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How Do Rising Interest Rates Affect Stock Prices?

The usual argument is that rising interest rates mean higher borrowing costs for corporations, which leads to lower profit margins, then lower corporate earnings and stock prices. But looking at the chart below, it doesn't appear that this a direct, straight line, cause-and-effect relationship. Inst...
by Simplegift
Sat Aug 23, 2014 2:41 am
 
Forum: Investing - Theory, News & General
Topic: How Do Rising Interest Rates Affect Stock Prices?
Replies: 1
Views: 183

Re: Is the Aggregate Index Too Heavy in Treasuries?

Doc wrote:
Simplegift wrote:Can anyone shed light on why the duration has risen nearly 40% in the five years since 2009?

This was addressed in the thread that Nisi referenced earlier.

Johno wrote:This Treasury report has graph of average maturity (not duration) of govt debt since 1980, p. 19

Thanks, Doc and Johno, very helpful!
by Simplegift
Fri Aug 22, 2014 11:27 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 52
Views: 2031

Re: Is the Aggregate Index Too Heavy in Treasuries?

Do you have any information on average maturity? Duration is essentially a function of interest rate and maturity. No, offhand I don't — but I'd like to research this situation in more depth. The rise in duration is concerning and I'd like to understand more about it before making a decision on my ...
by Simplegift
Fri Aug 22, 2014 9:56 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 52
Views: 2031

Re: Is the Aggregate Index Too Heavy in Treasuries?

Has maturity increased? Duration increases as interest rates decrease, so the drop in interest rates could be enough to account for the duration change. Looking at the long-term trends (chart below), the duration of the Barclays U.S. Aggregate Index was fairly constant at around 4.5 years for the t...
by Simplegift
Fri Aug 22, 2014 9:29 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 52
Views: 2031

Re: Is the Aggregate Index Too Heavy in Treasuries?

I wonder if there were articles about 14 years ago worrying about whether the Aggregate Index had become too light in Treasuries, because when I first invested in the Vanguard Total Bond Fund about 1992, the proportion that was Treasuries was at the current level or larger than it is now. (Somewher...
by Simplegift
Fri Aug 22, 2014 1:57 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 52
Views: 2031

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

For some historical perspective, a chart of Vanguard's market share of total U.S. mutual fund and ETF assets since 1993, relative to its competitors. So far, Vanguard's cost advantage is just unbeatable. On an asset-weighted basis (according to the article), its average expense ratio is 0.15% — well...
by Simplegift
Thu Aug 21, 2014 7:56 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 65
Views: 5035

Re: Is the Aggregate Index Too Heavy in Treasuries?

There is one sense in which the Agg is too heavy in Treasuries: if you invested in it in 2000 and incorporated it into your allocation with the risk it had back then, you are now overly safe. This is the opposite of Valuethinker's dreaded risk creep — and is a clear case of "safety creep."...
by Simplegift
Thu Aug 21, 2014 6:02 pm
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 52
Views: 2031

Re: Blog:Vanguard surpasses SSgA for the first time

Just for some perspective, Morningstar reports that, at the end of 2013, exchange-traded funds made up just 13% of total managed assets in the U.S. However, ETFs enjoyed a 14% annual growth rate in 2013, compared with a 3% growth rate for mutual fund assets. Looking to the future, it's expected that...
by Simplegift
Thu Aug 21, 2014 5:46 pm
 
Forum: Investing - Theory, News & General
Topic: Blog:Vanguard surpasses SSgA for the first time
Replies: 4
Views: 1144

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

ResearchMed wrote:Was there a breakdown for equity vs. bond fund assets? Probably tricky, given the mixed funds, but it could be separated out.

Sorry, RM, but Morningstar's annual reporting isn't quite that detailed, as best I know. I'm sure the data is out there somewhere, but I don't have ready access to it.
by Simplegift
Thu Aug 21, 2014 2:34 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 65
Views: 5035

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Any idea what percentage of the total money invested at Vanguard is in "index" vs. "managed" funds? According to Morningstar , at the end of 2013, about 70% of Vanguard's assets were indexed and about 30% were actively-managed. The suburban Pennsylvania behemoth now manages $2.3...
by Simplegift
Thu Aug 21, 2014 1:35 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 65
Views: 5035

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Could this all be happening because of the strong bull market? I wonder if people are jumping on board seeing that S&P 500 doubled its value during the last 5 years (actually ~2.5x w/ dividends re-invested). Will they stay on board when the next big correction comes? If the experience of the 20...
by Simplegift
Thu Aug 21, 2014 12:21 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 65
Views: 5035

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Looking at mutual fund flows over the past seven years, there appears to be a steady and relentless march out of actively-managed funds and into indexed mutual funds and ETFs. It seems a historic shift in investor attitudes is underway. http://i.imgur.com/T6t5Q4l.jpg Source: 2014 Investment Company ...
by Simplegift
Thu Aug 21, 2014 10:35 am
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 65
Views: 5035

Re: portfolio turnover

The primary reason is that most fixed income indices are rebalanced monthly — in contrast to most equity indices, which are rebalanced annually, I believe. These monthly bond index rebalancings involve various market changes, including new issues, bonds that have been called or paid down early, cash...
by Simplegift
Wed Aug 20, 2014 10:44 pm
 
Forum: Investing - Theory, News & General
Topic: portfolio turnover
Replies: 9
Views: 805

Re: Subaru Blues

We've driven the same Subaru Outback wagon for 13 years now (bought it new in 2001). After 85,000 miles, all the important elements are still going strong — engine, manual transmission, drive train. We've had a few minor maintenance issues over the years — replacing a faulty oxygen sensor, a worn cl...
by Simplegift
Wed Aug 20, 2014 9:07 pm
 
Forum: Personal Consumer Issues
Topic: Subaru Blues
Replies: 59
Views: 4030

Re: How to weather market downturn with a high chance of lay

I'm in my early 20s and currently holding 50% US stock and 50% international stock. Can I or should I rebalance? (I know it depends on my risk tolerance, and I think I'm okay with 100% stock since I'm so young.) What are options for fixed incomes to sleep well at night? Does that basically means mo...
by Simplegift
Wed Aug 20, 2014 5:36 pm
 
Forum: Investing - Theory, News & General
Topic: How to weather market downturn with a high chance of layoff
Replies: 41
Views: 2814

Re: When did you hear of Bill Miller and Legg Mason Value Tr

Along with this kind of poll i wish there was some kind of way to see a funds performance over time along with the market cap of the fund. It would be huge ammo to use in the arguments about funds that outperform over long periods of time if you can show that in reality very few investors were on b...
by Simplegift
Wed Aug 20, 2014 5:17 pm
 
Forum: Investing - Theory, News & General
Topic: When did you hear of Bill Miller and Legg Mason Value Trust?
Replies: 26
Views: 1656

Re: How to weather market downturn with a high chance of lay

I'm a firm believer in the superiority of buy-and-hold over day-trading. However, it is unclear to me how the tracking-the-index strategy works well given the fact that during boom years we tend to have more money to invest, whereas in downturns we tend to have less (due to layoffs, less work for f...
by Simplegift
Wed Aug 20, 2014 4:58 pm
 
Forum: Investing - Theory, News & General
Topic: How to weather market downturn with a high chance of layoff
Replies: 41
Views: 2814

Re: John Hussman, smart guy, should you listen to his foreca

Not to pick on Mr. Hussman, but the long-term performance of his flagship fund (Hussman Stategic Growth-HSGFX) is instructive on the perils of market timing — and how difficult it is to make consistently correct timing calls. Rolling 12-month Total Returns, HSGFX (blue) vs. S&P 500 (orange) http...
by Simplegift
Wed Aug 20, 2014 1:28 pm
 
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 20
Views: 2304

Re: John Hussman, smart guy, should you listen to his foreca

From what I've read of Mr. Hussman's market commentary and the way he's managed his funds, he's the exact opposite of a buy-hold-rebalance investor. In fact, he's a poster boy for the shortcomings of market timing. His approach is to periodically hedge his stock exposure through put options (that sh...
by Simplegift
Wed Aug 20, 2014 10:20 am
 
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 20
Views: 2304

Re: US REITs already have international exposure

Another aspect worth considering about REITs is their role in the portfolio as inflation protection, and not just diversification. Based on the studies I've seen, there seems to be strong evidence that publicly-traded equity REITs (such as Vanguard's REIT Index) have historically provided effective ...
by Simplegift
Wed Aug 20, 2014 12:42 am
 
Forum: Investing - Help with Personal Investments
Topic: US REITs already have international exposure
Replies: 14
Views: 1209

Re: US REITs already have international exposure

Interesting research, InvestorNewb, thanks. Ever since Vanguard came out with their US REIT Index Fund in 1996, I've had a 10% portfolio allocation to it and appreciated its good returns and modest diversification benefits. However, since they launched their Global Ex-US REIT Index Fund in 2010, I h...
by Simplegift
Tue Aug 19, 2014 4:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: US REITs already have international exposure
Replies: 14
Views: 1209

Re: Shiller on Lofty Market Elevations

One important point that shouldn't be overlooked in this discussion is that, even if the average, fair-value PE10 has drifted higher in recent decades (due to persistent low interest rates, changed investor behavior or whatever) — and stocks are actually fairly valued today at a PE10 of 25 — future ...
by Simplegift
Tue Aug 19, 2014 2:37 am
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4807

Re: Shiller on Lofty Market Elevations

Very nice article, thanks! One has to sympathize with Mr. Shiller, in that it's wholly unsatisfactory to believe that stocks have been consistently overpriced since the early 1990s (except at the bear market bottoms). I don't see why not, it matches perfectly with a period of heavy Fed involvement ...
by Simplegift
Mon Aug 18, 2014 9:23 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4807

Re: Shiller on Lofty Market Elevations

Say, I'm wondering whether in previous instances where PE/10 was high, as it is now, were the expected returns on other assets such as bonds also low, as they are now (low current rates)? Do these things tend to move in tandem, so that there's no place to hide? Or were there good places to hide whe...
by Simplegift
Mon Aug 18, 2014 4:22 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4807

Re: Response to Shiller's "lofty" CAPE - where should it be?

The second quote is particularly interesting - what should be a normal p/e? Valuing the stock market relative to its own history of price-earnings, that is, comparing the current price-earnings ratio (PE10) to the long-run average, implicitly makes the assumption that there exists some kind of true...
by Simplegift
Sun Aug 17, 2014 5:02 pm
 
Forum: Investing - Theory, News & General
Topic: Response to Shiller's "lofty" CAPE - where should it be?
Replies: 3
Views: 817

Re: Shiller on Lofty Market Elevations

It is encouraging to see that Mr. Shiller is willing to consider investors' behavioral changes as a possible explanation for unexpected or anomalous trends in the PE10 data. Certainly during the late 1990s, when PE10 went from 20 to 44 in five years, investors were exhibiting a marked behavioral cha...
by Simplegift
Sun Aug 17, 2014 2:56 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4807

Re: Shiller on Lofty Market Elevations

So nothing I’ve come up with is a slam-dunk explanation for the continuing high level of valuations. I suspect that the real answers lie largely in the realm of sociology and social psychology — in phenomena like irrational exuberance, which, eventually, has always faded before. If the mood changes...
by Simplegift
Sun Aug 17, 2014 12:22 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4807

Re: Spouse not ready to cut ties with financial advisers

So Bogleheads - do you have any advice for me? Things to consider? Ways to get through to a spouse who basically just wants to cover his ears? Additional items I should bring up during our meeting? My suggestion is that you and your spouse carefully consider the impact on your terminal wealth of th...
by Simplegift
Sun Aug 17, 2014 9:51 am
 
Forum: Investing - Help with Personal Investments
Topic: Spouse not ready to cut ties with financial advisers
Replies: 98
Views: 6344

Re: Poll for 65+ Seniors

Our ages are 65 and 69.
We have a 50% stock allocation, which we plan to maintain to the end.
Our goals are asset growth at pace with inflation during our lifetimes — then family and charitable bequests.
by Simplegift
Sun Aug 17, 2014 9:26 am
 
Forum: Investing - Help with Personal Investments
Topic: Poll for 65+ Seniors
Replies: 51
Views: 5700

Re: Business Insider: The Stock Market Could Drop 50% Tomor

I would personally see this as an opportunity to purchase more. This is an admirable aspiration, ny_rn — but I wouldn't underestimate the extreme emotional and psychological impacts of a 50% market drop, as experienced at the time. You're likely to see drastically lower corporate earnings, much hig...
by Simplegift
Sat Aug 16, 2014 8:39 pm
 
Forum: Investing - Theory, News & General
Topic: Business Insider: The Stock Market Could Drop 50% Tomorrow
Replies: 14
Views: 2177

Re: help with Moms free cash reserves

I was about to suggest that you place the $50,000 in Schwab's Short-Term Bond Fund (SWBDX), if indeed these are emergency funds not needed for everyday trust expenses — and you can handle the modest price fluctuations. This is what I do with my excess cash at Vanguard, in their Short-Term Bond Index...
by Simplegift
Sat Aug 16, 2014 1:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: help with Moms free cash reserves
Replies: 8
Views: 755

Re: 'Risk Creep' - new term

The inadvertent or unintentional introduction of risk into a portfolio by adding a new more volatile asset class (which has high correlation with existing assets) or by a drift in weightings eg holding more equities during an equity bull market. To be proper 'risk creep' it must be unappreciated or...
by Simplegift
Sat Aug 16, 2014 11:40 am
 
Forum: Investing - Theory, News & General
Topic: 'Risk Creep' - new term
Replies: 26
Views: 2162

Re: Do Super wealthy have access to different investing vehi

According to some surveys, the main difference between the portfolios of the super-wealthy and the average investor is their large allocation to alternative investments (hedge funds, venture capital and private equity). This article shows a 30% overall allocation to these alternative vehicles by the...
by Simplegift
Fri Aug 15, 2014 11:36 pm
 
Forum: Investing - Theory, News & General
Topic: Do Super wealthy have access to different investing vehicles
Replies: 76
Views: 6196

Re: Market valuation analysis

At NO time, NEVER, did the value of VTSAX drop below where it was in 1997, so buying stocks when PE10 was near 30 (let alone holding stocks that you bought years before even cheaper) doesn't seem like a terrible decision... You never got a chance to buy back in cheaper. Right. The problem with rely...
by Simplegift
Fri Aug 15, 2014 9:51 pm
 
Forum: Investing - Theory, News & General
Topic: Market valuation analysis
Replies: 36
Views: 1670

Re: For valuation metric fans

As a beginning investor in the 1990s, I used to believe there actually was an objective measure of "market value." However, in the years since, I've come to believe that judging market "value" is a lot like judging "beauty." One might believe that they know what beauty ...
by Simplegift
Fri Aug 15, 2014 7:09 pm
 
Forum: Investing - Theory, News & General
Topic: For valuation metric fans
Replies: 1
Views: 274

Re: Trying to figure out why not tilt heavily to Small

Am I missing some major long-term risk here (like a longer-term cycle that's not being adequately captured in the past 15 year's returns), or should i finally bite the bullet and go say 50/50 total market/small cap for my domestic equities? Relative outperformance by small caps and large caps go in...
by Simplegift
Sat Dec 14, 2013 2:02 am
 
Forum: Investing - Help with Personal Investments
Topic: Trying to figure out why not tilt heavily to Small
Replies: 21
Views: 1928

Re: Investor Deficit Effect

Investor Deficit Effect (IDE) is confirmation of why Stay The Course is important... Haven't seen a fifty-year chart comparing investor returns and market returns, but as a buy-hold-rebalance investor, it's fascinating (and quite baffling) to look at aggregate mutual fund flows in and out of stock ...
by Simplegift
Fri Dec 13, 2013 2:15 am
 
Forum: Investing - Theory, News & General
Topic: Investor Deficit Effect
Replies: 1
Views: 276

Re: To Be or Not To Be: Orthodox or Unorthodox Asset Allocat

Why own the whole market, when owning more uncorrelated slices of the market appears to produce better results (i.e. higher returns, comparable volatility, lower draw-downs and better compensation for risk)? Incorporating "uncorrelated slices of the market" into one's portfolio has been t...
by Simplegift
Tue Dec 10, 2013 2:11 am
 
Forum: Investing - Theory, News & General
Topic: To Be or Not To Be: Orthodox or Unorthodox Asset Allocation
Replies: 14
Views: 1499

Re: Is there a new size of small, mid and large caps???

According to Morningstar's "style box" methodology, they use a floating system that's designed to avoid being significantly affected by market movements: Rather than a fixed number of "large cap"or "small cap" stocks, Morningstar uses a flexible system that isn't advers...
by Simplegift
Fri Dec 06, 2013 7:35 pm
 
Forum: Investing - Theory, News & General
Topic: Is there a new size of small, mid and large caps???
Replies: 4
Views: 505

Re: Endpoint sensitivity on "historic" data

... My point is more the uncertainty of historic data, due to the almost pathological amount of fluctuation in market data. I was honestly surprised that a small change in endpoints could affect a 70-80 year average by 2%. Rolling returns (despite their shortcomings) also serve to reinforce Nisi's ...
by Simplegift
Thu Dec 05, 2013 11:46 am
 
Forum: Investing - Theory, News & General
Topic: Endpoint sensitivity on "historic" data
Replies: 30
Views: 1198

Re: of bitcoins, money & Byzantium

The graphs of the bitcoin value are interesting but two other charts would be more interesting if anyone can find them; 1) Dollar value of bitcoin actual purchases of merchandise. 2) Number of locations that accept bitcoins for purchases. Watty, some of the current bitcoin charts and statistics in ...
by Simplegift
Mon Dec 02, 2013 11:39 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4374

Re: of bitcoins, money & Byzantium

In my opinion, the log chart at first glance dramatically understates what has happened with the price of a Bitcoin this year. What has happened to the price of bitcoin this year that is dramatically different than previous years? In all three years of its market existence, the bitcoin price has in...
by Simplegift
Sun Dec 01, 2013 5:13 pm
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4374

Re: New DFA Paper on Inflation and Global Stock & Bond Retur

"All five of the indices included in this study had positive inflation-adjusted average returns during high-inflation years, with non-US stocks showing the highest average. Thus, the well-documented advantages of international diversification carry over to returns that are adjusted for US infl...
by Simplegift
Sun Dec 01, 2013 12:46 pm
 
Forum: Investing - Theory, News & General
Topic: New DFA Paper on Inflation and Global Stock & Bond Returns
Replies: 7
Views: 767

Re: App for writers on Macs

Is it worth the time and effort to learn Pages? Is there any way in which it is superior to Word? The most appropriate answer is that "it depends on what you use it for." I've used Pages for years, mostly for writing short technical pieces (up to 50 pages) that are quite graphics intensiv...
by Simplegift
Sun Dec 01, 2013 11:39 am
 
Forum: Personal Consumer Issues
Topic: App for writers on Macs
Replies: 15
Views: 618

Re: of bitcoins, money & Byzantium

I don't find anything misleading about it. Using a linear scale, if you chart anything over a long enough period that starts with a low initial value and has a constant growth rate, a "panic chart" will always result — one that is flat for a long time at the start, and then becomes steepe...
by Simplegift
Sun Dec 01, 2013 3:54 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4374

Re: of bitcoins, money & Byzantium

Chart it from Jan 1, 2013 to Friday, and it will still look scary... You're right, it looks a bit scary — but not apocalyptic. Just wanted to encourage the use of log scale charts when depicting rate-of-growth data. Otherwise, the chart can appear quite misleading. Log scale: http://i.imgur.com/z4K...
by Simplegift
Sun Dec 01, 2013 3:29 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4374

Re: of bitcoins, money & Byzantium

Has a financial graph that looks like that EVER turned out well in the end? Don't know anything about bitcoins, but do know that if you chart the rate-of-change for almost any growth on a linear scale, you'll get a "panic chart" like the one posted upthread for bitcoins. Even if the rate-...
by Simplegift
Sun Dec 01, 2013 1:53 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4374

Re: Correlation between US Large cap/small cap/international

I am thinking presently to sell my Tax managed small cap and invest in the VXUS (International Total Market) just to keep things simple. I found another graft that indicates that international (developed and emerging) is a slightly less correlated to large cap than small cap (see http://www.assetco...
by Simplegift
Wed Nov 27, 2013 11:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Correlation between US Large cap/small cap/international
Replies: 7
Views: 792

Re: Correlation between US Large cap/small cap/international

So my question is in terms of diversification what percentage of correlation is there between US large cap vs US small cap and between US large cap vs total international market. In other words, is it more important to get the international/domestic US allocation right rather than the domestic smal...
by Simplegift
Wed Nov 27, 2013 8:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Correlation between US Large cap/small cap/international
Replies: 7
Views: 792

Re: Is the bond market efficient?

It would seem that bond markets have many built-in mechanisms that tend to create an efficient market. Bond ratings, interest rate derivatives, wide publication of bond-yield curves and spreads, and predominance of long-term institutional investors (such as insurance companies and pension plans) wou...
by Simplegift
Sun Aug 11, 2013 7:40 pm
 
Forum: Investing - Theory, News & General
Topic: Is the bond market efficient?
Replies: 11
Views: 937
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