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Re: Buffett: Modern investment theory is horse-pucky

How do folks rectify their tilts with EMH? It seems contradictory. Of course it is. It's based on the notion that there are certain unexplainable "anomalies" in the efficient market hypothesis that for some unexplainable reason are likely to persist into the future. If you invest in one o...
by Clearly_Irrational
Sat Sep 13, 2014 11:14 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 8460

Re: Buffett: Modern investment theory is horse-pucky

Did your professor also mention Galloping Gertie ? I don't remember him doing so but I watched a great documentary on it. To be fair to the designers they were really pushing the state of the art at that time, still it stands as a pretty substantial warning not underestimate the value of safety fac...
by Clearly_Irrational
Fri Sep 12, 2014 7:45 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 8460

Re: A 'really good book' you did NOT enjoy

3. Charity is immoral. I don't agree with her on that one, but I will admit that some forms of charity end up causing more problems than they solve. US Food aid to Africa being a prime example. Objectivists tend to overlook the idea of market failures, ignore externalized costs, dismiss social good...
by Clearly_Irrational
Fri Sep 12, 2014 6:58 pm
 
Forum: Personal Consumer Issues
Topic: A 'really good book' you did NOT enjoy
Replies: 193
Views: 8702

Re: Buffett: Modern investment theory is horse-pucky

This is literally untrue. If you wanted to buy $20 trillion worth of "the market" you would literally be unable to do so at today's valuations. Hence the magic of derivatives. Who cares if the global economy is too small, lets leverage it! Notional value of all derivatives in Dec 2013 $71...
by Clearly_Irrational
Fri Sep 12, 2014 6:50 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 8460

Re: Buffett: Modern investment theory is horse-pucky

Good engineers also consider the consequences of failure and build in an appropriate safety margin. The designer of the Brooklyn Bridge made it six times as strong as he thought it needed it to be, to allow for the things he didn't understand. Was that too much? Possibly, but the bridge is still st...
by Clearly_Irrational
Fri Sep 12, 2014 4:35 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 8460

Re: Angry when stock market is down

Current market moves are essentially noise, quit stressing about it. If you want a less zen answer that says essentially the same thing: 1) Bollinger band squeeze suggests there will be a small price move soon (up or down) 2) MACD is on sell signal and doesn't look to have turned around yet 3) RSI i...
by Clearly_Irrational
Fri Sep 12, 2014 1:35 pm
 
Forum: Investing - Theory, News & General
Topic: Angry when stock market is down
Replies: 79
Views: 3735

Re: Buffett: Modern investment theory is horse-pucky

nisiprius wrote:What's your take on "one cannot expect to get paid for a risk that can be eliminated without cost?"


I'd put it more like this: All compensation comes with risk but not all risk is compensated.
by Clearly_Irrational
Thu Sep 11, 2014 5:26 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 8460

Re: Buffett: Modern investment theory is horse-pucky

nisiprius wrote:Wow. Just wow. Breathtaking. Bookmarked.


Meh, he defines his conclusion then accepts his definition.
by Clearly_Irrational
Thu Sep 11, 2014 5:15 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 8460

Re: Is it safe to pay down rental property?

Paying down the mortgage is basically reducing your risk and consequently your return. If you want extra safety and don't need the extra return that's great! Otherwise you should probably be saving up for another rental instead.
by Clearly_Irrational
Thu Sep 11, 2014 1:47 pm
 
Forum: Personal Finance (Not Investing)
Topic: Is it safe to pay down rental property?
Replies: 12
Views: 804

Re: Buffett: Modern investment theory is horse-pucky

I think there is some room in between "the theory is perfect" and "the theory is worthless". The results tend to be more rule of thumb than they appear but they're often still better than the alternative. I deal with SWAGs (scientific wild ass guesses) at work all the time so I s...
by Clearly_Irrational
Thu Sep 11, 2014 1:42 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 8460

Re: Would you quit over the pretend boss

I agree with the bolded. A flat "no" will make you look like you aren't a team player. Instead,as leonard suggests, you should simply tell the COO that you'll discuss the matter with the CIO and see what priority that project should take as against existing projects. This is the right ans...
by Clearly_Irrational
Wed Sep 10, 2014 5:21 pm
 
Forum: Personal Finance (Not Investing)
Topic: Would you quit over the pretend boss
Replies: 33
Views: 2937

Re: A 'really good book' you did NOT enjoy

VictoriaF wrote:5. You would lobby your Congressmen to put Austen on U.S. currency.


I was hoping for the terrorist watch list, but I suppose dreams don't come easy.
by Clearly_Irrational
Tue Sep 09, 2014 7:41 pm
 
Forum: Personal Consumer Issues
Topic: A 'really good book' you did NOT enjoy
Replies: 193
Views: 8702

Re: Simplicity vs. Complexity

Au contraire. You could do without stocks better than doing without REITS. If you had held 70% REITS / 30% Bonds for the last 20 years, your portfolio returns would have been more than a half percent higher per year than with stocks with about the same volatility. A 20 year sample is very short. St...
by Clearly_Irrational
Tue Sep 09, 2014 2:49 pm
 
Forum: Investing - Theory, News & General
Topic: Simplicity vs. Complexity
Replies: 50
Views: 3291

Re: Simplicity vs. Complexity

You can probably drop REITs, commodities & hedge funds with little downside. Foreign bonds have additional risk that probably isn't worth it.

I think it would be a mistake to avoid foreign investment completely. At the very least go with a three fund portfolio.
by Clearly_Irrational
Tue Sep 09, 2014 1:32 pm
 
Forum: Investing - Theory, News & General
Topic: Simplicity vs. Complexity
Replies: 50
Views: 3291

Re: A 'really good book' you did NOT enjoy

Pride and Prejudice by Jane Austen. It's supposedly a classic. I do a lot of reading, I like to read and enjoy a wide variety of subject matter. When required to read this book for school I found it shallow, poorly written and utterly without value.
by Clearly_Irrational
Mon Sep 08, 2014 3:46 pm
 
Forum: Personal Consumer Issues
Topic: A 'really good book' you did NOT enjoy
Replies: 193
Views: 8702

Re: If you won the lottery, does boglehead thinking still wo

joe8d wrote:With correction,comment is true.I can't imagine a true boglehead playing the lottery.


I play for entertainment purposes on the rare occasion when the jackpot is larger than the odds of winning it.
by Clearly_Irrational
Mon Sep 08, 2014 3:40 pm
 
Forum: Investing - Theory, News & General
Topic: If you won the lottery, does boglehead thinking still work?
Replies: 39
Views: 2921

Re: How exactly would you define market timing?

baw703916 wrote:Market timing: something that is disliked on this board.


Oh I don't know, find something that works using proper in and out of sample methodology and I'm sure everyone would be interested to see your results.
by Clearly_Irrational
Sat Sep 06, 2014 2:02 pm
 
Forum: Investing - Theory, News & General
Topic: How exactly would you define market timing?
Replies: 67
Views: 1977

Re: Let me get this straight about SCV & factor diversificat

There is two issues with that. One is that if the factors have the out of sample premium of 0, then there is no good reason to invest in it. Two, according to the same academics, small and value have done well since the early 90s. But the funds that purport to invest in those factors have not done ...
by Clearly_Irrational
Fri Sep 05, 2014 7:51 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 150
Views: 7533

Re: Let me get this straight about SCV & factor diversificat

Out of sample data have been pretty disappointing since the early 90s. The vanguard value funds have done poorer than their growth counterparts. Some value funds have done better, but an investor also have to ask himself if he have the skills to pick the correct value fund. The vanguard small funds...
by Clearly_Irrational
Fri Sep 05, 2014 6:33 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 150
Views: 7533

Re: Coin Counting Machines

I use Coinstar, but if you take out the quarters and do those by hand the counting "fee" is trivial. *shrug* I don't need to do this often any more since I use my debit card for nearly everything.
by Clearly_Irrational
Fri Sep 05, 2014 6:29 pm
 
Forum: Personal Consumer Issues
Topic: Coin Counting Machines
Replies: 58
Views: 4024

Re: Let me get this straight about SCV & factor diversificat

To "diversify" the coins in our pocket, one chooses to have three 25¢ coins, a couple of 10¢ coins, and one 5¢ coin - ALL very different coins, ALL very differently valued at my local grocery store. We can call that TSM for all practical purposes. :) The person choosing the have only 1¢ c...
by Clearly_Irrational
Fri Sep 05, 2014 12:34 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 150
Views: 7533

Re: How exactly would you define market timing?

You've got it exactly wrong. ECONOMICS is not the right discipline for studying market behavior. PSYCHOLOGY is. Back when I was actively trading my best results came when I used both rather than one or the other. As I mentioned before, market-timing is NOT about predictions. It's about playing the ...
by Clearly_Irrational
Fri Sep 05, 2014 11:26 am
 
Forum: Investing - Theory, News & General
Topic: How exactly would you define market timing?
Replies: 67
Views: 1977

Re: How exactly would you define market timing?

I think market timing means acting based on some kind of prediction going forward. Increasing one's allocation to stocks to 75% from 50% after a 50% drop in the market is not market timing, because one already knows that the market has fallen 50%. Every time the market has fallen 50%, it has bounce...
by Clearly_Irrational
Thu Sep 04, 2014 4:38 pm
 
Forum: Investing - Theory, News & General
Topic: How exactly would you define market timing?
Replies: 67
Views: 1977

Re: Let me get this straight about SCV & factor diversificat

Larry will have to speak for himself about what he advocates. If you accept that a multi-factor model more accurately describes the returns of stocks and bonds then the decision about what to own becomes more complicated than just your stock/bond split. Beta remains the largest factor and so still h...
by Clearly_Irrational
Thu Sep 04, 2014 4:33 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 150
Views: 7533

Re: Why is REIT only sector fund recommended in slice & dice

tc101 wrote:So I wonder why this is not suggested more often?


Because it's uncompensated risk? In order for sector plays to make sense you have to throw out the whole theoretical underpinning that makes passive investing rational in the first place.
by Clearly_Irrational
Thu Sep 04, 2014 4:05 pm
 
Forum: Investing - Theory, News & General
Topic: Why is REIT only sector fund recommended in slice & dice?
Replies: 113
Views: 7043

Re: How exactly would you define market timing?

I would define market timing as a plan which: 1) Involves regular buying and selling 2) Isn't based on the idea of a fixed asset allocation 3) Is more than just accounting for your current need to take risk vs. what is available 4) Generally involves some sort of future prediction that is more than ...
by Clearly_Irrational
Thu Sep 04, 2014 12:25 pm
 
Forum: Investing - Theory, News & General
Topic: How exactly would you define market timing?
Replies: 67
Views: 1977

Re: Why is REIT only sector fund recommended in slice & dice

Do any of the other sectors like health, technology, consumer cyclicals and so on have a lower correlation to the total market than small cap value? If they do have a low correlation, why not use them in slice and dice just like using small value? In theory, small value is compensated risk but indi...
by Clearly_Irrational
Thu Sep 04, 2014 12:08 am
 
Forum: Investing - Theory, News & General
Topic: Why is REIT only sector fund recommended in slice & dice?
Replies: 113
Views: 7043

Re: Costco:is it worth it for just two people?

madbrain wrote:The prices at Whole foods really are out of this world, especially when you compare on a per-unit basis.


Around the Portland area it's called "Whole Paycheck" and people joke about getting direct deposit.
by Clearly_Irrational
Wed Sep 03, 2014 6:45 pm
 
Forum: Personal Consumer Issues
Topic: Costco:is it worth it for just two people?
Replies: 135
Views: 10046

Re: Why is REIT only sector fund recommended in slice & dice

To piggyback on VT above: REITs aren't the only entities that have a peculiar structure and tax treatment. If you want to slice/dice with a tilt to REITs, then to be consistent, why not MLPs? In fact, to get a piece of the private equity market, why not Business Development Corporations? BDC's also...
by Clearly_Irrational
Wed Sep 03, 2014 6:07 pm
 
Forum: Investing - Theory, News & General
Topic: Why is REIT only sector fund recommended in slice & dice?
Replies: 113
Views: 7043

Re: Why is REIT only sector fund recommended in slice & dice

I think most believe that real honest to goodness physical real estate is a different asset than stocks in general. I would agree. The question is then: How reasonable are REITS as a proxy for honest to goodness physical real estate? In my opinion not a very good one. Their prices tend to act more ...
by Clearly_Irrational
Wed Sep 03, 2014 5:01 pm
 
Forum: Investing - Theory, News & General
Topic: Why is REIT only sector fund recommended in slice & dice?
Replies: 113
Views: 7043

Re: A Low-Return Future? Are We Prepared?

Arguing about what the exact percentage of market returns will be for the next 1, 2, or 3 decades is a lot like arguing over how many angels can dance on the head of a pin. I don't think it's quite that bad. It seems that we can make some estimates, sure the error bars are large but that's not the ...
by Clearly_Irrational
Wed Sep 03, 2014 2:42 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Correlation/R2 don't tell you the full story though. The Inverse PE10 overshoots returns by 0.75% or so, on average. I have yet to understand why. I suspect an arithmetic vs geometric adjustment missing somewhere. Then it's interesting to look at 50-years periods since 1871, correlation/R2 isn't qu...
by Clearly_Irrational
Wed Sep 03, 2014 12:29 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

So I hadn't previously done a numerical analysis of the effectiveness of my combined forecasting model. We've been talking about future returns so much that it seemed like a good idea in order to make sure I was being fully rigorous. Here are my methods and results: I used http://www.multpl.com for ...
by Clearly_Irrational
Tue Sep 02, 2014 5:53 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Another problem. 3.5% real GDP growth? In whose world? We've not done anything like that since 2000 in US and Europe (nor Japan). The context in which I posted the diagram was a question about the attribution model I was using and why population growth figured into it. I agree with you on the GDP g...
by Clearly_Irrational
Mon Sep 01, 2014 4:46 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

1210sda wrote:"Clearly", I have a question. How do you get 8% Nominal GDP growth from 3.5% (Real?) Growth rate and 2.5% inflation?? Shouldn't that be 6% Nominal GDP, or am I reading this wrong??


I think it's just a typo.
by Clearly_Irrational
Mon Sep 01, 2014 3:24 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Cut-Throat wrote:I am done trying to 'educate' you, because you apparently know everything while understanding nothing.


I'm sorry if you were personally offended, that was never my intent. Apparently it's time to move on to other topics.
by Clearly_Irrational
Sat Aug 30, 2014 11:08 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Sure you're not! :confused There is no perfect withdrawal system because we don't have complete information. Each system attempts to compensate for that lack but they all fail in different ways. Choosing an appropriate failure mode is actually important because there are different ways to compensat...
by Clearly_Irrational
Sat Aug 30, 2014 9:42 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

As far as Spending ALL of your money, yes you can do that, but that is a very minor point of VPW..... If you look at VPW when it starts to withdraw 10% of your portfolio, you can customize it so you never withdraw more than 10% (which is usually around age 90) so you don't ever run out of money. *s...
by Clearly_Irrational
Sat Aug 30, 2014 9:12 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

siamond wrote:This is a cool chart. Thanks for sharing. Where does it come from? Where can I find more background information about it?


I've seen similar diagrams in several places, I got that one from here: http://www.financialphysics.net/future.html
by Clearly_Irrational
Sat Aug 30, 2014 8:57 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Nope, you still don't get it. I see two possible advantages: 1) You're guaranteed to use up all of the money by the end of the duration, thus leaving no money unspent. In theory, if a retiree has no bequest motive he would want to run out of money exactly as he died. (assuming that intentionally go...
by Clearly_Irrational
Sat Aug 30, 2014 8:17 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

These folks that are planning to live past 100, will fail to live while they're still alive. Just look at the Obits and see how many folks live past 95. For me, I look at it as a probability distribution. My current life expectancy is 82, I could die much earlier or much later than that but it's th...
by Clearly_Irrational
Sat Aug 30, 2014 5:57 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Cut-Throat wrote:I agree; You don't see it.


The advantage is that you're guaranteed to use up all of the money, the only problem for me is that I don't see that as an advantage unless you pair it with an SPIA.
by Clearly_Irrational
Sat Aug 30, 2014 5:51 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Tell me something I don't know. Now if someone that was retired, actually used VPW for their Withdrawal Method (Like Myself)...They could easily figure out reasonable input values and be far ahead of the game. But, if someone just wanted to be 'right', and wanted to argue the ridiculous (Like yours...
by Clearly_Irrational
Sat Aug 30, 2014 2:56 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Cut-Throat wrote:Don't be ridiculous!...Just plug in age 105.....You aren't going to live that long. There's a very good chance to won't live to age 90.


The duration you plug in has a very large effect on the withdrawal rate.
by Clearly_Irrational
Sat Aug 30, 2014 2:14 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

How is that being required to know the "'Exact Date of your death" ? :confused Because if you don't guess the duration correctly you'll be out of luck. SWR modeling gives you a chance of running out of money at the end of the period, the VPW guarantees it. With a lifespan of unknown durat...
by Clearly_Irrational
Sat Aug 30, 2014 2:50 am
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

"functioning technological civilization based on capitalism" we are getting terribly close to the Karl Marx critique of industrial capitalism (profit and economic cycles of ever increasing violence due to the problem of labour surplus). It is way too broad an assertion to make. His soluti...
by Clearly_Irrational
Sat Aug 30, 2014 2:48 am
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

I agree that it is pretty unlikely that one would run out of money with such a low withdrawal rate, but I don't think that is because it is "dividends + interest"; it's just low enough that you almost certainly won't run out. I'm not sure if this is supported by academic research or not, ...
by Clearly_Irrational
Fri Aug 29, 2014 3:59 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: A Low-Return Future? Are We Prepared?

Where do you see the lowest balance results? I went to the firecalc page but didn't see where they display that data. Edit: I see that now but I also get this warning for the 30 year run with 2.1%: "(Caution: The portfolio failed, or went negative, during some of the years in your scenario, bu...
by Clearly_Irrational
Fri Aug 29, 2014 3:37 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110

Re: Burton Malkiel Opinion in WSJ -- "Are Stock Prices ..."

nisiprius wrote:In fact it was a good exercise in explaining why predictions may not be actionable even if they are correct.


That's a really important point.
by Clearly_Irrational
Fri Aug 29, 2014 3:28 pm
 
Forum: Investing - Theory, News & General
Topic: Burton Malkiel Opinion in WSJ -- "Are Stock Prices ..."
Replies: 26
Views: 3003

Re: A Low-Return Future? Are We Prepared?

Yes, but what was the value of that $1 million in constant dollars after 50 years? Certainly far less than $1 million. In other words, it was depleted by inflation even though not nominally. You know, I hadn't actually looked into that portion of the FireCalc site before. Here is what it says "...
by Clearly_Irrational
Fri Aug 29, 2014 3:20 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12110
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