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Re: Why should stocks go up over the long term?

Stocks of particular companies do not for the most part go up over the long-term. Stocks that are growing in value change over time because economies are dynamic. Many of the biggest US stocks today were tiny or non-existent in 1980. Many of the biggest stocks in 2050 are undoubtedly tiny or non-ex...
by Clive
Mon Jul 28, 2014 8:04 pm
 
Forum: Investing - Theory, News & General
Topic: Why should stocks go up over the long term?
Replies: 23
Views: 1247

Re: Why should stocks go up over the long term?

What's to say that this long term growth of stocks will continue going forward? Couldn't we have hit the "peak" and it no longer grow from here? If you buy some land and sell it 10, 20, whatever years later, you might reasonably expect to receive a similar amount in inflation adjusted ter...
by Clive
Mon Jul 28, 2014 7:39 pm
 
Forum: Investing - Theory, News & General
Topic: Why should stocks go up over the long term?
Replies: 23
Views: 1247

Re: Higher Returns at Lower Risk - please comment

It seems to me that in the link, Vanguard is not arguing the existence of a small cap value premium, rather it is exploring whether (and why) it may or may not exist I'd conjecture that its more a case of reducing the cost of failure/stress - not so much a premium but a reduction of the losses that...
by Clive
Mon Jul 28, 2014 6:21 am
 
Forum: Investing - Theory, News & General
Topic: Higher Returns at Lower Risk - please comment
Replies: 59
Views: 6352

Re: Predict: S&P Doubles or Halves First?

The obvious answer then was and still is that it will likely double before it will half because equities have an upward bias. The OP stipulated do not include dividends Robert Shillers real S&P share prices indicate 1906 236, 1982 251. With hindsight that's a relative high to a relative low how...
by Clive
Wed Jul 23, 2014 2:52 pm
 
Forum: Investing - Theory, News & General
Topic: Predict: S&P Doubles or Halves First?
Replies: 36
Views: 2698

Re: Gold, Silver, Copper

If you base your plan on history in the US, the point is entirely moot, there will be no such crisis, period. 1933 the US bought all investment grade gold at its then fixed market price of around $20 and a year later ramped the price fix up to around $35. In effect a confiscation/default. Periodica...
by Clive
Wed Jul 23, 2014 1:59 pm
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 4971

Re: Gold, Silver, Copper

Hyper inflation in one country is a silly argument for gold. gold is only worth whatever it can buy. Gold can buy other currencies. During 2008 Icelandic financial crisis the price of gold stayed much the same in Euro's, but the Icelandic Krona currency dropped. i.e. the price of gold rose in Krona...
by Clive
Wed Jul 23, 2014 1:35 pm
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 4971

Re: Predict: S&P Doubles or Halves First?

http://www.jfholdings.pwp.blueyonder.co.uk/images/7580FD1DBD45996DBEC05AF93174E161092B0C66.jpg By eye, and assuming US stocks broadly compared to UK stocks halved halved doubled doubled halved doubled halved halved doubled doubled doubled Recency, trend and mean reversion looks more to the next pha...
by Clive
Wed Jul 23, 2014 12:55 pm
 
Forum: Investing - Theory, News & General
Topic: Predict: S&P Doubles or Halves First?
Replies: 36
Views: 2698

Re: Gold, Silver, Copper

the UK is not in the Euro so it pulling out of the EU does not directly impact the Euro Agreed, but the euro zone include the UK's GDP as part of the EU Australia and Canada (nor New Zealand) The UK is 65% self sufficient in food (and on average the populous is 35% overweight!), the rest is made up...
by Clive
Wed Jul 23, 2014 12:14 pm
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 4971

Re: Gold, Silver, Copper

But at the moment, there is this shift (I don't know how big) towards settling in gold. gold Renminbisation BRIC (Brazil, Russia, India, China) is 35% of world trade (global GDP), 42% of the global population, yet have a relatively (disproportionately) small international (financial) voice (11% of ...
by Clive
Wed Jul 23, 2014 8:07 am
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 4971

Re: Gold, Silver, Copper

There's lack of faith in any one single primary reserve currency. The tendency is more towards a one-world fiat paper standard (a new currency unit) issued by a World Reserve Bank - "the bancor", "unita", "phoenix", rather than a return to the finite reserves gold stand...
by Clive
Wed Jul 23, 2014 6:26 am
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 4971

Re: How indexing let these retirees live footloose and fancy

Rather than a model, let's take a real world case of Japan. From their 1990 peak when interest rates were up at 7% or 8% levels and following strong gains during the 1980's their market prices dived. -40% in 1990, 0% 1991, -23% in 1992 (nominal total gains (dividends reinvested)). Counting that peri...
by Clive
Wed Jul 23, 2014 5:38 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3846

Re: How indexing let these retirees live footloose and fancy

I bet they will receive close to $30K/year in combined SS payments at FRA. The current younger generation live in a 'are-we-there-yet' world. Bio-tech advances is and will continue to prolong life. In the UK we're seeing a trend towards deferring entering the work-place/benefit system until you're ...
by Clive
Wed Jul 23, 2014 4:27 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3846

Re: How indexing let these retirees live footloose and fancy

Whilst smaller markets (such as Greece) periodically openly default, the majors (US, UK etc.) tend to default more via stealth. UK around 1920 defaulted by a series of sequential years of high inflation. US 1933 removed investment gold from the equation by buying it all up for around $20/ounce to th...
by Clive
Wed Jul 23, 2014 4:09 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3846

Re: How indexing let these retirees live footloose and fancy

As stated earlier, they probably had more assets than that based on selling some property. Regarding setting up a conservative bond ladder to fund their retirement from this point on . . . they absolutely don't need to do that. As Billy has told me, they could just live on their upcoming social sec...
by Clive
Wed Jul 23, 2014 3:34 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3846

Re: How indexing let these retirees live footloose and fancy

This is not one I would be comfortable with at all, especially since they apparently spent a few months in the US each year, where we know that health care costs can be astronomical. If you get hit by the proverbial truck and land in a US hospital unconscious when you are "going naked", y...
by Clive
Tue Jul 22, 2014 6:29 pm
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3846

Re: How indexing let these retirees live footloose and fancy

They did not start out spending $30,000 per year back in the early 90's when they retired, that is what they spend now. So their withdrawal rate was not 6%. I can recall that throughout the mid-2000's their spending level was consistently about $24,000. $500K 1991 is around $830K more recently in i...
by Clive
Tue Jul 22, 2014 12:56 pm
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3846

Re: Bond strategy resilient to rate increase

are there better alternatives? A relatively short bond ladder perhaps? Maybe with 5 rungs. With a ladder you generally roll maturing bonds into a replacement 5 year and in holding each rung to maturity there's low/no capital risk should interest rates rise (bond repaid at par), whilst maturing bond...
by Clive
Mon Jul 21, 2014 8:37 pm
 
Forum: Investing - Theory, News & General
Topic: Bond strategy resilient to rate increase
Replies: 13
Views: 1516

Re: Help with International Stock Volatility

One measure I like to monitor is what I call best and rest. For stocks (UK 1900 - 2010) that's simply the average of all yearly gains, nominal 10.9% with 20.8 standard deviation. For inflation 4.1% average with 6.7 standard deviation. For a portfolio however there's a bit more calculation involved. ...
by Clive
Mon Jul 21, 2014 8:10 pm
 
Forum: Investing - Theory, News & General
Topic: Help with International Stock Volatility
Replies: 4
Views: 460

Re: Help with International Stock Volatility

My guess is that most of the supposed extra volatility of holding international stocks is just an artifact of using nominal rather than real returns. If we were to calculate volatility using real returns, most of that volatility would go away. Does anyone know if this is true? Foreign stocks adds i...
by Clive
Mon Jul 21, 2014 7:12 pm
 
Forum: Investing - Theory, News & General
Topic: Help with International Stock Volatility
Replies: 4
Views: 460

Re: Favorite portfolio tracking software

Dedicated hardware - HB input device, parchment display.

Inexpensive, resilient to hardware crashes and power outages.
by Clive
Mon Jul 21, 2014 10:02 am
 
Forum: Investing - Theory, News & General
Topic: Favorite portfolio tracking software
Replies: 14
Views: 1802

Re: Japan's Lost Decades in One Chart

I just figured that over the long term that all the currency fluctuations would even themselves out. Broadly they do (some up/others down) - except if the domestic currency collapses in isolation. I don't do anything particularly clever with currencies, just normal rebalancing stuff. 2009 reduce US...
by Clive
Mon Jul 21, 2014 6:22 am
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2861

Re: Japan's Lost Decades in One Chart

Clive, you raised a great point about currencies. This has been talked about on other threads. Because of YEN appreciation and very low inflation if not a mild deflation, the Japanese investor did not fare as badly as what is perceived here. I am still a believer in international diversification. B...
by Clive
Sun Jul 20, 2014 1:10 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2861

Re: Japan's Lost Decades in One Chart

"it couldn't happen here," when we all know, or at least suspect, that with the right political/economic conditions, it could And the answer is to diversify to reduce risk/impact - up to a point. TIPS, bonds, stocks ... etc have all had periods when they failed to reward sufficiently/as-e...
by Clive
Sun Jul 20, 2014 6:20 am
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2861

Re: Japan's Lost Decades in One Chart

So if folks have enough, i.e. won the game why are they invested in stocks at all? Why not all in TIPS for example. Concentration risk. What if inflation spikes to 16% yearly, TIPS yield 16%, but are taxed at a 25% rate = -4% real, less perhaps 3% withdrawals for living expenses = -7% yearly. If th...
by Clive
Sat Jul 19, 2014 8:24 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2861

Re: Japan's Lost Decades in One Chart

Japan is an excellent example of why an investor should diversify internationally. One should note that while Japan was experiencing bust in the 1990's, the US Stock Market was booming. To paint a more artful than scientific picture - whilst US stock total gains doubled in nominal terms 1990 - 1995...
by Clive
Sat Jul 19, 2014 7:53 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2861

Re: Japan's Lost Decades in One Chart

In the 1980's Japan's economy was rising strongly, heading towards and reaching becoming the world dominant economy. http://static5.businessinsider.com/image/51156986ecad04e86900002f-618-/moneygame-cotd-020813.jpg Many indexes are market cap weighted - weighting larger companies more heavily than sm...
by Clive
Sat Jul 19, 2014 5:42 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2861

Re: If you are currently leveraged...when to deleverage?

Realign to whatever is now suggested by the model that incited you to be 150% leveraged (mine is currently indicating 0.76 and hasn't been anywhere near 1.5 since the 2009 lows - when it indicated 1.7 (model based on ValueLine's Price Appreciation Potential)). 1.0 leveraged is just a figure, sometim...
by Clive
Fri Jul 18, 2014 4:51 am
 
Forum: Investing - Theory, News & General
Topic: If you are currently leveraged...when to deleverage?
Replies: 2
Views: 679

Re: Withdrawal Rate and Net Worth

If I was comfortable spending the proverbial inflation-adjusted 4% of starting portfolio value (given my age and risk-tolerance) I would certainly not be comfortable spending 8% of a portfolio just because I had a house worth the same amount. Its mostly a mental accounting thing, but it can also gi...
by Clive
Thu Jul 17, 2014 8:56 pm
 
Forum: Investing - Theory, News & General
Topic: Withdrawal Rate and Net Worth
Replies: 16
Views: 1798

Re: Imputed income (rent) Owner occupied houses.

P.S. I am so old that the standard was rent your house for 1% a month. A $40,000 house would rent for 400 a month or 12% per year. I don't know when this 5% stuff came in, but I have seen it before. It's closer to the 1/2% a month rule, 6%. I think that is a 90s thing. 12%/year sounds more like a 8...
by Clive
Sat Jul 12, 2014 5:27 am
 
Forum: Investing - Theory, News & General
Topic: Imputed income (rent) Owner occupied houses.
Replies: 21
Views: 2368

Re: International exposure: does it really help?

Egypt. Rome. Great Britain. Japan. USA. China. Can you discern a historical pattern? I quite like this chart that I posted in another thread recently. The US time at the helm was handed over to Japan during the 1970's/80's (having peaked at around 75% during the late 1960's) before being handed bac...
by Clive
Sat Jul 12, 2014 3:52 am
 
Forum: Investing - Theory, News & General
Topic: International exposure: does it really help?
Replies: 75
Views: 7458

Re: Imputed income (rent) Owner occupied houses.

I am simply fascinated that Bogleheads who analyze investment portfolios to multiple decimal places do not analyze their imputed income and its related housing expenses. Most studies use an average of 5 percent of the capital value of a home as the imputed income. 7.5% average yearly gross rent, le...
by Clive
Sat Jul 12, 2014 3:40 am
 
Forum: Investing - Theory, News & General
Topic: Imputed income (rent) Owner occupied houses.
Replies: 21
Views: 2368

Re: Tax Efficiency of Treasuries

Taxable - 100*[(1+0.67*0.035)^20 - 1] = 58.98% Tax-Deferred - 100*[(1+0.035)^20 - 1]*0.61 = 60.38% So you earn a mere 1.4% (cumulative) more over the 20 years (an average of 0.07%/year) in the tax-deferred account. This is a difference I can comfortably ignore. Comments welcome. UK 1900 to 2010 20 ...
by Clive
Fri Jul 11, 2014 10:59 am
 
Forum: Investing - Theory, News & General
Topic: Tax Efficiency of Treasuries
Replies: 19
Views: 1610

Re: Risk Adjusted Return?

Indeed. But with a collapse of the British Empire, two costly world wars, nigh on hyperinflation in the mid 1970's and a global inflation following that in the early 1980's .... etc. one would hope that the longer term (30 year) risk premium for taking on shorter term (yearly) stock volatility would...
by Clive
Fri Jul 11, 2014 6:35 am
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: Risk Adjusted Return?

Empirical evidence suggest that for all sequential 30 year periods (yearly granularity) that the distributions/stat's of such data - at least for the UK years 1900 - 2010 inclusive, stocks (accumulation/total return with dividends reinvested) provided a better prospect for at least a return of your ...
by Clive
Fri Jul 11, 2014 5:13 am
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: Risk Adjusted Return?

After a quick browse through Zvi Bodie's paper it looks to me to be (with greatest of respect) a brain-accident. From Table 1 of the paper, 1 year cost to insure a risk-free return = 8% (rounding). Stocks are renown for being volatile over the shorter term with single year declines of -20% or more b...
by Clive
Thu Jul 10, 2014 8:28 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: Risk Adjusted Return?

Although the long-term expected return for stocks is higher than for safe fixed income, so is the variance of terminal wealth. Here is a paper that discusses the trade-offs of expected return and variance of terminal wealth for portfolios of stocks and bonds: Measuring and Controlling Shortfall Ris...
by Clive
Thu Jul 10, 2014 6:21 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: International exposure: does it really help?

hints rather strongly that the fundamental economic, regulatory and tax backdrop matters in how people invest As someone who prefers to measure in net real terms (net of basic rate i.e. most common tax rate, inflation adjusted), I'm all too aware that such measures are pretty rare. Nominal gross is...
by Clive
Thu Jul 10, 2014 4:21 pm
 
Forum: Investing - Theory, News & General
Topic: International exposure: does it really help?
Replies: 75
Views: 7458

Re: Want international exposure? You already have it.

Another quote in the link I posted earlier : Back in 1900, the UK had the world's largest equity market Less than a handful of years during the subsequent 20 years and the US took over as the largest. After a series of sequential years of UK inflation 24%, 18%, 21%, 15% (stocks, gold, T-bills, T-Bon...
by Clive
Thu Jul 10, 2014 11:09 am
 
Forum: Investing - Theory, News & General
Topic: Want international exposure? You already have it.
Replies: 65
Views: 6342

Re: Want international exposure? You already have it.

Interesting to see how some of the larger equity markets can wax and wane http://www.businessinsider.com/world-stock-market-mix-since-1900-2013-2 http://static5.businessinsider.com/image/51156986ecad04e86900002f-618-/moneygame-cotd-020813.jpg Makes you wonder whether equal weighting countries might ...
by Clive
Thu Jul 10, 2014 6:00 am
 
Forum: Investing - Theory, News & General
Topic: Want international exposure? You already have it.
Replies: 65
Views: 6342

Re: Risk Adjusted Return?

Investment A: 10.99/17.24 = 0.64 Investment B: 5.95 / 9.94 = 0.60 So, investment A is slightly less risky. Am I on the right track? Investment A GENERALLY (over that period) indicated a better risk-adjusted reward. That's a very general measure however. More commonly risk takes many forms. Investor...
by Clive
Thu Jul 10, 2014 5:26 am
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: Risk Adjusted Return?

it's worth something to look at correlations All knowledge is generally good - but a little knowledge can be bad, such as luring you into a false sense of security where otherwise you might not have ventured. You're better placed being aware of the variations in measures across time. Long dated tre...
by Clive
Thu Jul 10, 2014 4:46 am
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: Risk Adjusted Return?

it's worth looking into the correlation of returns Correlations (and volatility) are as equally variable/unpredictable as price changes. i.e. you can employ long/short strategies to potentially gain (or lose) from correlations, or trade Options to target volatility. There are the obvious consistent...
by Clive
Wed Jul 09, 2014 5:47 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: Want international exposure? You already have it.

The worry that I do have is in owning 0% of the international market cap and that the one country that becomes the next "Japan" turns out to be mine! http://monevator.com/world-stock-markets-data/ Long term returns from different countries’ stock markets (Annualized real returns) Australi...
by Clive
Wed Jul 09, 2014 5:26 pm
 
Forum: Investing - Theory, News & General
Topic: Want international exposure? You already have it.
Replies: 65
Views: 6342

Re: Risk Adjusted Return?

So for example this should be rewritten as: Investment A: 10.99/17.24 = 0.64 Investment B: 5.95 / 9.94 = 0.60 11/17 = .6 6/10 = .6 There is no meaningful difference. Crudely adjusting for the risk-free rate however, perhaps inflation bonds and 3% inflation (11-3)/17 = 0.47 (6-3)/10 = 0.3 i.e. A has...
by Clive
Wed Jul 09, 2014 12:22 pm
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: 50/50 NOT rebalanced

For the min, max, average, stdev figures for all UK 1900 onwards 30 year annualised real rewards (where bonds are rolled 20 year gilts (treasury's)), total returns (accumulation/yearly rebalanced) : Stock/Bonds, min, max, average, stdev 50/50 -0.1% 8.2% 3.7% 1.7% 66/34 0.7% 8.8% 4.4% 1.6% 100/0 2.3%...
by Clive
Wed Jul 09, 2014 10:12 am
 
Forum: Investing - Theory, News & General
Topic: 50/50 NOT rebalanced
Replies: 2
Views: 909

Re: Risk Adjusted Return?

Time is a factor to consider when assessing risk For the min, max, average, stdev figures for all UK 1900 onwards 30 year annualised real rewards (where bonds are rolled 20 year gilts (treasury's)), total returns (accumulation/yearly rebalanced) : Stock/Bonds, min, max, average, stdev 50/50 -0.1% 8....
by Clive
Wed Jul 09, 2014 9:28 am
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4554

Re: How many veteran investor have LARGE MAJORITY in three-f

do you still use something as simple as a three-fund portfolio for the majority of your savings? You'd have gleamed a better indicator if you had asked '...majority of total WEALTH' - that included a valuation against pensions received etc. Someone for instance might have a third of their total wea...
by Clive
Wed Jul 09, 2014 5:50 am
 
Forum: Investing - Theory, News & General
Topic: How many veteran investor have LARGE MAJORITY in three-fund?
Replies: 56
Views: 3825

Re: In Which Theories Should I Have Confidence?

I did read Buffett’s letter and that section in particular some time ago. If I am to believe what he says, then I should hold only equities I would contest that equities (stocks) only are the best choice of productive asset. Personally I consider a home to be comparable. Owning your own home avoids...
by Clive
Tue Jul 08, 2014 5:38 am
 
Forum: Investing - Theory, News & General
Topic: In Which Theories Should I Have Confidence?
Replies: 43
Views: 4237

Re: 4% Withdrawals Through 2000 and 2008 Bear Markets

I am fine with 1970's style inflation when I have a TIPS ladder for LMP. Or am I missing something? Provided in tax efficient/exempt. Taxes can correlate with the inflation rate. 15% inflation, 15% nominal, 33% tax = -5% real. In the UK the inflation uplift element of index linked gilts (similar to...
by Clive
Mon Jul 07, 2014 8:59 am
 
Forum: Investing - Theory, News & General
Topic: 4% Withdrawals Through 2000 and 2008 Bear Markets
Replies: 26
Views: 3330

Re: 4% Withdrawals Through 2000 and 2008 Bear Markets

Withdrawals Through 2000 and 2008 Bear Markets You might ask have stock declines during those years impacted the longer term rewards? June 1999 S&P500 Total Return Index 1877 Recent = 3599 92% increase (4.4% annualised). Newly retired with a $10,000 inflation adjusted pension, who lives in a $3...
by Clive
Mon Jul 07, 2014 7:38 am
 
Forum: Investing - Theory, News & General
Topic: 4% Withdrawals Through 2000 and 2008 Bear Markets
Replies: 26
Views: 3330
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