking of the value of combing through this data. What I mean is, the French stock market outperformed the Italian one between 1950 and 1960.There's no obvious cause for this - French companies just has better results. How much academic brainpower should go into statistical analysis breakin...
by Clearly_Irrational
Fri Apr 18, 2014 1:56 pm
 
Forum: Investing - Theory, News & General
Topic: The dangers of backtesting and overfitting data - paper
Replies: 31
Views: 1777

Re: The dangers of backtesting and overfitting data - paper

I remember one string where a poster confidently stated that he had backtested his strategies and this gave him confidence in his approach. Feeling a bit like a smart aleck, I asked him if he had performed rigorous "future testing." I do believe in looking at past data and learning from i...
by Clearly_Irrational
Thu Apr 17, 2014 5:37 pm
 
Forum: Investing - Theory, News & General
Topic: The dangers of backtesting and overfitting data - paper
Replies: 31
Views: 1777

Re: Japan Does not Show That Stocks are Dangerous

After reading this thread I plan to continue to stick to CDs. In my view, Japan DOES show why stocks are dangerous. I don't want to be part of stock market irrational games. You're making a false assumption that CDs are safe. Sure, they have low volatility, but the expected return is somewhere betw...
by Clearly_Irrational
Thu Apr 17, 2014 11:23 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 79
Views: 4139

Re: Stocks: How Bad It Can Get

If you are talking about the long term discounted cash flow of an investment you are not describing the stock market. You'd be talking about individual stocks which comprise the market. It's pretty much the basis of all academic theory about the market and fundamental analysis so I don't think I'm ...
by Clearly_Irrational
Wed Apr 16, 2014 3:32 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: Japan Does not Show That Stocks are Dangerous

What is the CAPE at which I should not buy stocks? Values over one standard deviation for the market in question are usually a bad sign. Should I sell my stocks if CAPE goes above this level? Probably not completely, but you should really consider changing your AA in response. In this example, the ...
by Clearly_Irrational
Wed Apr 16, 2014 1:50 pm
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 79
Views: 4139

Re: Stocks: How Bad It Can Get

The next big drop will occur during "Ukraine, the invasion of." It's not an invasion but a civil war. Victoria Well, a US backed popular coup followed by a Russian backed popular secession. Now they're having internal troubles that could possibly lead to a civil war or an invasion. Of cou...
by Clearly_Irrational
Wed Apr 16, 2014 1:29 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: Stocks: How Bad It Can Get

This is actually a different issue, and I would agree with you. You are describing the underlying structure of the economy, not the stock market. Sort of the difference between climate and weather forecasting. I would respectfully disagree, the economy is whole different ball of wax with more compl...
by Clearly_Irrational
Wed Apr 16, 2014 1:03 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: Stocks: How Bad It Can Get

LH wrote:[OT comment removed by admin LadyGeek]


I prefer the gumball jar model but I suppose Plato's cave works as a fair approximation as well.
by Clearly_Irrational
Wed Apr 16, 2014 11:26 am
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: Stocks: How Bad It Can Get

Using words like correction and dip and bump etc suggest that there is underlying structure to the market. I.e. a set of real values that the market only approximates. There isn't. You're welcome to your opinion of course but that doesn't seem to match what the academic research is saying. The main...
by Clearly_Irrational
Wed Apr 16, 2014 11:25 am
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: Stocks: How Bad It Can Get

I would like to see if Great-great-great-great Grandpa invested a $1,000 in Vanguard Total Stock Market back in 1792, what would his account value be worth now? Also, his average performance for 222 years. :-) Well, I don't have data for 1792, but 1871-2013 inflation adjusted he'd have $13,281,130....
by Clearly_Irrational
Tue Apr 15, 2014 6:55 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: Stocks: How Bad It Can Get

Clearly, you may be interested in the longer article that this chart illustrates. The article looks at the history of the particular financial crises that brought about substantial changes in banking regulations, essentially a little history of how and why banking regulations have the form they hav...
by Clearly_Irrational
Tue Apr 15, 2014 5:48 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: A portfolio with a 7% yield? Your thoughts?

It's not even a particularly well designed high income portfolio. Sorry, not impressed. This is definitely a case of curve fitting rather than optimizing.
by Clearly_Irrational
Tue Apr 15, 2014 2:45 pm
 
Forum: Investing - Theory, News & General
Topic: A portfolio with a 7% yield? Your thoughts?
Replies: 9
Views: 1030

Re: SCV premium is a history/math story, its not scientific

I guess if it is not a risk story, then do we have enough data to assume it is some sort of story? The logical candidate being something behavioral, which really doesn't get a lot of respect in terms of potentiial for any sort of systematic phenomena. I'm at least open to the possibility of somethi...
by Clearly_Irrational
Tue Apr 15, 2014 1:24 pm
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2270

Re: Stocks: How Bad It Can Get

In the decades that I was building my retirement savings, the advice-givers were always cheerleading about stocks and talking about statistics that treated 1929 dismissively--mentioning it to brush it away as of no importance, because it was obviously such an extreme, unprecedented event that it sh...
by Clearly_Irrational
Tue Apr 15, 2014 12:57 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: How Bad It Can Get
Replies: 72
Views: 5379

Re: SCV premium is a history/math story, its not scientific

Oh, and of course we always need to remember that... "Investing is not a science."--John C. Bogle, Clash of the Cultures , p. 1. The "hardness" of science is on a spectrum. http://xkcd.com/435/ Despite that, I think it can be useful in investing as long as you understand the lim...
by Clearly_Irrational
Mon Apr 14, 2014 5:37 pm
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2270

Re: The Case for Dividend Stocks in Retirement (article)

"The math is such that a person living from dividend stocks ends up in the same place as a person selling shares, provided that the total returns of the two portfolios are exactly the same." It would seem that given a sufficient time horizon one cow keeps giving milk while the other cow g...
by Clearly_Irrational
Mon Apr 14, 2014 2:41 pm
 
Forum: Investing - Theory, News & General
Topic: The Case for Dividend Stocks in Retirement (article)
Replies: 27
Views: 2255

Re: What % of stock market "drive" is gambling?

So, like many things in life it's not really a black and white scenario, more shades of grey. At one end you have gambling, in the middle is speculation, and at the other end is investing. For me, the definitions would look something like this: Gambling: Highly variable, mostly dominated by luck ove...
by Clearly_Irrational
Mon Apr 14, 2014 2:30 pm
 
Forum: Investing - Theory, News & General
Topic: What % of stock market "drive" is gambling?
Replies: 41
Views: 3779

Re: New Housing Bubble and upcoming cycle peak

I am going to consider 14-16x a wash, and will have a hat time swallowing 17x or more The 15x is a fairly good rule of thumb, but I do think some allowances should be made for present day interest rates, as compared to historical rates. With very low rates, you can probably creep that number up a b...
by Clearly_Irrational
Sat Apr 12, 2014 4:17 pm
 
Forum: Investing - Theory, News & General
Topic: New Housing Bubble and upcoming cycle peak
Replies: 74
Views: 6385

Re: Mr. Money Mustache: Hero or Foolish?

I would actually be willing to bet the opposite. We'll never know, I suppose. Obviously some people have fulfilling jobs that they enjoy, but here are some large swaths of the population I think 95% would quit tomorrow if they could: Fast Food Workers Long Haul Truckers Janitorial Staff Low End Ret...
by Clearly_Irrational
Fri Apr 11, 2014 2:59 pm
 
Forum: Investing - Theory, News & General
Topic: Mr. Money Mustache: Hero or Foolish?
Replies: 252
Views: 28078

Re: Mr. Money Mustache: Hero or Foolish?

Despite all their complaining, people like working. I'd want to make the distinction between "work" as defined by trading your time for money you need to buy the necessities of life, and "work" that you might do if you were financially independent. I'm not saying most people wou...
by Clearly_Irrational
Fri Apr 11, 2014 2:26 pm
 
Forum: Investing - Theory, News & General
Topic: Mr. Money Mustache: Hero or Foolish?
Replies: 252
Views: 28078

Re: Mr. Money Mustache: Hero or Foolish?

But he has stated, numerous times, that he could triple his spending, stop doing side jobs, and have enough money to last until he's dead. That's financial independence. I agree, that would be financial independence. I did find this quote "All in all, we are now at a point where we could proba...
by Clearly_Irrational
Thu Apr 10, 2014 6:59 pm
 
Forum: Investing - Theory, News & General
Topic: Mr. Money Mustache: Hero or Foolish?
Replies: 252
Views: 28078

Re: Mr. Money Mustache: Hero or Foolish?

Mr. FI wrote:The point is, when you don't let consumerism run your life, and you're industrious, and think differently than the rest of society, you can benefit in a myriad of ways, one of which is financial independence.


Except he's not financially independent, he's self employed, there's a difference.
by Clearly_Irrational
Thu Apr 10, 2014 5:11 pm
 
Forum: Investing - Theory, News & General
Topic: Mr. Money Mustache: Hero or Foolish?
Replies: 252
Views: 28078

Re: This time it's different?

I think the one thing of value you can take away from this is that it's likely returns going forward will be lower . . . It seems like I've been hearing this for a very long time. I can't recall what it was, but I was reading something from the '50s or '60s the other day that said almost the exact ...
by Clearly_Irrational
Thu Apr 10, 2014 3:42 pm
 
Forum: Investing - Theory, News & General
Topic: This time it's different?
Replies: 16
Views: 2468

Re: This time it's different?

I think the one thing of value you can take away from this is that it's likely returns going forward will be lower than those in the 80s & 90s. There are a variety of headwinds that were previously tailwinds including valuations, interest rates and demographics. Despite all that, there is no rea...
by Clearly_Irrational
Thu Apr 10, 2014 2:51 pm
 
Forum: Investing - Theory, News & General
Topic: This time it's different?
Replies: 16
Views: 2468

Re: BH Greatest Hits: PE10 predicitive power

If your goal is to "predict" with some level of accuracy the returns over the next decade then ... you are living in a fantasy land where you can imagine the unimaginable, predict the unpredictable, and secure yourself a false sense of security an knowledge that at best is irrational, at ...
by Clearly_Irrational
Thu Apr 10, 2014 1:54 pm
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 3056

Re: BH Greatest Hits: PE10 predicitive power

While I think the comparison with Price to Peak Earnings or Tobin's Q would be useful and interesting, given the level of noise in the system I certainly consider R^2 of 0.43 vs R^2 of 0.38 "equal" within the bounds of the noise. Change time period and not only will you get a different pa...
by Clearly_Irrational
Thu Apr 10, 2014 1:23 pm
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 3056

Re: BH Greatest Hits: PE10 predicitive power

richard wrote:The problem with CAPE is it includes years which are no longer relevant. Vanguard found the two methods to have equal predictive power.


I wouldn't call R^2 of 0.43 vs R^2 of 0.38 "equal". A better comparison would be to Price to Peak Earnings or Tobin's Q.
by Clearly_Irrational
Thu Apr 10, 2014 12:13 pm
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 3056

Re: The case against small cap value

Prior to 1959, there was a long history of stock yielding more than bonds, I dunno, say 50 to 100 years. Now, CLEARLY this was because stocks were riskier than bonds, and investors needed to be paid to take the risk. Sure, and you still get paid more for owning stocks. Dividends payments were repla...
by Clearly_Irrational
Thu Apr 10, 2014 12:02 pm
 
Forum: Investing - Theory, News & General
Topic: The case against small cap value
Replies: 53
Views: 5152

Re: The case against small cap value

If you were in circa 1959 would you be saying the same thing about the stock/bond yield ratio? Great risk explanation then, stocks more risky, must payout more than bonds to get people to take risk, lots of history behind it then, had pretty much always reverted, sounded great. eminently reasonable...
by Clearly_Irrational
Wed Apr 09, 2014 10:54 pm
 
Forum: Investing - Theory, News & General
Topic: The case against small cap value
Replies: 53
Views: 5152

Re: The case against small cap value

My take is that the small premium is definitely risk based and will persist. All my analysis & reading suggests that BOTH the small value and the small growth categories beat small blend and the weight of evidence seems to be in small value's favor. Even if I'm wrong about small value though I'l...
by Clearly_Irrational
Wed Apr 09, 2014 7:39 pm
 
Forum: Investing - Theory, News & General
Topic: The case against small cap value
Replies: 53
Views: 5152

Re: BH Greatest Hits: PE10 predicitive power

PE10 is the best predictor we have, but it's still not all that great. It does tend to be more useful towards the extreme readings though. Personally I use it for two things: 1) To let me know when the market is getting far enough out of whack that I should be trying to figure out what's going on 2)...
by Clearly_Irrational
Wed Apr 09, 2014 6:17 pm
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 3056

Re: Brown bagging in a more formal office

PowDay wrote:Assuming you save $5 a day bringing your lunch, this bag will pay for itself in 6 months.

http://www.saddlebackleather.com/briefc ... ory=301406


Damn you, now I want one. That'll have to sit on the wish list for a while though, pure extravagance for me.
by Clearly_Irrational
Wed Apr 09, 2014 3:57 pm
 
Forum: Personal Consumer Issues
Topic: Brown bagging in a more formal office
Replies: 43
Views: 3093

Re: Help me understand Michael Lewis' "Flash Boys"

If you are talking about the fragmentation part of the issue, then yes. Operating on the same or multiple of the clock cycle with cooperative information exchange would obviate that intermediation completely. In lieu of synchronization (for technical or other reasons), people have also suggested a ...
by Clearly_Irrational
Wed Apr 09, 2014 3:34 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 164
Views: 8817

Re: Help me understand Michael Lewis' "Flash Boys"

zeugmite wrote:But synchronized period call markets don't require intermediaries except when they are actually necessary.


In order for that to work wouldn't all global markets (or at least all the significant ones) need to be synced to the same clock cycle?
by Clearly_Irrational
Wed Apr 09, 2014 2:33 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 164
Views: 8817

Re: Help me understand Michael Lewis' "Flash Boys"

If it is really a single market, then the market state should be synchronized. I agree, and yet GW pointed out earlier that it's not a single market and that the current loosely coupled system is auto-synchronized without external intervention. I got to thinking the other night and I'm wondering if...
by Clearly_Irrational
Wed Apr 09, 2014 12:02 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 164
Views: 8817

Re: Any Bogleheads here into real estate investing?(renting

leonard wrote:I didn't express confusion. You oversimplified my argument by saying real estate compared to stock investing.


I wrote a long reply but then realized we're just getting off topic and wasting time. We'll just have to agree to disagree.
by Clearly_Irrational
Tue Apr 08, 2014 2:33 pm
 
Forum: Investing - Theory, News & General
Topic: Any Bogleheads here into real estate investing?(renting out)
Replies: 53
Views: 3833

Re: Mr. Money Mustache: Hero or Foolish?

It is surprising to me how well some of you got paid for summer jobs. When I was in high school in the late 90s it was always a struggle to find summer employment and the only options were minimum wage/low skill jobs. Of course, this is in a rural part of the midwest. The first time I went to colle...
by Clearly_Irrational
Tue Apr 08, 2014 1:47 pm
 
Forum: Investing - Theory, News & General
Topic: Mr. Money Mustache: Hero or Foolish?
Replies: 252
Views: 28078

Re: Job Offer Negotiation / Interview Snafu

While money certainly has value it's certainly not the only consideration. Given the better commute and learning opportunities it sounds like you made a good choice. Being energized about your work makes a big difference.
by Clearly_Irrational
Tue Apr 08, 2014 1:03 pm
 
Forum: Personal Finance (Not Investing)
Topic: Job Offer Negotiation / Interview Snafu
Replies: 175
Views: 15238

Re: Why pay off your house?

I've seen lists similar to this several times and I don't understand why the order of priority is based on the type of debt rather than the after-tax interest rate. Is the assumption that the after-tax mortgage interest rate will always be your lowest-cost debt? Or is there something else that I'm ...
by Clearly_Irrational
Tue Apr 08, 2014 11:39 am
 
Forum: Investing - Help with Personal Investments
Topic: Why pay off your house?
Replies: 119
Views: 8620

Re: Help me understand Michael Lewis' "Flash Boys"

All that would be needed is to drop RegNMS, and let each exchange operate independently. That would vastly reduce the technical complexity of the markets, and it would eliminate the current need for every serious market participant to manage its own synchronization issues (exhibit 1: the Thor kludg...
by Clearly_Irrational
Mon Apr 07, 2014 6:44 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 164
Views: 8817

Re: Any Bogleheads here into real estate investing?(renting

So you are equating leaving money in a mutual fund and fund company like vanguard with leaving money with a true relative stranger. Are you honestly arguing those are equivalent? If so, your straw is showing. *shrug* I don't see it as a straw man argument. Yes, in both cases you're opening yourself...
by Clearly_Irrational
Mon Apr 07, 2014 5:15 pm
 
Forum: Investing - Theory, News & General
Topic: Any Bogleheads here into real estate investing?(renting out)
Replies: 53
Views: 3833

Re: How are you preparing for the coming bear market

Three things: 1) I have an AA that includes highly divergent assets, some of which are known to go up during market crashes (long bonds and gold) 2) Per my IPS, given current market valuations I'm doing research into why valuations are so high 3) I'm keeping an eye on my crash meter (most current re...
by Clearly_Irrational
Mon Apr 07, 2014 4:49 pm
 
Forum: Investing - Theory, News & General
Topic: How are you preparing for the coming bear market
Replies: 104
Views: 7862

Re: Why pay off your house?

I think it's a matter of priorities. If you have surplus cash flow and a decent emergency fund then I'd say they should look something like this: 1) Paying down high interest non-mortgage debt 2) Matched tax advantaged investing (like a 401k with company match) 3) Paying down low interest non-mortga...
by Clearly_Irrational
Mon Apr 07, 2014 4:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why pay off your house?
Replies: 119
Views: 8620
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