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Re: Asset Class Junkie Reads Bernstein's Skating Where Puck

That being said though, correlations do change over time and long term correlations between various risky asset classes are lower than when they converge in crises. Seems that there is still benefit to multi asset class investing for those with strong hands and long time frames, but the enthusiasm ...
by Simplegift
Wed Mar 25, 2015 8:22 pm
 
Forum: Investing - Theory, News & General
Topic: Asset Class Junkie Reads Bernstein's Skating Where Puck Was
Replies: 4
Views: 704

Re: Global Dominance of U.S. Companies (by Mkt. Cap)

We can be sure most/some countries will still be around... and we should compare that to individual businesses. Okay... :confused That seems like quite a reach. Sorry for the confusion. I was just following up on the comparisons in the OP, where it was noted that many large-cap U.S. companies have ...
by Simplegift
Wed Mar 25, 2015 7:16 pm
 
Forum: Investing - Theory, News & General
Topic: Global Dominance of U.S. Companies (by Mkt. Cap)
Replies: 10
Views: 995

Re: Global Dominance of U.S. Companies (by Mkt. Cap)

In doing research on this topic, I also ran across an interesting study on the declining longevity of U.S. companies that was worth posting. We can be reasonably sure that South Korea, Mexico and Indonesia will be around in 50 years — but will Apple, JPMorgan Chase and Amgen? A few of the study's fi...
by Simplegift
Wed Mar 25, 2015 5:21 pm
 
Forum: Investing - Theory, News & General
Topic: Global Dominance of U.S. Companies (by Mkt. Cap)
Replies: 10
Views: 995

Re: "Looming Crisis" in Corporate Bond Fund Liquidity

As bond dealers have reduced the size of their balance sheets, making it less likely their trading desks will level out the volatility of the bond markets, I'm sure the smart folks at Vanguard have been paying attention to these trends. I expect they've been modeling the effects these changes are ha...
by Simplegift
Wed Mar 25, 2015 2:57 pm
 
Forum: Investing - Theory, News & General
Topic: "Looming Crisis" in Corporate Bond Fund Liquidity
Replies: 16
Views: 2629

Re: Global Dominance of U.S. Companies (by Mkt. Cap)

Hope this develops into a discussion on International/Global Allocation. Lest the U.S.-only investors on the Forum feel smug about the overwhelming number of large-cap companies from the United States, it should be pointed that, when one adds up all the numbers worldwide in the OP, there are actual...
by Simplegift
Wed Mar 25, 2015 1:18 pm
 
Forum: Investing - Theory, News & General
Topic: Global Dominance of U.S. Companies (by Mkt. Cap)
Replies: 10
Views: 995

Global Dominance of U.S. Companies (by Mkt. Cap)

Even knowing the U.S. makes up over 50% of global market cap, it's difficult to believe at times just how dominant large-cap U.S. companies are from a world perspective. While thumbing through the latest annual report from Vanguard's Total World Stock Index Fund (VTWSX), I happened to glance at the ...
by Simplegift
Wed Mar 25, 2015 9:31 am
 
Forum: Investing - Theory, News & General
Topic: Global Dominance of U.S. Companies (by Mkt. Cap)
Replies: 10
Views: 995

Re: Total or Sub-Asset Alloc? Which is more important?

Although it is likely impossible to know with certainty, which influences the projected portfolio return more? An increase in international weight by 10% at the sub-asset allocation level or a decrease in stock allocation by 10% at the top asset allocation level? Years ago, on his Efficient Frontie...
by Simplegift
Tue Mar 24, 2015 10:12 am
 
Forum: Investing - Theory, News & General
Topic: Total or Sub-Asset Alloc? Which is more important?
Replies: 4
Views: 387

Re: The Most Likely Portfolio Peril — Inflation or Deflation

Ben Bernanke thinks deflation will never become a serious problem under fiat currency system. This belief is called 'the bernanke doctrine'. It seems that many central banks around the world today have adopted the “Bernanke Doctrine.” That is, believing that deflation is caused by inadequate demand...
by Simplegift
Mon Mar 23, 2015 12:01 am
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: Philosophical Economics: Introducing the Total Return EP

In this most recent article, it's a bit difficult to distinguish what really matters to ordinary investors and what is just "inside baseball," with relevance only to true aficionados of the Shiller CAPE. But, personally, what I found most interesting were his insights on the historical gro...
by Simplegift
Sun Mar 22, 2015 8:41 pm
 
Forum: Investing - Theory, News & General
Topic: Philosophical Economics: Introducing the Total Return EPS
Replies: 16
Views: 1855

Re: How important is an international allocation?

MindBogler wrote:Looks pretty obvious to me when you choose a proper comparison and don't manipulate the endpoints.

And especially if one looks at the entire historical record since 1970:

by Simplegift
Sun Mar 22, 2015 5:38 pm
 
Forum: Investing - Theory, News & General
Topic: How important is an international allocation?
Replies: 66
Views: 4575

Re: The Most Likely Portfolio Peril — Inflation or Deflation

This all makes sense as a sniff test of common sense, but do we have the data to support it? Good question. From what I've seen, there's a vast body of literature and historical research about asset returns (including stocks, bonds, REITs, commodities, etc.) during inflationary periods , both expec...
by Simplegift
Sun Mar 22, 2015 4:59 pm
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: How important is an international allocation?

The majority of developed economies are facing far different demographic futures than they had pasts. Only one large, developed economy is facing a positive demographic future and that is the United States. Europe, with the exception of Sweden, will be facing negative population growth and will hav...
by Simplegift
Sun Mar 22, 2015 1:14 pm
 
Forum: Investing - Theory, News & General
Topic: How important is an international allocation?
Replies: 66
Views: 4575

Re: The Most Likely Portfolio Peril — Inflation or Deflation

In past years we have become accustomed to ever increasing productivity gains which allowed for wage growth and economic growth without corresponding rises in inflation. If productivity growth fails now and is added to our worry list of demographics and debt the future of our economy may not be nea...
by Simplegift
Sat Mar 21, 2015 5:12 pm
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: How much international stock for a foreigner

Why is China so under represented in the FTSE all world equity index? At first look I don't like this at all. China is the rising superpower. According to a recent Reuters article , Chinese-listed stock shares may someday be included in the key emerging market indexes — but there's still strong res...
by Simplegift
Sat Mar 21, 2015 2:00 pm
 
Forum: Investing - Theory, News & General
Topic: How much international stock for a foreigner
Replies: 23
Views: 1058

Re: How much international stock for a foreigner

What percentage of US/International/Chinese stocks should be? For a foreigner living in China like me? Vanguard published a nice research report a few years ago that offered some guidelines and metrics for international investors to use in deciding their foreign equity allocations. This paper won't...
by Simplegift
Sat Mar 21, 2015 12:56 pm
 
Forum: Investing - Theory, News & General
Topic: How much international stock for a foreigner
Replies: 23
Views: 1058

Re: The Most Likely Portfolio Peril — Inflation or Deflation

Your OP was highlighting long-term trends. As you note, if we have a an average of 1% deflation per year, then interest rates will be very low (or even zero and below). As long as the psychology of the marketplace adjusts to the new normal (which takes time), then economic activity will hum along j...
by Simplegift
Sat Mar 21, 2015 10:43 am
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: The Most Likely Portfolio Peril — Inflation or Deflation

Deflation is not a problem for either stocks or bonds. Deflation benefits anyone who's a net creditor, anyone who owns securities. Returns of everything increase in inflation. Anyone sitting on a nice portfolio that is reasonably liquid is fine--unless the general malaise of deflation spreads and c...
by Simplegift
Sat Mar 21, 2015 9:41 am
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: The Most Likely Portfolio Peril — Inflation or Deflation

Why not add credit expansion and productivity to your scenario. This is a very interesting discussion. Ned, I doubt we can discuss credit expansion and inflation without inviting spirited comments about the U.S. government's monetary and economic policies — which would likely violate the Forum's gu...
by Simplegift
Fri Mar 20, 2015 10:41 pm
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: The Most Likely Portfolio Peril — Inflation or Deflation

The question that arises in my mind is, in general, to a rough first approximation and ignoring taxation etc. what is the effect of inflation and deflation on a) real returns of stocks, b) real returns of bonds, c) the premium of stocks over bonds? Dimson, Marsh and Staunton reported on the real re...
by Simplegift
Fri Mar 20, 2015 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: The Most Likely Portfolio Peril — Inflation or Deflation

It also deserves mention that, demographically, the United States is a bit unique among developed countries worldwide (in middle, chart below). Because of its somewhat higher fertility rates and its higher immigration rates, the U.S. is projected to have a slowly growing workforce for decades to com...
by Simplegift
Fri Mar 20, 2015 9:05 am
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

The Most Likely Portfolio Peril — Inflation or Deflation?

Many of us who lived through the runaway inflation of the 1970s believe, consciously or unconsciously, that inflation is still the greatest risk to our investments. To quote William Bernstein, author of the book Deep Risk , "Financial history suggests that in the long run, the most probable thr...
by Simplegift
Fri Mar 20, 2015 12:22 am
 
Forum: Investing - Theory, News & General
Topic: The Most Likely Portfolio Peril — Inflation or Deflation?
Replies: 40
Views: 3792

Re: Philosophical Economics: Introducing the Total Return EP

Here is the first follow-up article from Mr Livermore. Clearly, there will be more. A terrific read! Yes, it's a "must read" for those interested in the long history of the U.S. market. Thanks for the link. One interesting observation that jumps out from Mr. Livermore's analysis is how &q...
by Simplegift
Thu Mar 19, 2015 6:38 pm
 
Forum: Investing - Theory, News & General
Topic: Philosophical Economics: Introducing the Total Return EPS
Replies: 16
Views: 1855

Re: Larry on interest rates and bond term risk

From the linked article: Consider ignoring all interest rate forecasts and build laddered portfolios with an average maturity typically of about four to five years. That maturity balances the two risks of maturity (inflation) and reinvestment. If beginning investors (and seasoned investors too!) wou...
by Simplegift
Thu Mar 19, 2015 1:07 pm
 
Forum: Investing - Theory, News & General
Topic: Larry on interest rates and bond term risk
Replies: 12
Views: 1675

Re: Qualms about Market Predictions

And while I have the highest respect for John Bogle and Bill Bernstein, does anyone share my concern when John Bogle and Bill Bernstein make predictions about stock market returns in future years? Valuations of both stocks and bonds in the U.S. are at extremely high levels today — and expected port...
by Simplegift
Thu Mar 19, 2015 10:15 am
 
Forum: Investing - Theory, News & General
Topic: Qualms about Market Predictions
Replies: 15
Views: 1000

Re: How much international is too much?

SG: Looking at world equity from the perspective of revenue source (and GDP) is fascinating, and it provides additional information and perspective that I think might actually affect my choice of Int'l exposure in equity, or at least help "inform" it, although as of now, I can't say that ...
by Simplegift
Wed Mar 18, 2015 11:55 am
 
Forum: Investing - Theory, News & General
Topic: How much international is too much?
Replies: 113
Views: 9143

Re: How much international is too much?

Again, I'm just being DA here, but I could see the point in saying that 1/3 is just too much for any one country. What if energy were 1/3 of the global economy - might one tilt toward other sectors to avoid swings in that particular industry? Or the 1/3 stock in index example I gave. I realize thes...
by Simplegift
Wed Mar 18, 2015 7:28 am
 
Forum: Investing - Theory, News & General
Topic: How much international is too much?
Replies: 113
Views: 9143

Re: Shiller - How Scary Is the Bond Market?

In the linked article, Mr. Shiller appears to be missing a global perspective, I believe. Real interest rates have been falling in the developed world for two decades (chart below). Since real interest rates are determined in a global marketplace by the supply and demand for capital, one has to ask,...
by Simplegift
Tue Mar 17, 2015 2:08 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller - How Scary Is the Bond Market?
Replies: 29
Views: 4410

Re: Philosophical Economics: Introducing the Total Return EP

This is another creative and insightful article by Mr. Livermore — but it troubles me that he assumes mean reversion of BOTH earnings growth and CAPE 10 back their historical averages. There's a very good case for mean reversion of corporate earnings, I believe, back toward a long-term trend growth ...
by Simplegift
Tue Mar 17, 2015 9:51 am
 
Forum: Investing - Theory, News & General
Topic: Philosophical Economics: Introducing the Total Return EPS
Replies: 16
Views: 1855

Re: Best investment in a deflationary scenario

High-quality bonds paying a stream of income are about the best protection one can have during deflationary periods, since the value of dollars is rising: • Nominal Treasuries are the lowest risk option. Long-term Treasuries provide the best returns during deflation, but holding them has serious int...
by Simplegift
Mon Mar 16, 2015 9:47 pm
 
Forum: Investing - Theory, News & General
Topic: Best investment in a deflationary scenario
Replies: 11
Views: 1311

Re: U.S. Stock Valuations — Making History?

Maybe we could assume that [earnings] oscillates around, and eventually reverts to, a long-term trend Article linked here: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=161146 Yes, well put. In the article you linked to, Mr. Livermore calculates the long-term trend growth rate of S&...
by Simplegift
Mon Mar 16, 2015 6:41 pm
 
Forum: Investing - Theory, News & General
Topic: U.S. Stock Valuations — Making History?
Replies: 46
Views: 4550

Re: How much international is too much?

Just to play Devil's Advocate: 1/3 exposure to just one country is a pretty big bet on that country, all else aside. Imagine if we were talking about an index fund that held 1/3 just one stock. I don't think it's entirely irrational to suggest someone could look at that and still want to tilt furth...
by Simplegift
Sun Mar 15, 2015 9:48 pm
 
Forum: Investing - Theory, News & General
Topic: How much international is too much?
Replies: 113
Views: 9143

Re: How much international is too much?

How much international is too much? More than you personally are comfortable with but in no case to exceed international cap weight in global indexes. Have to strongly agree with GW here. Once your international allocation reaches the cap-weights in the global stock index (about 50% U.S./50% Intern...
by Simplegift
Sun Mar 15, 2015 3:58 pm
 
Forum: Investing - Theory, News & General
Topic: How much international is too much?
Replies: 113
Views: 9143

Re: Bonds — The U.S. As a High-Yielding Country?

Here are some google links, if the NY Times articles aren't available: Thinking About International Bond Yields Exporting Europe’s Stagnation Very helpful articles, whaleknives , especially the first one. The inflation differential — the fact that the U.S. economy is improving and U.S. inflation is...
by Simplegift
Sun Mar 15, 2015 12:24 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds — The U.S. As a High-Yielding Country?
Replies: 15
Views: 1524

Re: Bonds — The U.S. As a High-Yielding Country?

Though the U.S. (and Australia!) may have the highest government bond yields among developed countries today, we should also keep in mind that government bonds from emerging countries are also vying for global investor demand (chart below). While few conservative investors will be looking at bonds f...
by Simplegift
Sun Mar 15, 2015 11:15 am
 
Forum: Investing - Theory, News & General
Topic: Bonds — The U.S. As a High-Yielding Country?
Replies: 15
Views: 1524

Bonds — The U.S. As a High-Yielding Country?

Among developed countries, U.S. government bonds are considered to be nearly the safest in the world. However, as a result of near-recession conditions and the threat of deflation in both the Eurozone and Japan, plus central banks' efforts to combat these problems, U.S. Treasuries are now among the ...
by Simplegift
Sun Mar 15, 2015 12:10 am
 
Forum: Investing - Theory, News & General
Topic: Bonds — The U.S. As a High-Yielding Country?
Replies: 15
Views: 1524

Re: Are Bogleheads by definition Hayek-ians?

Your search for a connection between von Hayek's views and the efficient market theory reminds me of a notable quote from, I believe, Rex Sinquefield, co-founder of DFA. He remarked, "So who believes markets don't work? Apparently it is only the North Koreans, the Cubans and the active managers...
by Simplegift
Sat Mar 14, 2015 7:57 pm
 
Forum: Investing - Theory, News & General
Topic: Are Bogleheads by definition Hayek-ians?
Replies: 6
Views: 841

Re: muni bond into asset allocation

Only you can decide the tradeoff between the added risks of the single-state muni bond fund versus the tax advantages it offers to you personally. Shifting from the Vanguard Total Bond Fund to the Vanguard PA Muni Fund, you're definitely exposing your "safe assets" to more risk — specifica...
by Simplegift
Sat Mar 14, 2015 1:31 pm
 
Forum: Investing - Theory, News & General
Topic: muni bond into asset allocation
Replies: 1
Views: 304

Re: U.S. Stock Valuations — Making History?

It's hard to make the case that U.S. stocks are anywhere near "bubble territory," in my view, primarily because U.S. corporate earnings in aggregate have been spectacular since the 2008 financial crisis (chart on right). Do earnings mean revert? If so, it could be dangerous to pay a high ...
by Simplegift
Sat Mar 14, 2015 11:49 am
 
Forum: Investing - Theory, News & General
Topic: U.S. Stock Valuations — Making History?
Replies: 46
Views: 4550

Re: U.S. Stock Valuations — Making History?

The trouble I have with this information is that an average over 20 years is just about meaningless to calibrate anything with the word 'earnings' inside it. Most of the countries on the RAFI site only have PE history starting in the mid-90s. Even the UK history only starts in 1969. Compare that to...
by Simplegift
Fri Mar 13, 2015 11:37 pm
 
Forum: Investing - Theory, News & General
Topic: U.S. Stock Valuations — Making History?
Replies: 46
Views: 4550

Re: U.S. Stock Valuations — Making History?

Are we getting hints of commentary parallels with the late 90s? I remember two prominent commentary strands in the tech run up. One group opined that owning large US growth stocks was the only reasonable strategy. The other pointed out the high valuations in that part of the market. There were rejo...
by Simplegift
Fri Mar 13, 2015 6:42 pm
 
Forum: Investing - Theory, News & General
Topic: U.S. Stock Valuations — Making History?
Replies: 46
Views: 4550

Re: How much international is too much?

You're correct, small caps generally have less foreign revenue than their large cap cohorts. In some regions, the difference is large (North America and Asia Pacific) and in others, not so much (Europe and Emerging Markets). Do you know how they calculated foreign revenue for the European small cap...
by Simplegift
Fri Mar 13, 2015 3:37 pm
 
Forum: Investing - Theory, News & General
Topic: How much international is too much?
Replies: 113
Views: 9143

Re: volatility ETF to hedge the falling stock risk

Do you have the same, but extending back to the high inflationary 1970's? Also, they are missing 2 asset that usually do well in bear markets as well which are: cash and gold. Any idea if there is a graphic including them as well? A quick search turned up the chart below for the performance of gold...
by Simplegift
Fri Mar 13, 2015 11:27 am
 
Forum: Investing - Theory, News & General
Topic: volatility ETF to hedge the falling stock risk
Replies: 14
Views: 1073

Re: volatility ETF to hedge the falling stock risk

When it is done seriously by institutions, "hedging" is not any kind of magic, it's an insurance policy that costs money in various ways. The question is always whether it is that much better than reducing risk and return simply by investing less in stocks and more in bonds--which is simp...
by Simplegift
Fri Mar 13, 2015 9:56 am
 
Forum: Investing - Theory, News & General
Topic: volatility ETF to hedge the falling stock risk
Replies: 14
Views: 1073

Re: How much international is too much?

This is a good point but one thing to keep in mind for people who tilt is that small and small value US stocks tend to get more of their revenue domestically than S&P500 stocks. I would appreciate it if someone had the numbers regarding this. In researching the original topic , I did run across...
by Simplegift
Thu Mar 12, 2015 8:19 pm
 
Forum: Investing - Theory, News & General
Topic: How much international is too much?
Replies: 113
Views: 9143

Re: How much international is too much?

Is there an agreed upon upper limit of international stock exposure? One way to think about an upper limit on international stocks is to look at revenue exposure (the graphic below is from a previous Forum discussion ). U.S. companies, in aggregate, already receive about 40% of their revenues from ...
by Simplegift
Thu Mar 12, 2015 5:28 pm
 
Forum: Investing - Theory, News & General
Topic: How much international is too much?
Replies: 113
Views: 9143

Re: Is High Frequency Trading a Problem For Bogleheads?

If index funds were losing up to 0.33% per year due to an "invisible scalp" from high-frequency trading, wouldn't it show up in the difference between the returns of the index fund and the index itself? To date, the return differences of these index funds appears to be right in line with t...
by Simplegift
Thu Mar 12, 2015 4:09 pm
 
Forum: Investing - Theory, News & General
Topic: Is High Frequency Trading a Problem For Bogleheads?
Replies: 42
Views: 1856

Re: U.S. Stock Valuations — Making History?

Which explains why value investing is so hard -- you have to sell the good stuff, buy krap, and try to convince yourself this was a smart thing to do as the krap sinks to the bottom. Not surprisingly, there's now an ETF that follows this exact strategy, originated by Meb Faber, I believe. It's the ...
by Simplegift
Thu Mar 12, 2015 2:19 pm
 
Forum: Investing - Theory, News & General
Topic: U.S. Stock Valuations — Making History?
Replies: 46
Views: 4550

U.S. Stock Valuations — Making History?

Has there been a time in recent history when one country's equities were so highly valued relative to all other countries' equities worldwide? Perhaps Japan in the late 1980s? Perhaps the United Kingdom in the early 1700s (the South Sea Company days)? Maybe these relative valuations are fully justif...
by Simplegift
Thu Mar 12, 2015 11:59 am
 
Forum: Investing - Theory, News & General
Topic: U.S. Stock Valuations — Making History?
Replies: 46
Views: 4550

Re: Source for global returns over the long term?

This PDF publication gives a good overview of historical asset returns for various major countries:

2015 Credit Suisse Global Investment Returns Yearbook
by Simplegift
Wed Mar 11, 2015 11:22 pm
 
Forum: Investing - Theory, News & General
Topic: Source for global returns over the long term?
Replies: 2
Views: 242

Re: If 2% is real, we are . . . . ?

Although history does not predict the future historically inflation was ~3%. Historically a 60/40 portfolio returned ~8.7%. That is 5.7% real returns. You want to hedge on caution then cut that by 20% and use 4.56% real returns and lets stop this fear mongering nonsense. Using past average returns ...
by Simplegift
Wed Mar 11, 2015 2:31 pm
 
Forum: Investing - Theory, News & General
Topic: If 2% is real, we are . . . . ?
Replies: 63
Views: 6246
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