Search found 1292 matches

Return to advanced search

Re: How does one hedge against deflation?

No one has mentioned TIPS as a deflation hedge — and since they have a more complicated response to deflation than nominal Treasuries, I'll give it a go (and bond experts, please chime in if I go astray!). Backed by the full faith and credit of the U.S. government, TIPS of any maturity should do wel...
by Simplegift
Mon Oct 20, 2014 8:19 pm
 
Forum: Investing - Theory, News & General
Topic: How does one hedge against deflation?
Replies: 39
Views: 2582

Re: How does one hedge against deflation?

But it *is* a contradiction to say there could be prolonged deflation and no impairment of government debt quality, also starting with today's high debt load and already slow growth... With Japan's decades-long struggle with deflation and many large European countries poised on the brink of deflati...
by Simplegift
Mon Oct 20, 2014 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: How does one hedge against deflation?
Replies: 39
Views: 2582

Re: Why do people use age instead of life expectancy?

One interesting aspect of life expectancy is that it appears to be becoming a bit more predictable over time — in other words, the statistical distribution of "age at death" is getting narrower and narrower (chart below). For one, more folks are surviving childhood and living to an older a...
by Simplegift
Mon Oct 20, 2014 12:52 pm
 
Forum: Investing - Theory, News & General
Topic: Why do people use age instead of life expectancy?
Replies: 43
Views: 2781

Re: Why do people use age instead of life expectancy?

So the question is why not use life expectancy directly ? (I agree it carries with it uncertainty, but no more than using age) and certainly you can use specific personal information to alter the number. When we both turned 65 recently, we looked into life expectancy calculations to help inform our...
by Simplegift
Sun Oct 19, 2014 8:24 pm
 
Forum: Investing - Theory, News & General
Topic: Why do people use age instead of life expectancy?
Replies: 43
Views: 2781

Re: How does one hedge against deflation?

Though there aren't many empirical studies of deflationary shocks in the U.S. economy, the table below summarizes asset returns during the six deflationary periods since 1900. Surprisingly, even 3-month Treasury bills and 10-year Treasury bonds proved to be decent deflation hedges — so holding 30-ye...
by Simplegift
Sun Oct 19, 2014 4:15 pm
 
Forum: Investing - Theory, News & General
Topic: How does one hedge against deflation?
Replies: 39
Views: 2582

Re: How to think about expected returns--continuing discussi

And there is simply no way IMO to build a plan without making assumptions about returns, so you use the best tools you have (even if not perfect, and understand their limitations). I'll just add that one of the beauties of these simple forecasting tools is that they are easily accessible to the ave...
by Simplegift
Sun Oct 19, 2014 12:15 pm
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 52
Views: 3765

Re: How to think about expected returns--continuing discussi

Now I am starting to better understand where your 50%/50% logic is coming from though. Seems quite ad hoc, but the 'overly fundamental' view of the (div yield + growth) Gordon equation combined with the 'overly speculative' view of the E/P (CAPE10) logic might very well not be far from the truth. T...
by Simplegift
Sun Oct 19, 2014 11:25 am
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 52
Views: 3765

Re: The Final, Definitive Thread on Rebalancing

Great post, stlutz . In addition, an obscure Forum member will post an inscrutable chart, showing how NOT re-balancing has increased an investor's average portfolio risk (standard deviation) by a huge 1.3% over the last twenty years! http://i.imgur.com/7Os1nRa.jpg Source: Fidelity Investments Then n...
by Simplegift
Sat Oct 18, 2014 10:08 pm
 
Forum: Investing - Theory, News & General
Topic: The Final, Definitive Thread on Rebalancing
Replies: 24
Views: 1794

Re: How does one hedge against deflation?

On the consumer level, deflation might seem attractive, since wages go farther as prices get lower — but on the macro-economic scale, prolonged deflation in today's global economy could have devastating effects, such as: • The smothering of demand and GDP growth, leading to the kind of decades-long ...
by Simplegift
Sat Oct 18, 2014 8:43 pm
 
Forum: Investing - Theory, News & General
Topic: How does one hedge against deflation?
Replies: 39
Views: 2582

Re: How does one hedge against deflation?

In their portfolio design, many investors discount the probability of deflation, perhaps because the U.S. hasn't had a significant deflation episode since the 1930s. However, the U.S. economy came close during the 2008-2009 financial crisis and we have the example of Japan's "lost decade" ...
by Simplegift
Sat Oct 18, 2014 6:02 pm
 
Forum: Investing - Theory, News & General
Topic: How does one hedge against deflation?
Replies: 39
Views: 2582

Re: How does one hedge against deflation?

High-quality bonds, preferably Treasuries. For a good discussion on deflation hedging, see this thread from 2012: In Defense of (Some) Treasuries in the Portfolio In a nutshell, in a deflationary environment with drastically falling prices, investors flee to the perceived safe haven of government de...
by Simplegift
Sat Oct 18, 2014 4:57 pm
 
Forum: Investing - Theory, News & General
Topic: How does one hedge against deflation?
Replies: 39
Views: 2582

Re: Thoughts on Paul Merriman's Portfolio

Personally, I wish I'd kept things simpler early in my investing career. I think just the opposite. When you are younger to can handle more things at a time. As I'm getting older I'm starting to simplify. The portfolio use to be similar to Paul's suggestion. However as I age, and the % equity decre...
by Simplegift
Sat Oct 18, 2014 4:27 pm
 
Forum: Investing - Theory, News & General
Topic: Thoughts on Paul Merriman's Portfolio
Replies: 38
Views: 2204

Re: Thoughts on Paul Merriman's Portfolio

I agree that it is more complicated than the 3 fund portfolio, his study shows a far greater return as well. You're missing an important disclaimer made in Merriman's fine print (quoted below). His study is simply illustrating the hypothetical effects of adding these less-than-perfectly correlated ...
by Simplegift
Sat Oct 18, 2014 2:32 pm
 
Forum: Investing - Theory, News & General
Topic: Thoughts on Paul Merriman's Portfolio
Replies: 38
Views: 2204

Re: Thoughts on Paul Merriman's Portfolio

The most important decision that an investor makes in their lifetime is the basic stock/bond split. This one decision will ultimately determine one's long-term portfolio returns and risk profile. For many investors, this is enough! A simple portfolio of broadly diversified stocks and high-quality bo...
by Simplegift
Sat Oct 18, 2014 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: Thoughts on Paul Merriman's Portfolio
Replies: 38
Views: 2204

Re: How to think about expected returns--continuing discussi

...currently we use the CAPE 10 and the Gordon Model, weighting each 50%. In forecasting returns, I'm beginning to see the advantage of averaging these two methods — since the CAPE earnings yield (inverse of the price-earnings ratio) is so strongly influenced by price, while the Gordon Equation is ...
by Simplegift
Sat Oct 18, 2014 12:20 pm
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 52
Views: 3765

Re: Long term return forecast

I guess his own firm has finally refuted it? Your long-term predictions may prove true, nisiprius , but I suspect you're reading too much into Arnott's forecast of expected returns for small cap stocks: U.S. Small Cap: 1.3% yield + 2.0% growth - 3.3% valuation = 0.0% total return U.S. Large Cap: 1....
by Simplegift
Sat Oct 18, 2014 11:41 am
 
Forum: Investing - Theory, News & General
Topic: Long term return forecast [Research Affil. Expected returns]
Replies: 27
Views: 1707

Re: Long term return forecast

Thanks for the link. Interesting to see that Research Affiliates' forecast of real returns for U.S. Large Cap stocks is less than 1% real over the next 10 years (1.8% yield + 1.3% growth - 2.4% valuation = 0.7% total return). This is where their estimate fits into the current range of other forecast...
by Simplegift
Sat Oct 18, 2014 4:18 am
 
Forum: Investing - Theory, News & General
Topic: Long term return forecast [Research Affil. Expected returns]
Replies: 27
Views: 1707

Re: Vanguard REIT Index and P/E

I see that Vanguard REIT Index P/E is 50+, but the dividend yield is no bad, >1%. Is this P/E normal for real estate or is it too high? For the REIT market as a whole (such as Vanguard's REIT Index), William Bernstein shows that the dividend yield is a fairly good predictor of future returns, espec...
by Simplegift
Thu Oct 16, 2014 9:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard REIT Index and P/E
Replies: 4
Views: 635

Re: Dealing with Volatility

One of the reasons that the recent market volatility is perhaps affecting investors and garnering so much attention is that we've had it so good for so long (chart below). In fact, over the last year, we've been experiencing the most calm, steady and easygoing financial markets of the last five year...
by Simplegift
Thu Oct 16, 2014 7:38 pm
 
Forum: Investing - Theory, News & General
Topic: Dealing with Volatility
Replies: 14
Views: 1103

Re: The Role of Life Expectancy

Was curious as to how much you rely on life expectancy data in planning for your retirement future. We don't necessarily rely on life expectancy for financial planning, but since we've both turned 65, we've at least looked at the survival probability chart (below). It appears at least one or both o...
by Simplegift
Thu Oct 16, 2014 5:49 pm
 
Forum: Investing - Theory, News & General
Topic: The Role of Life Expectancy
Replies: 25
Views: 1644

Re: Why Are Expected Investment Returns So Low?

I'm not saying this is all hooey, I'm just cautioning that some deep thought is needed and even then this, like everything else in economics and finance is on fairly shaky ground and some level of skepticism is warranted. Fair enough — but the story seems to be a fairly simple one about the global ...
by Simplegift
Wed Oct 15, 2014 12:25 pm
 
Forum: Investing - Theory, News & General
Topic: Why Are Expected Investment Returns So Low?
Replies: 13
Views: 1618

Re: Why Are Expected Investment Returns So Low?

...In short, our future portfolio returns appear to be squarely dependent upon the fate of the developing economies. ...as if there will be no growth or innovation from the rest of the world. It may just be the contrarian in me coming out, but the idea that the developed world is currently at some ...
by Simplegift
Wed Oct 15, 2014 10:23 am
 
Forum: Investing - Theory, News & General
Topic: Why Are Expected Investment Returns So Low?
Replies: 13
Views: 1618

Why Are Expected Investment Returns So Low?

In a recent thread , we explored the centuries-long downward trend in bond yields and expected stock returns due to greater global macro-economic stability (in a nutshell, greater stability = less risk = lower returns). In this post, we'll dig a little deeper into the economic trends of the last few...
by Simplegift
Wed Oct 15, 2014 1:55 am
 
Forum: Investing - Theory, News & General
Topic: Why Are Expected Investment Returns So Low?
Replies: 13
Views: 1618

Re: [unofficial Fed announcements make bond prices predictab

The Fed controls the very short term and has considerable influence beyond it, but its setting of rates is less than seems to meet many eyes. To further PJW's point, it's instructive to see how little influence the Fed has actually had on longer-term interest rates over the last 25 years, beyond th...
by Simplegift
Tue Oct 14, 2014 2:58 pm
 
Forum: Investing - Theory, News & General
Topic: [unofficial Fed announcements make bond prices predictable?]
Replies: 25
Views: 913

Re: Gains and Losses from Periodic Investments

Here's a long-term view. $1,000 each month starting in June 1980. Nice, grayfox . It's interesting to see that "time in the market" strongly trumps even the perfect timing of stock investments during bear markets. In other words, even perfectly-timed investments at the market bottoms in 1...
by Simplegift
Tue Oct 14, 2014 2:32 pm
 
Forum: Investing - Theory, News & General
Topic: Gains and Losses from Periodic Investments
Replies: 9
Views: 738

Re: Gains and Losses from Periodic Investments

Thanks, grayfox . Though your analysis doesn't consider portfolio rebalancing, your chart suggests the significant benefits to accumulating investors of consistently rebalancing from bonds to stocks during market meltdowns. Yes, it takes nerves of steel to stick with one's financial plan and rebalan...
by Simplegift
Sat Oct 11, 2014 2:45 pm
 
Forum: Investing - Theory, News & General
Topic: Gains and Losses from Periodic Investments
Replies: 9
Views: 738

Re: is anything 'cheap' out there?

Unless investors want to seek out cheaper, exceptionally risky assets (Russian equities, oil service stocks, etc.), today's high asset values all across the board point to lower expected portfolio returns for at least the next decade — and perhaps beyond. Whether planning for retirement or in retire...
by Simplegift
Fri Oct 10, 2014 2:33 pm
 
Forum: Investing - Theory, News & General
Topic: is anything 'cheap' out there?
Replies: 54
Views: 5467

Re: Is a fall in portfolio value "only on paper"?

However, another poster has also pointed out that assets in the market are not money. Assets in the market are shares. Part of the conundrum lies in the fact that one has lost "value" but one has not lost shares. The ownership of a share is what links the investor to playing the result ou...
by Simplegift
Fri Oct 10, 2014 11:57 am
 
Forum: Investing - Theory, News & General
Topic: Is a fall in portfolio value "only on paper"?
Replies: 86
Views: 3599

Re: "Safe withdrawal rate" for 100% Treasury bills: 2.18%

Interesting work, Nisi. It brings to mind a quote from Robert Arnott: "In investing, what is comfortable is rarely profitable."
by Simplegift
Thu Oct 09, 2014 8:14 pm
 
Forum: Investing - Theory, News & General
Topic: "Safe withdrawal rate" for 100% Treasury bills: 2.18%
Replies: 6
Views: 819

Re: Invested Windfall and Now Market Is Down

I guess I don't really have a question, just looking for reassurance for someone not used to this roller coaster. When we're experiencing market corrections, I've found this chart reassuring. Nearly every year, the market drops anywhere from 5% to 20% or more (in red) — yet the calendar year return...
by Simplegift
Thu Oct 09, 2014 6:45 pm
 
Forum: Investing - Help with Personal Investments
Topic: Invested Windfall and Now Market Is Down
Replies: 34
Views: 4901

Re: Hold the Line

If you look at the chart though you can see the formula right up in the upper left corner, slope is about 60 right now (for every dollar of dividends the price should rise about 60 points.) A few musings about the implications of your chart for "rational" expected stock returns: • Your ch...
by Simplegift
Thu Oct 09, 2014 4:03 pm
 
Forum: Investing - Theory, News & General
Topic: Hold the Line
Replies: 11
Views: 1409

Re: Hold the Line

People have been talking a lot about buybacks, are they included, and if not what would be the likely effect of including them? My understanding, Nisi, is that the x-axis on the chart is cash dividends-per-share . Since net buybacks reduce the number of shares outstanding, the per-share figures alr...
by Simplegift
Thu Oct 09, 2014 2:15 pm
 
Forum: Investing - Theory, News & General
Topic: Hold the Line
Replies: 11
Views: 1409

Re: Hold the Line

The Schiller dividend data has been updated and the market is still rational within it's current trend (08/01/11 to present): Nice chart, Clearly_Irrational , thanks for posting it. If I understand your chart correctly, you're plotting cash dividends for the S&P 500 on the x-axis against a cons...
by Simplegift
Thu Oct 09, 2014 1:19 pm
 
Forum: Investing - Theory, News & General
Topic: Hold the Line
Replies: 11
Views: 1409

Re: Is a fall in portfolio value "only on paper"?

And yes, this is actionable, because it means that jurisdictional diversification may be a good idea. Good point. Even the prospectus for Vanguard's Emerging Markets Stock Index alludes to "greater political, social, and economic instability" and "political upheaval" in the list...
by Simplegift
Thu Oct 09, 2014 12:16 pm
 
Forum: Investing - Theory, News & General
Topic: Is a fall in portfolio value "only on paper"?
Replies: 86
Views: 3599

Re: Is a fall in portfolio value "only on paper"?

Yes, it takes something like the end of the world for all businesses in a country to be worthless, but it takes much less for their shares to be worthless to you. Your point is that there could be a global confiscation of assets akin to the Russian revolution? Really? I consider that possibly so ex...
by Simplegift
Thu Oct 09, 2014 10:02 am
 
Forum: Investing - Theory, News & General
Topic: Is a fall in portfolio value "only on paper"?
Replies: 86
Views: 3599

Re: Is a fall in portfolio value "only on paper"?

During the Bolshevik Revolution in russia, the russian stock market went to zero. During the 2008 financial crisis, there was talk going around that America may not be immune from such an event. What if that wasn't just fearmongering hogwash? What if it really was a real risk and we just got lucky?...
by Simplegift
Thu Oct 09, 2014 9:31 am
 
Forum: Investing - Theory, News & General
Topic: Is a fall in portfolio value "only on paper"?
Replies: 86
Views: 3599

Re: In what conditions could the market stall?

What types of things would need to happen to stop the market from growing? Do we have any examples of long term periods of no growth? The long-term fundamental driver of any stock market's growth is the growth of earnings of its constituent companies. While the century-long growth trend of real ear...
by Simplegift
Thu Oct 09, 2014 1:41 am
 
Forum: Investing - Theory, News & General
Topic: In what conditions could the market stall?
Replies: 2
Views: 350

Re: Why Wouldn't You Tilt To Small Value?

If you don't tilt, why not? There are several sound reasons, I believe, for an investor NOT to tilt toward small-cap value: 1. You have an average or lower-than-average risk tolerance. 2. You don't like underperforming the broader market indexes for long periods. 3. You prefer portfolio simplicity....
by Simplegift
Wed Oct 08, 2014 1:17 pm
 
Forum: Investing - Theory, News & General
Topic: Why Wouldn't You Tilt To Small Value?
Replies: 52
Views: 2900

Re: Correlation Data for Total Bond, TIPS, & Total INTL Bond

I ask because the VG Planner suggested a change from current IPS policy of 50:50 Bond Allocation of Total Bond Market:ST TIPS to 80:20 Bond Allocation of Total Bond Market:Total INTL Bond Market. I'd be reluctant to make this tradeoff, personally. As pointed out by nisiprius upthread, the added div...
by Simplegift
Wed Oct 08, 2014 12:48 pm
 
Forum: Investing - Theory, News & General
Topic: Correlation Data for Total Bond, TIPS, & Total INTL Bond ?
Replies: 13
Views: 978

Re: Correlation Data for Total Bond, TIPS, & Total INTL Bond

Vanguard Financial Planner gave me a nice Correlation Graph that I would like to post here for us all to share but I am having a hard time figuring out how to post a 1 page pdf file. Any help is appreciated. This correlation chart is posted on behalf of Fat-Tailed Contagion (the OP), who wished to ...
by Simplegift
Wed Oct 08, 2014 12:42 am
 
Forum: Investing - Theory, News & General
Topic: Correlation Data for Total Bond, TIPS, & Total INTL Bond ?
Replies: 13
Views: 978

Re: Correlation Data for Total Bond, TIPS, & Total INTL Bond

Vanguard Financial Planner gave me a nice Correlation Graph that I would like to post here for us all to share but I am having a hard time figuring out how to post a 1 page pdf file. The Bogleheads Wiki has an explanation here of how to copy a chart or image and then post it. If you'd prefer to avo...
by Simplegift
Tue Oct 07, 2014 2:31 pm
 
Forum: Investing - Theory, News & General
Topic: Correlation Data for Total Bond, TIPS, & Total INTL Bond ?
Replies: 13
Views: 978

Re: Will Interm-Term Inv Grade Bonds Keep With Inflation?

What are everyone's thoughts on these funds and intermediate term inv grade bonds in general keeping pace with inflation (say at least 2-3% nominal average total return each year for the next 30 years)? Is the sole variable future interest rates? One important variable will be the premium over infl...
by Simplegift
Tue Oct 07, 2014 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: Will Interm-Term Inv Grade Bonds Keep With Inflation?
Replies: 13
Views: 1257

Re: Vanguard Growth Index Fund Inst

This has been bothering me for a while, I own Vanguard Small Cap Value Index Investor shares in my retirement with expenses of 0.44%. You may need to just accept that tilting to small cap value is going to be more costly than investing in the broader market indexes. No one can say whether the small...
by Simplegift
Tue Oct 07, 2014 12:57 am
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard Growth Index Fund Inst
Replies: 18
Views: 1448

Re: Correlation Data for Total Bond, TIPS, & Total INTL Bond

A quick search did not turn up direct correlation data between the three types of bonds — but it did find rolling correlations between several of your bond types and the S&P 500 over the last decade (chart below), which may give insights into the behavior of these bond types within the overall p...
by Simplegift
Mon Oct 06, 2014 11:01 pm
 
Forum: Investing - Theory, News & General
Topic: Correlation Data for Total Bond, TIPS, & Total INTL Bond ?
Replies: 13
Views: 978

Re: Diverging Asset Correlations Since the 2008 Financial Cr

All that shows is that correlations drift and the most important diversification is to SAFE BONDS... There's no doubt that high-quality bonds are far and away the most important portfolio diversification option for most investors. Even though the correlation between bonds and stocks does tend to dr...
by Simplegift
Mon Oct 06, 2014 5:59 pm
 
Forum: Investing - Theory, News & General
Topic: Diverging Asset Correlations Since 2008 Financial Crisis
Replies: 2
Views: 406

Diverging Asset Correlations Since 2008 Financial Crisis

Much was written about the convergence of asset correlations prior to and during the 2008 financial crises. Several pundits were predicting permanently high asset correlations, due to the globalization of financial markets. It now appears that, a few years beyond the crisis, that long-term trend has...
by Simplegift
Mon Oct 06, 2014 4:21 pm
 
Forum: Investing - Theory, News & General
Topic: Diverging Asset Correlations Since 2008 Financial Crisis
Replies: 2
Views: 406

Re: Shiller: Anxiety Driving up the Stock Market

"It's something about anxieties," Shiller said. So "animal anxieties" have now replaced "animal spirits" as the driver of lofty stock market valuations? In his recent articles, one gets the impression that Mr. Shiller is struggling mightily (and unsuccessfully so far) ...
by Simplegift
Mon Oct 06, 2014 2:34 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller: Anxiety Driving up the Stock Market
Replies: 42
Views: 4590

Re: "Stock Exposure: Grow or Shrink Throughout Retirement?"

Certainly the "U-shaped glide path" proposed by Pfau and KItces makes some rational sense. To best protect from a bad sequence of returns, retirees might be better off to reduce their stock allocation at the point when they have the most assets (at the start of retirement), then ramp their...
by Simplegift
Mon Oct 06, 2014 1:25 pm
 
Forum: Investing - Theory, News & General
Topic: "Stock Exposure: Grow or Shrink Throughout Retirement?"
Replies: 35
Views: 2708

Re: Estimating Future Investment Returns — On a Napkin

Neither Gordon nor earnings yield is fantastic and both have large overlapping margins of error, usually leading to results that are indistinguishable from a practical standpoint. One is a good check on the other and if results differ dramatically you might want to figure out why. Good points. Beca...
by Simplegift
Mon Oct 06, 2014 11:05 am
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4766

Re: Estimating Future Investment Returns — On a Napkin

$10,000 investment in the stock market for 10 years, the end balance would be: $7,773.79 < end balance < $46,001.12, which is a range of about 6 to 1. As a reminder, historically $10,000 ended up anywhere from $6,700 to $$68,100, a range of 10 to 1. So this method has a tighter range. One reason th...
by Simplegift
Mon Oct 06, 2014 9:48 am
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4766
Next

Return to advanced search