Search found 1700 matches

by Simplegift
Thu Jul 30, 2015 9:49 pm
Forum: Investing - Theory, News & General
Topic: US Labor Productivity
Replies: 7
Views: 416

Re: US Labor Productivity

To complete the connection between productivity and investing, folks might be interested in this 2013 paper, Productivity Growth and Stock Returns . Like so many other counter-intuitive relationships in investing, it appears that for the U.S. market at least over last few decades, there's been a neg...
by Simplegift
Thu Jul 30, 2015 7:38 pm
Forum: Investing - Theory, News & General
Topic: US Labor Productivity
Replies: 7
Views: 416

Re: US Labor Productivity

Once a year, I skim through the annual productivity brief from The Conference Board, which is very readable and accessible to the non-economist. They always have a nice chart (below) showing the long-term trends in labor productivity among both the developing and advanced economies. In their latest ...
by Simplegift
Thu Jul 30, 2015 4:31 pm
Forum: Investing - Theory, News & General
Topic: The Long-Term Decline of Interest Rates
Replies: 15
Views: 988

Re: The Long-Term Decline of Interest Rates

You can make the argument that its been happening over the past 33 years. Yes, and going even further back in time, it's apparent that real interest rates have been declining in the U.S. over the past two centuries (chart below). William Bernstein makes the point (in his Four Pillars of Investing a...
by Simplegift
Thu Jul 30, 2015 2:46 pm
Forum: Investing - Theory, News & General
Topic: The Long-Term Decline of Interest Rates
Replies: 15
Views: 988

Re: The Long-Term Decline of Interest Rates

The biggest question that a "lower equilibrium level of interest rates" raises for me is: Has the role of bonds in the portfolio fundamentally changed? When first designing my portfolio 25 years ago (50% stocks/50% bonds), my understanding was that high-quality bonds served three purposes ...
by Simplegift
Thu Jul 30, 2015 1:30 pm
Forum: Investing - Theory, News & General
Topic: The Long-Term Decline of Interest Rates
Replies: 15
Views: 988

The Long-Term Decline of Interest Rates

Interest rates worldwide have been falling since the early 1980s and have reached historically low levels. But does this experience indicate that the level of interest rates has shifted to a lower long-run equilibrium? A very readable new report by the Council of Economic Advisers surveys the latest...
by Simplegift
Wed Jul 29, 2015 10:35 pm
Forum: Investing - Theory, News & General
Topic: "current yields are the best estimate of future returns"
Replies: 6
Views: 501

Re: "current yields are the best estimate of future returns"

There are numerous studies showing the close correspondence between beginning yields of bonds and their actual forward returns over long periods. This first one is from Mr. Bogle's Financial Research Center and shows intermediate-term Treasury yields and their subsequent 10-year returns (R^2 = 0.91)...
by Simplegift
Wed Jul 29, 2015 7:13 pm
Forum: Investing - Theory, News & General
Topic: Equity Risk Premiums Around the World - July 2015
Replies: 14
Views: 1377

Re: Equity Risk Premiums Around the World - July 2015

For those folks who are invested in Vanguard's Developed Markets and Emerging Markets Index Funds, these are the cap-weighted average equity risk premiums for the two funds, along with the U.S. (all from Mr. Damodaran's recent study): United States…….....…….........…..…5.8% Developed Markets Index……...
by Simplegift
Wed Jul 29, 2015 6:03 pm
Forum: Investing - Theory, News & General
Topic: Jeremy Grantham: The 10 Topics That Really Matter
Replies: 4
Views: 1123

Re: Jeremy Grantham: The 10 Topics That Really Matter

1. Pressure on gross domestic product growth in the U.S. and the balance of the developed world: count on 1.5% U.S. growth, not the old 3%. Mr. Grantham may be a permabear, but his comments about global economic growth are right in line with the IMF's most recent World Economic Outlook report . The...
by Simplegift
Wed Jul 29, 2015 1:00 pm
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 3977

Re: The Futility of Predicting Future Returns

During my 20s, even if I had known a good prediction of the future returns of stocks and bonds , they would have been useless to me for setting a savings rate. I simply had no idea what my future salary would be over the next almost three decades. The only factor that was actionable to decide of a ...
by Simplegift
Wed Jul 29, 2015 11:34 am
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 165
Views: 6110

Re: Are equities really as risky as anyone thinks?

What you seem to be saying is that the fundamental returns of stocks (dividends and earnings) are more stable than the market price — which is true — but investors can't just ignore the price risk and speculative returns that are inherent in equity investing. Thanks for the chart that was illustrat...
by Simplegift
Wed Jul 29, 2015 10:51 am
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 165
Views: 6110

Re: Are equities really as risky as anyone thinks?

People forget that equities are backed by their underlying earnings, which are quite stable, and that most of the price volatility is unwarranted speculation that tends to revert to the mean. There's also the dividend stream, so one could always just choose to hold their principle and only withdraw...
by Simplegift
Wed Jul 29, 2015 9:50 am
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 3977

Re: The Futility of Predicting Future Returns

The point I guess I'm trying to make is any timing or valuation models that result in portfolio changes isn't mainstream Boglehead philosophy. Just to be clear, I haven't seen many in this thread advocating the use of "expected returns" as a timing or a valuation tool for portfolio change...
by Simplegift
Wed Jul 29, 2015 9:04 am
Forum: Investing - Theory, News & General
Topic: Equity Risk Premiums Around the World - July 2015
Replies: 14
Views: 1377

Re: Equity Risk Premiums Around the World - July 2015

simplegift, would you mind publishing the actual list of data point pairs, you used in that correlation chart? I'd like to double-check your value, and I'd also like to do a rank correlation test (Spearman's rho) on whether it's significant. Good idea, Nisi. However, if you have the time, I'd sugge...
by Simplegift
Wed Jul 29, 2015 8:49 am
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 3977

Re: The Futility of Predicting Future Returns

Whether or not something is actionable can be in the eye of the beholder. If a weather forecast says rain is possible a person who already plans on staying indoors all day no matter what could state, "It's not actionable, forecasting today's weather is therefore futile." But for someone w...
by Simplegift
Tue Jul 28, 2015 9:04 pm
Forum: Investing - Theory, News & General
Topic: Equity Risk Premiums Around the World - July 2015
Replies: 14
Views: 1377

Re: Equity Risk Premiums Around the World - July 2015

One intriguing idea that was entirely new to me from Mr. Damodaran's paper was his concept that a country's equity risk premium is "the receptacle for all macro-economic fears" about that country. In other words, one can view a country's ERP much like the credit rating on its sovereign deb...
by Simplegift
Tue Jul 28, 2015 6:57 pm
Forum: Investing - Theory, News & General
Topic: Malkiel on Chinese Stock Markets
Replies: 10
Views: 1384

Re: Malkiel on Chinese Stock Markets

A thoughtful article by Mr. Malkiel — thanks for posting it. It will definitely be disappointing (and a bit ironic) if China's recent stock market run-up and crash sets back or derails the country's appetite for deeper changes and reforms in China's economy — because at the very same time it makes m...
by Simplegift
Tue Jul 28, 2015 12:03 pm
Forum: Investing - Theory, News & General
Topic: Equity Risk Premiums Around the World - July 2015
Replies: 14
Views: 1377

Re: Equity Risk Premiums Around the World - July 2015

PS. For those folks not inclined to wade through Mr. Damodaran's 90-page paper about country risk and equity risk premiums, he covers much of the same material on his website, especially this page , which I found helpful as a primer on country risk and globalization. The equity risk premium reflects...
by Simplegift
Tue Jul 28, 2015 11:19 am
Forum: Investing - Theory, News & General
Topic: Vanguard's Developed & Emerging Markets Indexes — Transition Details
Replies: 50
Views: 3799

Re: Vanguard's Developed & Emerging Markets Indexes — Transition Details

The inclusion of Chinese mainland stocks at their full, free-float, market-cap weight in the emerging market indexes is inevitable at some point, I believe — but just not imminent. Though FTSE and Vanguard have started down this path (with a 5% initial allocation), MSCI has decided to wait a bit, wi...
by Simplegift
Tue Jul 28, 2015 9:24 am
Forum: Investing - Theory, News & General
Topic: Equity Risk Premiums Around the World - July 2015
Replies: 14
Views: 1377

Equity Risk Premiums Around the World - July 2015

Aswath Damodaran has published a 2015 update of his paper, Country Risk: Determinants, Measures and Implications , in which he provides his latest estimates of equity risk premiums (ERP) around the world, along with an extensive discussion of country risk from the perspective of the individual inves...
by Simplegift
Mon Jul 27, 2015 10:23 pm
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 3977

Re: The Futility of Predicting Future Returns

I'm asking for a 30-year chart of an intermediate bond fund like Total Bond with 5-7 year duration bonds... Because I'm guessing it's not a straight line anymore once if you have to re-invest the bonds every 5 years over 30 years... Homer, I've not seen a scatter-plot chart like that. However, ther...
by Simplegift
Mon Jul 27, 2015 5:59 pm
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 3977

Re: The Futility of Predicting Future Returns

I'm curious... what does the 30-year chart look like? The first chart below shows long-term government bonds yields and their subsequent 20-year returns for 1926-1990 (the best I could do). The basic relationship between starting yield and eventual return still holds, but with a bit more noise: htt...
by Simplegift
Mon Jul 27, 2015 4:59 pm
Forum: Investing - Theory, News & General
Topic: Vanguard's Developed & Emerging Markets Indexes — Transition Details
Replies: 50
Views: 3799

Re: Vanguard's Developed & Emerging Markets Indexes — Transition Details

The only time frame I've seen mentioned is from Vanguard's original announcement of the changes, in early June: The affected funds and ETFs are expected to begin the transition to more broadly diversified FTSE all-capitalization benchmarks in the third or fourth quarter of 2015. Note the key word &q...
by Simplegift
Mon Jul 27, 2015 3:41 pm
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 3977

Re: The Futility of Predicting Future Returns

Just because there is a degree of dispersion in expected returns (wide for stocks, much narrower for bonds) doesn't mean there is no useful information at all to be gained from looking at them. The OP seems to imply that because there is uncertainty, then the whole exercise is useless — which is goi...
by Simplegift
Mon Jul 27, 2015 2:57 pm
Forum: Investing - Theory, News & General
Topic: Vanguard's Developed & Emerging Markets Indexes — Transition Details
Replies: 50
Views: 3799

Re: Vanguard's Developed & Emerging Markets Indexes — Transition Details

TIAX wrote:Is there any information on the transition indexes?

Yes, these are links to the fact sheets for the transition indexes, from FTSE's website:

FTSE Developed All-Cap ex-US Transition Index

FTSE Emerging Markets All-Cap China-A Transition Index
by Simplegift
Mon Jul 27, 2015 11:41 am
Forum: Investing - Theory, News & General
Topic: estimate future real returns ?
Replies: 16
Views: 1259

Re: estimate future real returns ?

Is there a way to estimate real returns for a 50/50 and 60/40 stock bond allocation using Total stock market index fund and Total bond market index fund for the next 10 years ? As others have mentioned, for bonds, there's a strong relationship between current yields and future returns (R^2 = 0.92, ...
by Simplegift
Mon Jul 27, 2015 10:03 am
Forum: Investing - Theory, News & General
Topic: Vanguard's Developed & Emerging Markets Indexes — Transition Details
Replies: 50
Views: 3799

Re: Vanguard's Developed & Emerging Markets Indexes — Transition Details

For those interested, I wanted to post links to the FTSE Fact Sheets for each of the new indexes: FTSE Developed Markets All-Cap ex-USA Index FTSE Emerging Markets All-Cap China-A Inclusion Index These fact sheets contain some historical return, volatility and index constituent data that's not inclu...
by Simplegift
Mon Jul 27, 2015 12:27 am
Forum: Investing - Theory, News & General
Topic: Vanguard's Developed & Emerging Markets Indexes — Transition Details
Replies: 50
Views: 3799

Re: Vanguard's Developed & Emerging Markets Indexes — Transition Details

I like the changes in theory. That is, I like the addition of small caps to these funds. I like to tilt to international small caps, and have sometimes wondered if my tilt was too small. This will provide a welcome, though modest, boost to the small cap tilt. I too tilt toward to international smal...
by Simplegift
Sun Jul 26, 2015 9:24 pm
Forum: Investing - Theory, News & General
Topic: Vanguard's Developed & Emerging Markets Indexes — Transition Details
Replies: 50
Views: 3799

Re: Vanguard's Developed & Emerging Markets Indexes — Transition Details

It can be difficult to gain an accurate perspective on the relative company sizes in the various FTSE all-cap indexes, since they each have about a 75% large-cap, 15% mid-cap and 10% small-cap breakdown (as in the OP). But if one compares the median, average and largest sizes of companies in the USA...
by Simplegift
Sun Jul 26, 2015 7:21 pm
Forum: Investing - Theory, News & General
Topic: Vanguard's Developed & Emerging Markets Indexes — Transition Details
Replies: 50
Views: 3799

Vanguard's Developed & Emerging Markets Indexes — Transition Details

Most of us are aware that in the third or fourth quarter of 2015, Vanguard will begin transitioning its Developed Markets Index Fund (VTMGX and VEA) and its Emerging Markets Index Fund (VEMAX and VWO) to new benchmarks, with added small-cap exposure and a few country changes. FTSE has now published ...
by Simplegift
Sun Jul 26, 2015 10:27 am
Forum: Investing - Theory, News & General
Topic: Would Demand For Bonds Temper the Drop in NAV
Replies: 13
Views: 789

Re: Would Demand For Bonds Temper the Drop in NAV

I'm no bond expert, but I'll take a stab at answering your question. My sense is the short end of the yield curve (say, 1-3 year average maturity) is much more strongly influenced by the Fed's raising interest rates. But intermediate and longer-term bonds are more influenced by the supply and demand...
by Simplegift
Sun Jul 26, 2015 8:38 am
Forum: Investing - Theory, News & General
Topic: Fear Not the Inevitable Stock Market Correction
Replies: 19
Views: 3521

Re: Fear Not the Inevitable Stock Market Correction

Market corrections are normal, are usually soon reversed, and rarely mean the start of a long bear market. Do you have a graph that depicts what the market does before a real bear market? :D Is there any secret correlation or blip that has been found, over the last 100 years or so, to precede a bad...
by Simplegift
Sat Jul 25, 2015 8:53 pm
Forum: Investing - Theory, News & General
Topic: Fear Not the Inevitable Stock Market Correction
Replies: 19
Views: 3521

Re: Fear Not the Inevitable Stock Market Correction

Do you have those charts for Japan? No, I've not seen such charts. But one could easily construct them, as historical price data for the Nikkei Index is readily available online — assuming one has lots of time on their hands! But, honestly, I don't understand why folks would want to draw parallels ...
by Simplegift
Sat Jul 25, 2015 5:49 pm
Forum: Investing - Theory, News & General
Topic: Fear Not the Inevitable Stock Market Correction
Replies: 19
Views: 3521

Re: Fear Not the Inevitable Stock Market Correction

Am going to make a hardcopy of these charts and paste them on the mirror in my bathroom. I've said it before, but really am impressed with the quality of graphs and tables you include in your posts. Thanks for the hard work. Appreciate your kind comments, staythecourse . This Forum (myself included...
by Simplegift
Sat Jul 25, 2015 3:42 pm
Forum: Investing - Theory, News & General
Topic: Fear Not the Inevitable Stock Market Correction
Replies: 19
Views: 3521

Fear Not the Inevitable Stock Market Correction

Many recent posters have expressed concerns about today's elevated stock market levels and their fear of a market correction. This post is intended to give a broader, historical perspective on yearly market drops and to show they are, 1) very common, and 2) not an impediment to strong annual gains. ...
by Simplegift
Sat Jul 25, 2015 2:09 pm
Forum: Investing - Theory, News & General
Topic: J.P. Morgan Guide to the Markets 3Q 2015 (graphs, charts)
Replies: 11
Views: 1225

Re: J.P. Morgan Guide to the Markets 3Q 2015 (graphs, charts)

Thanks for the heads up, lack_ey . For us chart lovers, this publication each quarter is eagerly looked forward to. But even for those not especially enamored with charts, this compilation of data always seems to include some novel analyses of markets and asset classes that are difficult to find any...
by Simplegift
Fri Jul 24, 2015 10:39 pm
Forum: Investing - Theory, News & General
Topic: [Original Research] Is credit risk exaggerated?
Replies: 20
Views: 1181

Re: [Original Research] Is credit risk exaggerated?

I respect that you are looking at total return but I am explicitly ignoring total return and focusing on distributions. It's true HYG has fallen in price since the beginning of that time period, but it's distribution yield on its original price is still higher. So if you buy-and-hold forever price ...
by Simplegift
Fri Jul 24, 2015 4:58 pm
Forum: Investing - Theory, News & General
Topic: [Original Research] Is credit risk exaggerated?
Replies: 20
Views: 1181

Re: [Original Research] Is credit risk exaggerated?

If you ignore price volatility and just focus on dividends, it looks like "credit risk" is grossly exaggerated. But with high-yield bonds, like Vanguard's High-Yield Corporate Fund, I don't believe one can just ignore the price changes. The first chart below shows the relative price histo...
by Simplegift
Tue Jul 21, 2015 9:45 pm
Forum: Investing - Theory, News & General
Topic: Correlations, eh?
Replies: 18
Views: 2747

Re: Correlations, eh?

You are probably kidding yourself if you think of emerging markets bonds as behaving like "bonds." Yes, emerging market bonds have performed like a "light version" of emerging market stocks — and surprisingly have outperformed EM stocks over the last twenty years, with less vola...
by Simplegift
Tue Jul 21, 2015 10:26 am
Forum: Investing - Theory, News & General
Topic: Are Stocks Overvalued? A Survey of Equity Valuation Models
Replies: 202
Views: 11609

Re: Are Stocks Overvalued? A Survey of Equity Valuation Models

A good survey paper. It's conclusions are pretty much in line with most of the other forecasting models that have been discussed here on the Forum in the past few years. Based just on fundamentals alone (with today's fixed CAPE valuation), stocks are expected to return about 3%-3.5% real over the co...
by Simplegift
Tue Jul 21, 2015 8:10 am
Forum: Investing - Theory, News & General
Topic: Frontier Markets - 5% of portfolio?
Replies: 51
Views: 3236

Re: Frontier Markets - 5% of portfolio?

While there are about 25 countries included in the MSCI and FTSE frontier market indexes, it's worth noting that the entire "investable universe" of these frontier markets, in total, is only about 128 companies (table below). In other words, these markets are mostly illiquid, with small tr...
by Simplegift
Sun Jul 12, 2015 11:03 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

In other words, The Shiller P/E is saying to the investor not to expect the same future prospects for stocks at a reading of 26 as you did from the reading of 13 in 2009. No one is disputing that future, long-term stock returns are expected to be lower at today's level of CAPE 26. This is a perfect...
by Simplegift
Sun Jul 12, 2015 9:38 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

Another bungee cord? Exactly. When the value of CAPE 10 has been above average for 24 out of the last 25 years, you'd think it's time to question whether the metric's "long-term average" is actually a stable, fixed value that one can depend upon — and even further, bet one's asset allocat...
by Simplegift
Sun Jul 12, 2015 7:03 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

A mental image that helps me is to see the current CAPE attached to its long term average by a bungee cord. The further it gets from the long-term average, the more force the stretched cord will pull it back to the average. Sooner or later, mean reversion wins the battle against fear and greed. You...
by Simplegift
Sun Jul 12, 2015 1:39 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

Interestingly, in Faber's backtest, conservatively moving 100% into bonds when stocks crossed above CAPE 20, you'd still be keeping up with the market some 20 years on... No doubt market timers were helped by generous bond returns during the period — 4.6% nominal and 2.4% real annual returns for th...
by Simplegift
Sun Jul 12, 2015 10:37 am
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

Just out of curiosity, how many here who are advocating Mr. Pfau's valuation-based asset allocation strategy have actually been implementing it in their own portfolios? According to the linked article in the OP, by using Mr. Pfau's system, you would have reduced your equity allocation to 25% sometim...
by Simplegift
Sat Jul 11, 2015 9:45 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

Any investor who seriously considers formulaically adjusting their asset allocations based on historical CAPE 10 values would be well served to first read Nobel winner Daniel Kahneman's book, Thinking, Fast and Slow . The main theme of his book is cognitive illusions — the false beliefs that we intu...
by Simplegift
Sat Jul 11, 2015 5:29 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

--As the market gets gradually more expensive, the stock allocation reduces. This is in line with the reducing expected future returns of stocks from the Shiller P/E's. It's worth noting that even Dr. Shiller himself is expressing doubts about his understanding of high CAPE 10 valuations and their ...
by Simplegift
Sat Jul 11, 2015 2:09 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Asset Allocation Using PE10
Replies: 83
Views: 6021

Re: Wade Pfau on Asset Allocation Using PE10

Anyone who honestly believes there is a given, pre-ordained average CAPE value at which stocks are destined to trade — a golden mean that CAPE values will eventually and naturally revert toward — should read this post first, then follow up with the original research and article by Mr. Livermore, fou...
by Simplegift
Sat Jul 11, 2015 12:05 pm
Forum: Investing - Theory, News & General
Topic: Emerging Markets Index and China A-Shares, 1995-2015
Replies: 4
Views: 528

Re: Emerging Markets Index and China A-Shares, 1995-2015

Trying to gain a perspective on the alphabet soup of Chinese stock shares, I ran across the breakdown below from July 2012. Apparently all the share classes except A-shares are now included in the major emerging markets stock indexes, with FTSE and Vanguard also now adding 5% mainland China A-shares...
by Simplegift
Sat Jul 11, 2015 6:01 am
Forum: Investing - Theory, News & General
Topic: Emerging Markets Index and China A-Shares, 1995-2015
Replies: 4
Views: 528

Re: Emerging Markets Index and China A-Shares, 1995-2015

Are you sure your graph includes dividends? I don't believe it does, as I think Yahoo charts are price only — which is fine for the volatility comparison we're making. I've edited the OP to make this clear. Thanks. Here's a Morningstar total returns chart with dividends added: Shanghai Composite In...

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