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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: 57
Views: 4037

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: 57
Views: 4037

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: 865

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: 2163

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: 57
Views: 4037

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: 2163

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: 2174

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: 23
Views: 2380

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: 6288

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: 225
Views: 23058

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: 225
Views: 23058

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: 225
Views: 23058

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: 225
Views: 23058

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: 2378

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: 2378

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: 2644

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: 2644

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: 2644

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: 5054

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: 5054

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: 5054

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: 2644

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: 2859

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: 7975

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: 7975

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: 7975

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: 3629

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: 225
Views: 23058

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: 174
Views: 14953

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: 8373

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: 7975

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: 3629

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: 7747

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: 8373

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

Yes. buying a single house in one place has the exact same level of effort, risk and returns as stock investing. What are you talking about? The statement was "it's a bad idea to leave it unattended with a relative stranger" (money that is). I was merely pointing out that is exactly what ...
by Clearly_Irrational
Mon Apr 07, 2014 4:08 pm
 
Forum: Investing - Theory, News & General
Topic: Any Bogleheads here into real estate investing?(renting out)
Replies: 53
Views: 3629

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

leonard wrote:are you folks serious?

obviously - obviously - the point was a large amount of money. $250k, $50k, $1M, $20k, etc. etc etc. Whatever that large amount is - it's a bad idea to leave it unattended with a relative stranger.


Oh, it's just like buying stocks! Do I win a prize?
by Clearly_Irrational
Mon Apr 07, 2014 3:57 pm
 
Forum: Investing - Theory, News & General
Topic: Any Bogleheads here into real estate investing?(renting out)
Replies: 53
Views: 3629

Re: Anyone else very reluctant to buy right now?

However, over the last seven years of retirement, I need to look at when would be the best time to liquidate and take some of the profits to be put into my cash bucket, for retirement expenses. It's the old thing of "know when to hold em, know when to fold em"... Timing something like tha...
by Clearly_Irrational
Mon Apr 07, 2014 3:54 pm
 
Forum: Investing - Theory, News & General
Topic: Anyone else very reluctant to buy right now?
Replies: 124
Views: 11313

Re: Anyone else very reluctant to buy right now?

I'll say the same thing I said in another thread of this type: Regular recessions can't be timed consistently, all the academic theory and real world performance data backs that up, my own research does as well. So from that perspective your best bet is just to pick an AA and then "set it and f...
by Clearly_Irrational
Mon Apr 07, 2014 2:40 pm
 
Forum: Investing - Theory, News & General
Topic: Anyone else very reluctant to buy right now?
Replies: 124
Views: 11313

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

Let's say a rental house costs $250,000. 250k of you hard earned money. Okay, now for some reality. A friend of mine owns 6 or 7 single family homes. The average purchase price of these homes has been around $50,000. The homes are obviously smaller bungalows. The rent from each house is $700-$800 p...
by Clearly_Irrational
Sun Apr 06, 2014 12:37 pm
 
Forum: Investing - Theory, News & General
Topic: Any Bogleheads here into real estate investing?(renting out)
Replies: 53
Views: 3629

Re: Interest Rates vs Inflation

Agreed as far as it goes, and if I may, Congress could also, although perhaps the prospect might seem far off, spend less than tax receipts, and the Treasury in response could pay down the national debt or even eventually build up a surplus. Weirdly enough that's actually a bad thing in most scenar...
by Clearly_Irrational
Fri Apr 04, 2014 8:15 pm
 
Forum: Investing - Theory, News & General
Topic: Interest Rates vs Inflation
Replies: 22
Views: 1455

Re: Interest Rates vs Inflation

staythecourse wrote:Think of interest rates as the brake pedal for Congress


Just to nitpick a bit, interest rates are the brake pedal/accelerator for the Fed, the one for Congress is Federal deficit spending. It's the whole monetary policy vs. fiscal policy thing.
by Clearly_Irrational
Fri Apr 04, 2014 6:16 pm
 
Forum: Investing - Theory, News & General
Topic: Interest Rates vs Inflation
Replies: 22
Views: 1455

Re: [High-frequency trading hurts regular customers]

I think what can be said about the event is exactly what the CFTC and SEC did say --- that while computers are vastly better than humans at managing the markets under all normal circumstances, they can't be programmed to handle everything. Under extraordinary circumstances, there needs to be a chan...
by Clearly_Irrational
Fri Apr 04, 2014 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 107
Views: 6128

Re: [High-frequency trading hurts regular customers]

At 2:32 PM ... a large fundamental trader (a mutual fund complex) initiated a sell program.... [executing the largest net trade of the year] extremely rapidly in just 20 minutes. In other words, it was essentially a fat-finger trade by an institution with a broken algorithm. The report continues by...
by Clearly_Irrational
Fri Apr 04, 2014 2:27 pm
 
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 107
Views: 6128

Re: [High-frequency trading hurts regular customers]

Other markets have tried to limit the impact of HFT, with predictable adverse effects, particularly for the "little guy." http://www.nytimes.com/2014/04/04/opinion/flash-boys-for-the-people.html Sure, the bid ask spread rose 9% which isn't at all unexpected. The real question is, did it r...
by Clearly_Irrational
Fri Apr 04, 2014 1:06 pm
 
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 107
Views: 6128

Re: [High-frequency trading hurts regular customers]

gw wrote:
Clearly_Irrational wrote:Sure, but the flash crash was caused by the HFTs, not the market makers.


That's false. See the SEC/CFTC report, for example.


If you mean this report: http://www.sec.gov/spotlight/sec-cftcjointcommittee/021811-report.pdf Then I'd say they agree with me.
by Clearly_Irrational
Fri Apr 04, 2014 12:49 pm
 
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 107
Views: 6128

Re: [High-frequency trading hurts regular customers]

People bring up market maker obligations because HFTs aren't typically bound by any (whereas the insiders they displaced were so bound, at least in theory). If you don't think about it, it sounds like market-maker obligations might help, but it's a complete red herring. NYSE still has designated ma...
by Clearly_Irrational
Thu Apr 03, 2014 4:41 pm
 
Forum: Investing - Theory, News & General
Topic: [High-frequency trading hurts regular customers]
Replies: 107
Views: 6128

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

Abe wrote:I would not pay much attention to the TV programs where they fix up properties and flip them. It doesn't work the way they portray it in real life.


You can make a ton of money flipping in an up market, but you can also lose your shorts in a down market. Too risky for me.
by Clearly_Irrational
Thu Apr 03, 2014 3:42 pm
 
Forum: Investing - Theory, News & General
Topic: Any Bogleheads here into real estate investing?(renting out)
Replies: 53
Views: 3629

Re: How did you determine your "number" for retirement

Confused wrote:Ha, it's a pretty simple secret. You know that good or service you were going to buy? Don't.


Wow, took a look at our budget to see what it would take to get down to $20k. Basically you have to take a chainsaw to anything that isn't life threatening.
by Clearly_Irrational
Thu Apr 03, 2014 2:26 pm
 
Forum: Personal Finance (Not Investing)
Topic: How did you determine your "number" for retirement
Replies: 51
Views: 3266

Re: Fibonacci numbers: has Cramer lost his mind?

dr.j wrote:Well, I have been wearing different color socks and I recent detected a change in the air-speed velocity of an unladen swallow. Indeed, imminent doom for the stock market.


Is that an African Swallow or European?
by Clearly_Irrational
Thu Apr 03, 2014 2:13 pm
 
Forum: Investing - Theory, News & General
Topic: Fibonacci numbers: has Cramer lost his mind?
Replies: 20
Views: 1773

Re: Fibonacci numbers: has Cramer lost his mind?

I looked into Fibonacci numbers back when I was actively trading. They have some validity in technical analysis, which is basically pattern recognition based on human psychology. When used with a variety of other confirming signals they can help increase the possibility of determining an inflection ...
by Clearly_Irrational
Thu Apr 03, 2014 1:50 pm
 
Forum: Investing - Theory, News & General
Topic: Fibonacci numbers: has Cramer lost his mind?
Replies: 20
Views: 1773
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