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Re: Bernstein: A Decade of Super-Low Returns

I'd like to see someone make the case for why PE1 today isn't a good measure of valuation. PE1 tends to be least reliable when you need it most because at the top of the cycle earnings are high and so are future expectations. Pretty much any alternate PE measure that does something to ameliorate th...
by Clearly_Irrational
Fri Apr 24, 2015 2:07 pm
 
Forum: Investing - Theory, News & General
Topic: Bernstein: A Decade of Super-Low Returns [1.4% for 60/40]
Replies: 232
Views: 23447

Re: Bernstein: A Decade of Super-Low Returns

schuyler74 wrote:As I understand it, the general equation is:

RealReturns = Dividends + DividendGrowth - Inflation


Where do stock price increases fit into that? For example, a company that does stock buybacks but not dividends..
by Clearly_Irrational
Fri Apr 24, 2015 2:02 pm
 
Forum: Investing - Theory, News & General
Topic: Bernstein: A Decade of Super-Low Returns [1.4% for 60/40]
Replies: 232
Views: 23447

Re: Can Shiller's PE10 (CAPE) Get Any More Discredited?

PE10 indication that US stocks were overvalued in 2011 is enough to convince it's not a winning approach. Why? Stocks were over-valued in 1997, that didn't mean that you should automatically dump your whole equity portfolio. You're confusing "over-valued" with "will crash tomorrow&qu...
by Clearly_Irrational
Wed Apr 22, 2015 1:25 pm
 
Forum: Investing - Theory, News & General
Topic: Can Shiller's PE10 (CAPE) Get Any More Discredited?
Replies: 81
Views: 5627

Re: Can Shiller's PE10 (CAPE) Get Any More Discredited?

Analysis mis-uses a tool to make a one signal market timing system then complains it has poor results. Surprised, not so much. PE10 can be used to infer the mean of the probability distribution of long term future returns, and even those who like it concede that it's far from a complete solution. Th...
by Clearly_Irrational
Tue Apr 21, 2015 11:33 am
 
Forum: Investing - Theory, News & General
Topic: Can Shiller's PE10 (CAPE) Get Any More Discredited?
Replies: 81
Views: 5627

Re: [retired guy said] terrible crash is coming

... The only thing that can go wrong is if we don't have either a huge crash or a huge gain in the stock market... I hate when that happens. Sounds like you need a third newsletter that advertises how to make money using options in the side-ways market. You could use the name "Mega Skeptic&quo...
by Clearly_Irrational
Thu Apr 16, 2015 3:12 pm
 
Forum: Investing - Theory, News & General
Topic: [retired guy said] terrible crash is coming
Replies: 71
Views: 8360

Re: [retired guy said] terrible crash is coming

It certainly is tough to account for irrational behavior. Market crashes do indeed happen, and whether EMH can adequately explain them or not, the facts don't change. Panics occur, often for unclear reasons, and fleeing investors sometimes trample each other on the way out the door. On an interesti...
by Clearly_Irrational
Wed Apr 15, 2015 5:13 pm
 
Forum: Investing - Theory, News & General
Topic: [retired guy said] terrible crash is coming
Replies: 71
Views: 8360

Re: Dr. Ron Paul politician says terrible crash is coming

Could we not agree that prices are correctly set at a given point in time, yet acknowledge that, if a group of investors suddenly decides to pull money out of the market, it's an action that can trigger a rush to the exits, thus a market crash? That doesn't necessarily mean EMH is wrong, just that ...
by Clearly_Irrational
Wed Apr 15, 2015 4:54 pm
 
Forum: Investing - Theory, News & General
Topic: [retired guy said] terrible crash is coming
Replies: 71
Views: 8360

Re: Dr. Ron Paul politician says terrible crash is coming

Support for that? Economists build models by fitting equations to past data. They may not be very good at predicting anything but anything that has happened in the past is supported by the model. They are experts at retrospection Take the EMH for example. A group of rationally calculating investors...
by Clearly_Irrational
Wed Apr 15, 2015 3:24 pm
 
Forum: Investing - Theory, News & General
Topic: [retired guy said] terrible crash is coming
Replies: 71
Views: 8360

Re: [retired guy said] terrible crash is coming

If a crash is coming there are two main possibilities: 1) It will be in response to an "event" of some kind and thus totally unpredictable 2) It will be in response to a realization of market over-valuation caused by some form of unwarranted credit expansion, similar to 1929, 2001 or 2008,...
by Clearly_Irrational
Wed Apr 15, 2015 2:07 pm
 
Forum: Investing - Theory, News & General
Topic: [retired guy said] terrible crash is coming
Replies: 71
Views: 8360

Re: Dr. Ron Paul politician says terrible crash is coming

tludwig23 wrote:but since economists can't accurately predict such crashes


Of course most economic models don't even support the concept of crashes, so there's that.
by Clearly_Irrational
Wed Apr 15, 2015 1:42 pm
 
Forum: Investing - Theory, News & General
Topic: [retired guy said] terrible crash is coming
Replies: 71
Views: 8360

Re: What is Sammy Savers net worth?

It all depends on your definition of net worth and which way you want to look at it. For me, I use the liquidation approach, as in how much cash would Sammy have if he sold everything and paid off his debts today. In that scenario the SS and Pension are worthless since they can't be factored. (at le...
by Clearly_Irrational
Fri Apr 10, 2015 5:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: What is Sammy Savers net worth?
Replies: 41
Views: 3658

Re: Do you think Ric Edelman is correct, never pay down mort

This is the wrong way of looking at it. Because money is fungible, you should care about the total gains and losses on all your assets and liabilities, not the percentage return on the rentals. What matters to the end result is not the percentage return, it is the return in dollar terms. If you hav...
by Clearly_Irrational
Fri Apr 10, 2015 10:46 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

Current 30 year mortgage rate = 3.5% Historical average return on equities = 6.5% All of the many other things equal, pretty much a no-brainer. Ok great, so you proved that increasing risk increases returns, hardly a surprise. Additionally, if you're going to use historical average equity returns t...
by Clearly_Irrational
Fri Apr 10, 2015 10:43 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

TradingPlaces wrote:- pay down in the order from high to low.


If cash flow is irrelevant, then yes that's the mathematically optimal way, but cash flow is relevant for all but a very few.
by Clearly_Irrational
Thu Apr 09, 2015 11:18 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

He has repeatedly rejected this practice for rentals Which is weird, I'd recommend just the opposite. Pay off your personal residence but use leverage for rentals. What are your reasons? I see paying off your home as a risk management decision. It's a guaranteed return that frees up cash flow. On t...
by Clearly_Irrational
Thu Apr 09, 2015 11:15 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Nailed it! $223,199/yr: magic# for making it in SF Bay A

Our joint income is around $800k and people on here tell me I shouldn't be spending $100k on housing! With an income of $800k the rule of thumb suggests you'd be best served by a house costing around $1.6mm or so. Some quick back of the envelope math suggests your annual PITI would be around $128k....
by Clearly_Irrational
Wed Apr 08, 2015 6:19 pm
 
Forum: Personal Finance (Not Investing)
Topic: Nailed it! $223,199/yr: magic# for making it in SF Bay Area
Replies: 117
Views: 11057

Re: Do you think Ric Edelman is correct, never pay down mort

We are looking at across 15 to 30 years.. So, does current valuation matters?? Please note that the cash flow will be dollar cost average invested over that 15 to 30 years. That's a fair point. Currently I'd tend to favor mortgage paydown over taxable investing but I agree that over time that situa...
by Clearly_Irrational
Wed Apr 08, 2015 11:57 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

I'd still put paying down the mortgage last. My mortgage, after the interest deduction, is around 3%. If I'm only getting 3% in my taxable for the next couple decades, I've got bigger problems than having a mortgage to pay for. It's a risk/reward trade off. You trade a guaranteed low return for the...
by Clearly_Irrational
Wed Apr 08, 2015 10:44 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

And you can't buy food with a paid-up mortgage. If you were truly that hard up it's pretty likely you'd be able to get a home equity loan or a new mortgage, or worst case sell your house. Yes, obviously you're trading some liquidity for reduced risk but I think you're overstating the case just a tad.
by Clearly_Irrational
Tue Apr 07, 2015 11:59 am
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

Why differentiate between mortgage and non-mortgage debt rather than simply ordering the debt from highest after-tax interest rate to lowest? For most people their non-mortgage debt will be significantly smaller in scale, by doing it in this fashion you prioritize free cash flow which for most prov...
by Clearly_Irrational
Mon Apr 06, 2015 3:08 pm
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

letsgobobby wrote:He has repeatedly rejected this practice for rentals


Which is weird, I'd recommend just the opposite. Pay off your personal residence but use leverage for rentals.
by Clearly_Irrational
Mon Apr 06, 2015 2:24 pm
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Do you think Ric Edelman is correct, never pay down mort

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 06, 2015 2:17 pm
 
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 209
Views: 16560

Re: Rental property returns

Exactly, 30% would be a no brainer , wouldn't it ? :happy. That would depend on the risk level. Anecdotally my two duplexes have been producing about 28% real returns on the cash I initially invested, of course that's because they're highly leveraged, very little money down deals. Normally I'd expe...
by Clearly_Irrational
Sun Apr 05, 2015 3:04 pm
 
Forum: Investing - Theory, News & General
Topic: Rental property returns
Replies: 39
Views: 3928

Re: Rental property returns

DVMResident wrote:<4-units have are governed by a simpler set of laws, regulations, and financing requirements.


Yeah, I knew that part I was just surprised that it applied to the tax credit.
by Clearly_Irrational
Sun Apr 05, 2015 2:43 pm
 
Forum: Investing - Theory, News & General
Topic: Rental property returns
Replies: 39
Views: 3928

Re: Rental property returns

MossySF wrote:That $8000 first-time homeowner credit was too tempting.


Yeah, for some reason it was available for multi-unit buildings of up to 4 units so I managed to cash in on it when I bought my duplex.
by Clearly_Irrational
Sun Apr 05, 2015 12:18 am
 
Forum: Investing - Theory, News & General
Topic: Rental property returns
Replies: 39
Views: 3928

Re: Rental property returns

MossySF wrote:As an accidental landlord, I started with better numbers than your projections. I bought in 2009 for $321K. Rent started at $1700/mo and it is now at $2250/mo.


I wouldn't have bought at those numbers either.
by Clearly_Irrational
Sat Apr 04, 2015 10:29 am
 
Forum: Investing - Theory, News & General
Topic: Rental property returns
Replies: 39
Views: 3928

Re: Rental property returns

EasilyConfused wrote:I the odds that you'll immediately find a property management company that doesn't completely suck are about 1/100.


Well, it's anecdotal obviously but so far we're 2 for 3. Our current two are great but we had to fire one that was terrible.
by Clearly_Irrational
Fri Apr 03, 2015 5:19 pm
 
Forum: Investing - Theory, News & General
Topic: Rental property returns
Replies: 39
Views: 3928

Re: Rental property returns

Vgopez wrote:$350000 SFH with a 30 year mortgage ( 20 % down), I am assuming rental income of $1800 a month to start with


My quick back of the envelope calculation suggests rent won't even cover PITI. That's my minimum standard so I'd pass without even doing a more detailed analysis.
by Clearly_Irrational
Fri Apr 03, 2015 5:17 pm
 
Forum: Investing - Theory, News & General
Topic: Rental property returns
Replies: 39
Views: 3928

Re: What are you up YTD?

YTD +2.68%
by Clearly_Irrational
Fri Apr 03, 2015 11:44 am
 
Forum: Investing - Help with Personal Investments
Topic: What are you up YTD?
Replies: 319
Views: 39166

Re: Bernanke's Blog: why are interest rates so low?

Which is only fair. Why should people expect a positive real return for doing nothing? You save so much productivity, you get that much back at a later time. We've been spoiled by the good times where capital was scarcer. That would actually be a serious problem, it would mean that businesses are h...
by Clearly_Irrational
Fri Apr 03, 2015 11:17 am
 
Forum: Investing - Theory, News & General
Topic: Bernanke's Blog: why are interest rates so low?
Replies: 52
Views: 6852

Re: Wise move to move some $ to cash before bear market?

Swensen is a smart cookie, I definitely agree with him on which markets to use passive and active techniques with.
by Clearly_Irrational
Thu Apr 02, 2015 2:26 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Ad Blockers

I do not use any blockers and since I switched to Apple and Safari for our browser it is no where near as bad as windows and Internet Explorer. In fact, I am not sure one could use a blocker with Apple even if they wanted. Their current operating system is Yosemite. I use Ad Block Plus with Firefox...
by Clearly_Irrational
Tue Mar 31, 2015 5:27 pm
 
Forum: Personal Consumer Issues
Topic: Ad Blockers
Replies: 34
Views: 1827

Re: Bernanke's Blog: why are interest rates so low?

Duration is an academic measurement, nothing more. It has little to no bearings on what will ACTUALLY happen to the value of the bonds. A higher duration means that it will be more susceptible to changes in interest rates, sure, but the magnitude of any effect isn't decided only by duration. One of...
by Clearly_Irrational
Tue Mar 31, 2015 4:48 pm
 
Forum: Investing - Theory, News & General
Topic: Bernanke's Blog: why are interest rates so low?
Replies: 52
Views: 6852

Re: Wise move to move some $ to cash before bear market?

Maynard F. Speer wrote:You could call the world's (at the time) 2nd largest economy bad out of sample behaviour for buy-and-hold - as well as various 20-60 year stretched in the US


I would agree actually, which is why my IPS has clauses to deal with excessive over-valuation conditions.
by Clearly_Irrational
Tue Mar 31, 2015 12:17 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Wise move to move some $ to cash before bear market?

Maynard F. Speer wrote:It's something subtle about market behaviour, and it shows the timing system is vulnerable to less certain markets


Personally I'd call that bad out of sample behavior.
by Clearly_Irrational
Tue Mar 31, 2015 10:20 am
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Wise move to move some $ to cash before bear market?

It's a superset. The argument remains that nothing prevents the funds from using a simple mechanical rule and doing nothing else. The fact that they fail in such majority should tell you that it's hard . I'm sure the quantitative models of VAA looked great when back tested, then they went straight ...
by Clearly_Irrational
Mon Mar 30, 2015 11:44 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Wise move to move some $ to cash before bear market?

I don't really buy this. What makes it "active" is that it makes decisions depending on market conditions. The moving average is a signal like many others, to the more sophisticated funds. Vanguard Asset Allocation was "quantitative" (maybe the word you were looking for), and it...
by Clearly_Irrational
Mon Mar 30, 2015 7:30 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Wise move to move some $ to cash before bear market?

ogd wrote:Darn right it's data mining. If it was this simple, tactical allocation funds would work instead of being big time losers.


To be fair, this is a passive timing system wherein most tactical allocation funds are active allocators, not the same thing.
by Clearly_Irrational
Mon Mar 30, 2015 6:48 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Ad Blockers

I use Ad Block Plus and Element Hiding Helper. The first catches nearly everything, the second lets me manually block anything that got missed and is annoying enough to bother with.
by Clearly_Irrational
Mon Mar 30, 2015 6:05 pm
 
Forum: Personal Consumer Issues
Topic: Ad Blockers
Replies: 34
Views: 1827

Re: Wise move to move some $ to cash before bear market?

2. Possibly moving to a 65/35 AA for my peace and less anxiety That seems wise. If you're stressed now you're going to totally freak when things really start happening. Personally I'd say even 65/35 might be too aggressive for you but that's just off the cuff, you'll need to do some more soul searc...
by Clearly_Irrational
Thu Mar 26, 2015 2:10 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Wise move to move some $ to cash before bear market?

Because that would be blatant Market Timing , not more reasoned Tactical Asset Allocation... If we're talking moving to cash I think I'd call that market timing even at 30%. If he's talking about just being nervous with his current risk level and changing his stock/bond ratio to something more comf...
by Clearly_Irrational
Thu Mar 26, 2015 12:41 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Wise move to move some $ to cash before bear market?

I just read an article that described how to prepare for a bear market and listed the history of the previous bear markets over time. Since we are at an all time high , a bear market is coming , nobody knows when. The author suggested taking 20%- 30 % and putting it in cash to hold and buy in the b...
by Clearly_Irrational
Thu Mar 26, 2015 12:36 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 116
Views: 11853

Re: Excess Cash - Play Monopoly or Repay Debt?

malabargold wrote:All that debt and you only have $500-1000 per month in extra cash?
This is scary.


That's after their investing and $5k worth of fun money so not quite as strapped as it sounds.
by Clearly_Irrational
Tue Mar 24, 2015 6:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Excess Cash - Play Monopoly or Repay Debt?
Replies: 67
Views: 5365

Re: Excess Cash - Play Monopoly or Repay Debt?

To me, having a 2% loan is better than a 5% loan....I mean even paying down the personal residence loan would be better than the negligible amount of the auto loans - it's not as if there is a cash flow issue here. The student loan may make the most sense just because it's a variable rate - but it'...
by Clearly_Irrational
Tue Mar 24, 2015 10:43 am
 
Forum: Investing - Help with Personal Investments
Topic: Excess Cash - Play Monopoly or Repay Debt?
Replies: 67
Views: 5365

Re: Excess Cash - Play Monopoly or Repay Debt?

Not understadning the posts recommending paying off Auto & Student loan debt. Some of the mortgages have rates twice as high. I guess it depends on your tax bracket. Unless you are driving beaters (which I doubt), I don't see any reason to pay off those auto's ahead of schedule when you have 5%...
by Clearly_Irrational
Mon Mar 23, 2015 10:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: Excess Cash - Play Monopoly or Repay Debt?
Replies: 67
Views: 5365

Re: Excess Cash - Play Monopoly or Repay Debt?

I like rentals so you won't get any guff from me about that. That said I think a bit of de-levering might be in order before buying more properties, more from a safety than returns perspective. I'd recommend the following: 1) Pay off the car loans for sure, you've got $37k in cash coming and only ow...
by Clearly_Irrational
Mon Mar 23, 2015 4:51 pm
 
Forum: Investing - Help with Personal Investments
Topic: Excess Cash - Play Monopoly or Repay Debt?
Replies: 67
Views: 5365

Re: Buy a rental property in this market ?

denovo wrote:A tenet of Bogleheadism is that speculation of the stock market is a waste of time. It's the same for any other financial market including real estate.


I would agree but argue that speculation in the real estate market means flipping properties rather than buying rentals.
by Clearly_Irrational
Thu Mar 19, 2015 1:34 pm
 
Forum: Investing - Theory, News & General
Topic: Buy a rental property in this market ?
Replies: 42
Views: 2946

Re: Buy a rental property in this market ?

I suggest you go physically look at 100 properties. Analyze the numbers. PITI, taxes, cash flow, depreciation, etc. You've got to analyze 100, not 10 or 20. This is a good suggestion, I looked at a huge number of properties each time before I bought the ones I have now. It gives you a good feel for...
by Clearly_Irrational
Thu Mar 19, 2015 11:34 am
 
Forum: Investing - Theory, News & General
Topic: Buy a rental property in this market ?
Replies: 42
Views: 2946

Re: Buy a rental property in this market ?

this is not the time i'd recommend non-professional RE investors dipping their toes into market rate SFR rentals. Personally I like Duplexes better anyways. Since you're not competing with people buying their "dream home" prices tend to be more rational based on the expected rents. Additi...
by Clearly_Irrational
Thu Mar 19, 2015 11:03 am
 
Forum: Investing - Theory, News & General
Topic: Buy a rental property in this market ?
Replies: 42
Views: 2946

Re: Rental property vs. REIT

That's only true in the very short term, Vanguard and others have published research that find in the longer term REITS behave significantly more like the physical real estate they own than equities. That sounds unlikely, REITs have a pretty high correlation to stocks (0.59) (Simba data 1972-2014)....
by Clearly_Irrational
Thu Mar 19, 2015 11:01 am
 
Forum: Personal Finance (Not Investing)
Topic: Rental property vs. REIT
Replies: 38
Views: 3247
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