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Re: I'm a genius!

I was short the market until late Feb 2009. I got out when Cramer threw in the towel. It seemed to me that if the perma-bull was giving up then we were pretty darn close to the bottom.
by Clearly_Irrational
Tue Jul 22, 2014 7:16 pm
 
Forum: Investing - Theory, News & General
Topic: I'm a genius!
Replies: 15
Views: 3847

Re: P/E Ratio: How do YOU interpret/use it?

Mostly I ignore it, with three caveats: 1) I keep an eye on the relative valuation of the total market (PE10, Tobin's Q, Price to PeakPE) to see if things are getting irrational 2) PE10 is part of my composite crash indicator. Based on those items and a few others, my IPS allows me to suspend the no...
by Clearly_Irrational
Tue Jul 22, 2014 6:59 pm
 
Forum: Investing - Theory, News & General
Topic: P/E Ratio: How do YOU interpret/use it?
Replies: 25
Views: 1055

Re: Gold, Silver, Copper

Don`t look now but the gold, silver and copper train is leaving the station. It`s a shame that most Bogleheads aren`t diversified into at least a small percentage of these asset classes. The sentiment has been very negative and isn`t that the way it`s supposed to be at low price levels? I happen to...
by Clearly_Irrational
Tue Jul 22, 2014 6:40 pm
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 41
Views: 3338

Re: How to track expenses to the penny?

Originally I used quicken and saved all of my receipts. That was a lot of work though, nowadays I just try to use my debit card for everything and Mint tracks it all for me. Unless you're seriously broke penny accuracy probably isn't necessary. At my current income $5 accuracy is good enough.
by Clearly_Irrational
Tue Jul 22, 2014 6:22 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to track expenses to the penny?
Replies: 33
Views: 1849

Re: Should market valuations be completely disregarded?

You may think that but in the last 15 years gas has gone in my area from $0.85/gal to nearly $4/gal, and everyone still gets up and drives to work every day just as they always have. Right, but we're talking about real increases not just inflation based ones. When I got my first car gas prices in m...
by Clearly_Irrational
Tue Jul 22, 2014 5:37 pm
 
Forum: Investing - Theory, News & General
Topic: Should market valuations be completely disregarded?
Replies: 12
Views: 578

Re: Should market valuations be completely disregarded?

Valuations matter, but there's nothing I can do about them. I consider it much like the price of gasoline...the price of gasoline matters to me, but I still have to fill my tank so I can drive to work regardless of the price. Well, sort of. It depends on how much the price of gas goes up: 2x Time t...
by Clearly_Irrational
Tue Jul 22, 2014 5:06 pm
 
Forum: Investing - Theory, News & General
Topic: Should market valuations be completely disregarded?
Replies: 12
Views: 578

Re: Value Overvalued

Suppose for a moment that you're right. Do you have a timing system that switches between the two that you've successfully backtested and checked against out of sample data? If not then this information isn't even theoretically actionable.
by Clearly_Irrational
Tue Jul 22, 2014 3:59 pm
 
Forum: Investing - Theory, News & General
Topic: Value Overvalued
Replies: 23
Views: 2049

Re: Do any bogleheads hold the "Larry Portfolio?"

No but I use a similar concept. 30% Small Cap Value 20% Emerging Market 30% Long Treasuries 20% Gold (Rotated with cash based on real interest rates) Additionally I have an IPS rule that allows me to violate normal buy and hold rules at extreme market valuations, though currently it hasn't triggered...
by Clearly_Irrational
Fri Jul 18, 2014 2:24 pm
 
Forum: Investing - Theory, News & General
Topic: Do any bogleheads hold the "Larry Portfolio?"
Replies: 18
Views: 2323

Re: Tobins Q as market valuation metric

Heyolshan wrote:Let me ask one of you stat-savvy investors this: what do you get from Tobin's Q that you don't get from Shiller PE?


A different way of measuring the same thing.
by Clearly_Irrational
Thu Jul 17, 2014 7:05 pm
 
Forum: Investing - Theory, News & General
Topic: Tobins Q as market valuation metric
Replies: 42
Views: 2010

Re: Tobins Q as market valuation metric

I think everyone expects returns to be lower than average for forseeable future, but I don't think too many people expect loosing money after 30 years in the market and the Tobin's Q seems to suggest that this is exactly what happened last 5 times the value was at the level that it is right now, wh...
by Clearly_Irrational
Thu Jul 17, 2014 12:38 pm
 
Forum: Investing - Theory, News & General
Topic: Tobins Q as market valuation metric
Replies: 42
Views: 2010

Re: Tobins Q as market valuation metric

Whether you use Tobin's Q, Price to PeakPE or PE10 they're all saying that valuations are pretty high right now. At the very least I think it's reasonable to say that returns going forward for stocks purchased now will be lower than the historical average.
by Clearly_Irrational
Thu Jul 17, 2014 12:18 pm
 
Forum: Investing - Theory, News & General
Topic: Tobins Q as market valuation metric
Replies: 42
Views: 2010

Re: POLL: Do you have a dedicated REIT allocation?

I don't hold any REITs because I prefer direct investment for my real estate allocation.
by Clearly_Irrational
Wed Jul 16, 2014 5:21 pm
 
Forum: Investing - Theory, News & General
Topic: POLL: Do you have a dedicated REIT allocation?
Replies: 123
Views: 6792

Re: Neighbor's ugly overgrown bushes and fence

Plant a hedge. In my area fences are restricted to 6' in height but there is no limit on hedges.
by Clearly_Irrational
Wed Jul 16, 2014 3:17 pm
 
Forum: Personal Consumer Issues
Topic: Neighbor's ugly overgrown bushes and fence
Replies: 41
Views: 3190

Re: How much do you spend on your hobby annually?

Confession time. My wife and I love horses we spend a lot on this hobby. Wife pays all horse related expenses so I will not know exactly what we spend but my estimate is 18- 20k I know there is no logical way to justify this amount but we worked hard during the accumulation phase and it our money. ...
by Clearly_Irrational
Mon Jul 14, 2014 1:40 pm
 
Forum: Personal Consumer Issues
Topic: How much do you spend on your hobby annually?
Replies: 77
Views: 6853

Re: Anyone here flip houses?

Lastly, I would never rent a flip. Any value you create by installing shiny, new finishes will be destroyed by renters the first week they move in. If you're rehabbing a rental you do a lot less, basically just resolve any health & safety issues plus the few cosmetic items that bring in decent ...
by Clearly_Irrational
Mon Jul 14, 2014 12:58 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone here flip houses?
Replies: 39
Views: 4256

Re: Does a Precious Metals & Mining Fund Improve a Portfolio

It doesn't, unless you enjoy uncompensated sector risk.
by Clearly_Irrational
Fri Jul 11, 2014 5:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: Does a Precious Metals & Mining Fund Improve a Portfolio?
Replies: 29
Views: 3047

Re: Why not include gold?

i think his recommended portfolio for his wife, 90 equities / 10 tbills is very boglehead..... That's an incredibly risk heavy portfolio and I personally don't think it really matches the Boglehead philosophy especially given her age. A more Bogleheadish setup would be 40-60% intermediate term bond...
by Clearly_Irrational
Thu Jul 10, 2014 11:20 am
 
Forum: Investing - Help with Personal Investments
Topic: Why not include gold?
Replies: 48
Views: 3698

Re: Why not include gold?

Maybe so, but he did say investors should have cash to reduce volatility. http://www.usatoday.com/story/money/business/2013/05/06/warren-buffett-federal-reserve-stocks-bonds-heinz/2138403/ My take on it is that he doesn't like bonds as an investment. However I think he'd be ok with short or interme...
by Clearly_Irrational
Wed Jul 09, 2014 6:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why not include gold?
Replies: 48
Views: 3698

Re: Why not include gold?

Eh, cash is indistinguishable from a zero-duration bond. Semantics; it's all fixed income. If you want to be that way about it then sure, he's fine with zero-duration bonds for your emergency fund but he advocates against holding any longer duration notes purposes of investing. Which is pretty much...
by Clearly_Irrational
Wed Jul 09, 2014 4:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why not include gold?
Replies: 48
Views: 3698

Re: Why not include gold?

This is incredibly misleading. Buffett keeps 10's of billions in TBills. This is a more extreme version of Bernstien's advocated position to keep your "bonds" of the highest quality and lowest risk. http://www.usatoday.com/story/money/business/2013/05/06/warren-buffett-federal-reserve-sto...
by Clearly_Irrational
Wed Jul 09, 2014 4:18 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why not include gold?
Replies: 48
Views: 3698

Re: Why not include gold?



Be careful quoting Warren, he doesn't like bonds either.
by Clearly_Irrational
Wed Jul 09, 2014 3:27 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why not include gold?
Replies: 48
Views: 3698

Re: Why not include gold?

I'm mildly pro-gold, but before you decide to add some you have to ask "What am I trying to accomplish by adding gold to my portfolio?" If you can't answer that question in detail then you can't make a rational decision as to whether it makes sense to hold some or not.
by Clearly_Irrational
Wed Jul 09, 2014 2:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why not include gold?
Replies: 48
Views: 3698

Re: Windows 7 going the way of XP?

Don't worry, hang out for a while longer and they'll release Windows 9 which will be the Windows 8 fix just the way 7 was the fix for Vista. Or of course, you could take a more Bogleheads type stance and move to a free operating system like Linux. As Tom Peterson used to say "Free is a very goo...
by Clearly_Irrational
Wed Jul 09, 2014 2:35 pm
 
Forum: Personal Consumer Issues
Topic: Windows 7 free support will be ending in 2015
Replies: 27
Views: 2172

Re: Risk Adjusted Return in a Multi-Factor Model

If we agree that the risk adjusted return = return explained by factor model, then to answer OP's question, In addition to factor loadings he provided, he needs risk premiums such as MKT, SMB, HML, MOM expected returns. If one doesn't know this, then using past average returns is one method. Ok, so...
by Clearly_Irrational
Wed Jul 09, 2014 10:54 am
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return in a Multi-Factor Model
Replies: 28
Views: 890

Re: stocks about to plunge

I agree with Nisi. Although this type of post isn't usually looked upon with great favor in this forum, I think it is interesting and I like the way you use it to double-check a buy & hold mentality rather than just outright time the market in and out. Please keep us posted when things get a bi...
by Clearly_Irrational
Tue Jul 08, 2014 6:54 pm
 
Forum: Investing - Theory, News & General
Topic: stocks about to plunge
Replies: 39
Views: 7651

Re: stocks about to plunge

Very nice stuff, clearly_irrational, and I learned a new term from you today: "Lévy flight." http://en.wikipedia.org/wiki/Lévy_flight Thanks! I actually owe you credit for the composite crash indicator. I was tracking a list of indicators previously but you kept asking a lot of tough ques...
by Clearly_Irrational
Tue Jul 08, 2014 4:58 pm
 
Forum: Investing - Theory, News & General
Topic: stocks about to plunge
Replies: 39
Views: 7651

Re: stocks about to plunge

mptfan wrote:Do you have a newsletter? How much does it cost to subscribe?


No, but I could probably make a go of it if I really wanted to. The problem is that the incentives in running a newsletter are opposed to the message I'd want to send.
by Clearly_Irrational
Tue Jul 08, 2014 4:26 pm
 
Forum: Investing - Theory, News & General
Topic: stocks about to plunge
Replies: 39
Views: 7651

Re: stocks about to plunge

There was some weakness in 2013 but by September my indicators were suggesting it was still too early to call, which looks to have been correct. My current data suggests we're still in a period of market order that started July 2011. Latest crash indicator reading is only 14.29/100 (over 30 is usua...
by Clearly_Irrational
Tue Jul 08, 2014 4:22 pm
 
Forum: Investing - Theory, News & General
Topic: stocks about to plunge
Replies: 39
Views: 7651

Re: stocks about to plunge

denovo wrote:I am 99 percent this was a joke, but the sad thing is how many people in the general public would act on this.


I wasn't joking, I'm pretty sure Bertilak was, though if someone took the offered advice "continue with a buy and hold strategy" then they'd hardly be doing badly thereby.
by Clearly_Irrational
Tue Jul 08, 2014 2:47 pm
 
Forum: Investing - Theory, News & General
Topic: stocks about to plunge
Replies: 39
Views: 7651

Re: When do you "limit" saving and start to spend more?

For me, I would prioritize financial independence. Even if I didn't plan to stop working, I would want the knowledge that I could leave at any time. Personally I would find that incredibly empowering and it would likely change my attitude towards work and what sorts of jobs I would accept. Now, once...
by Clearly_Irrational
Tue Jul 08, 2014 1:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: When do you "limit" saving and start to spend more?
Replies: 39
Views: 3835

Re: stocks about to plunge

There was some weakness in 2013 but by September my indicators were suggesting it was still too early to call, which looks to have been correct. My current data suggests we're still in a period of market order that started July 2011. Latest crash indicator reading is only 14.29/100 (over 30 is usual...
by Clearly_Irrational
Tue Jul 08, 2014 1:10 pm
 
Forum: Investing - Theory, News & General
Topic: stocks about to plunge
Replies: 39
Views: 7651

Re: Risk Adjusted Return in a Multi-Factor Model

I thought you were asking how to measure the risk-adjusted return in a 4-factor model. alpha is clearly one method. Do you disagree that alpha is not a risk-adjusted return? Yes, I would disagree, alpha is not a risk adjusted return. Alpha is a measure of the return not explained by other factors. ...
by Clearly_Irrational
Mon Jul 07, 2014 6:38 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return in a Multi-Factor Model
Replies: 28
Views: 890

Re: Risk Adjusted Return in a Multi-Factor Model

CI, have you heard of abnormal return? Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances. http://en.wikipedia.org/wiki/Alpha_(investment)...
by Clearly_Irrational
Mon Jul 07, 2014 6:05 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return in a Multi-Factor Model
Replies: 28
Views: 890

Re: Risk Adjusted Return in a Multi-Factor Model

acegolfer wrote:Calculate the alpha using 4 factor model.


Sure, and you could compare that but it's still not a risk adjusted return.
by Clearly_Irrational
Mon Jul 07, 2014 5:31 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return in a Multi-Factor Model
Replies: 28
Views: 890

Re: Risk Adjusted Return in a Multi-Factor Model

Risk adjusted return, most common way you cannot determine with that information You use Sharpe ratio So you need AVERAGE ANNUAL returns (not compound) and you subtract the AVERAGE ANNUAL return of one month T bills and divide by annual SD Larry That's a different risk model though. Is the idea tha...
by Clearly_Irrational
Mon Jul 07, 2014 4:47 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return in a Multi-Factor Model
Replies: 28
Views: 890

Risk Adjusted Return in a Multi-Factor Model

Assume you're using a multi-factor model, for the sake of argument let's choose the 4 factor model that includes beta, small, value & momentum. Date range 02/02/2004 - 05/31/2014 Ticker, Beta, Size, Value, Momentum, Return SPY 1.00, -0.15, 0.02, -0.00, 69.79% VBR 0.99, 0.63, 0.37, -0.08, 103.06%...
by Clearly_Irrational
Mon Jul 07, 2014 3:58 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return in a Multi-Factor Model
Replies: 28
Views: 890

Re: Easy careers to last me to retirement?

If you just want to do something different for a while and have your expenses covered why not join the Peace Corps?
by Clearly_Irrational
Mon Jul 07, 2014 2:23 pm
 
Forum: Personal Finance (Not Investing)
Topic: Easy careers to last me to retirement?
Replies: 92
Views: 13443

Re: The Two-Fund SVIT Portfolios - Higher Returns and Lower

I feel like this thread is suffering from amnesia, since it was already demonstrated that SCV had lower returns than SCG since May 1998(their inception date) in real funds on an after tax basis. I think larry swedroe believes that there are problems with the indexes that the Vanguard funds follow, ...
by Clearly_Irrational
Fri Jul 04, 2014 1:41 am
 
Forum: Investing - Theory, News & General
Topic: The Two-Fund SVIT Portfolios - Higher Returns and Lower Risk
Replies: 110
Views: 6542

Re: Any Bogelheads get involved in private equity?

Can ask what do you think you will get out of private equity that you cannot get for less fees using equities and possibly some leverage? Private equity is not as efficient the market, therefore there is probably alpha available if you're a sharp operator. I'm not recommending it, just pointing out...
by Clearly_Irrational
Thu Jul 03, 2014 4:35 pm
 
Forum: Investing - Theory, News & General
Topic: Any Bogleheads get involved in private equity?
Replies: 31
Views: 3288

Re: Is now a bad time to invest?

Have you done any quantitative testing of this model? Yes. The data series are of different lengths but the effect appears to be pretty consistent. The orange bars represent NBER recessions while the blue line is the crash indicator. Looking back at previous signals showed that normal recessions ar...
by Clearly_Irrational
Wed Jul 02, 2014 11:27 am
 
Forum: Investing - Help with Personal Investments
Topic: Is now a bad time to invest?
Replies: 100
Views: 8407

Re: The Two-Fund SVIT Portfolios - Higher Returns and Lower

bnes wrote:Remember: if it really works, and it is widely known, some computer somewhere will arb out all the alpha.


Only if it's not a risk story. If your statement were blanket true then the equity risk premium would be arbitraged away.
by Clearly_Irrational
Tue Jul 01, 2014 3:59 pm
 
Forum: Investing - Theory, News & General
Topic: The Two-Fund SVIT Portfolios - Higher Returns and Lower Risk
Replies: 110
Views: 6542

Re: The Two-Fund SVIT Portfolios - Higher Returns and Lower

If markets are efficient, there is no reliable method to get higher returns with lower risk, assuming the investor is properly diversified and has low costs (it's always possible to get lucky). Absolutely correct and yet misleading in this context. The whole point of multi-factor models is that the...
by Clearly_Irrational
Tue Jul 01, 2014 3:54 pm
 
Forum: Investing - Theory, News & General
Topic: The Two-Fund SVIT Portfolios - Higher Returns and Lower Risk
Replies: 110
Views: 6542

Re: Paul Merriman article: every investor needs Small Cap Va

Ok, so show me. Show me that SCG, the bit of the market that crashed so violently during the dot.com bust, is low risk, while SCV is high risk. I'm not actually suggesting that. Here are the stats for the two relevant Vanguard funds: VBR Beta 0.99 Small 0.63 Value 0.37 Momentum -0.08 VBK Beta 1.12 ...
by Clearly_Irrational
Sun Jun 29, 2014 2:34 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman article: every investor needs Small Cap Value
Replies: 127
Views: 6657

Re: Paul Merriman article: every investor needs Small Cap Va

Empirical evidence! Nobel prizes! Peer reviewed papers! Academics agree! It is undeniable and I can beat the market because this time it's different. All the data agrees across space, time and geography. How many "strategies" have come out to beat the market and how many have actually pan...
by Clearly_Irrational
Sun Jun 29, 2014 12:09 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman article: every investor needs Small Cap Value
Replies: 127
Views: 6657

Re: Modeling the Worst Case for Stocks

For modeling purposes I normally ask what's the most common seriously bad event that happens? (turns out to be a 50% crash) Additionally I do monte carlo analysis using actual return series. While that doesn't necessarily cover the "worst case" it does cover some pretty aweful cases. If yo...
by Clearly_Irrational
Fri Jun 27, 2014 1:08 pm
 
Forum: Investing - Theory, News & General
Topic: Modeling the Worst Case for Stocks
Replies: 41
Views: 3059

Re: NY Times: Not enough younger investment advisors

I looked into it but the kind of people who could really benefit from my assistance couldn't afford me and those who could afford me wouldn't be interested in the low cost passive approach I'd recommend.
by Clearly_Irrational
Fri Jun 27, 2014 12:51 pm
 
Forum: Investing - Theory, News & General
Topic: NY Times: Not enough younger investment advisors
Replies: 72
Views: 7194

Re: Paul Merriman article: every investor needs Small Cap Va

To the extent that the size factor and value factor are the result of additional risk, we should expect them to persist as well. But where is the risk? According to Merriman, everyone would be better off if they added SCV to their portfolios. That doesn't sound risky to me, and that's what doesn't ...
by Clearly_Irrational
Fri Jun 27, 2014 12:00 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman article: every investor needs Small Cap Value
Replies: 127
Views: 6657

Re: School me on my rental property understanding..

You should keep the property if: 1) You're making a profit on an after-tax basis including all costs, not just the mortgage 2) You expect positive inflation going forward 3) You expect positive population growth going forward 4) There aren't any other properties that would make you more money for th...
by Clearly_Irrational
Thu Jun 26, 2014 5:50 pm
 
Forum: Personal Finance (Not Investing)
Topic: School me on my rental property understanding..
Replies: 16
Views: 985

Re: Paul Merriman article: every investor needs Small Cap Va

I for one agree with Bogle that they do not exist in real world investor results. My take on the small value/ smart beta explosion is that it = recency bias. Beware the fundamental law of markets, reversion to the mean. The evidence that it's explanatory is clear and pretty overwhelming. The real q...
by Clearly_Irrational
Thu Jun 26, 2014 1:30 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman article: every investor needs Small Cap Value
Replies: 127
Views: 6657

Re: Rental property in asset allocation

I generally use a meta-diversification model between the four types of economic returns: wages, rent, interest, profit My job generates wages My properties generate rent My investment portfolio generates interest and has it's own AA My wife's business generates profit So the short answer is that I d...
by Clearly_Irrational
Thu Jun 26, 2014 12:04 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rental property in asset allocation
Replies: 18
Views: 845
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