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Re: Does market cap weighted indexing logically follow from

The proof that the market portfolio is efficient doesn't apply very well to bonds. If TIPS are 6% of the U.S. Bond market, does this mean that the efficient frontier portfolio must contain 6% TIPS in its bond allocation? With bonds, you will either receive payment as agreed upon, or the issuer will ...
by baw703916
Mon Sep 29, 2014 7:26 pm
 
Forum: Investing - Theory, News & General
Topic: Does market cap weighted indexing logically follow from EMH?
Replies: 17
Views: 911

Re: VXUS and Muni Bonds tax efficiency

am wrote:Is total world stock from Vanguard more efficient that total us or international?


It should be quite similar.
by baw703916
Sun Sep 28, 2014 4:23 pm
 
Forum: Investing - Help with Personal Investments
Topic: VXUS and Muni Bonds tax efficiency
Replies: 9
Views: 689

Re: Does market cap weighted indexing logically follow from

If there's a single "market" then assuming the market is efficient at allocating capital, the market portfolio (the total market cap of all investible assets) is on the efficient frontier. For an individual investor, holding everything according to their market cap weights replicates the m...
by baw703916
Sun Sep 28, 2014 4:18 pm
 
Forum: Investing - Theory, News & General
Topic: Does market cap weighted indexing logically follow from EMH?
Replies: 17
Views: 911

Re: VXUS and Muni Bonds tax efficiency

Municipal bonds have no tax costs per se (assuming the fund isn't distributing capital gains and that you either aren't subject to AMT or you own a fund whose bonds aren't subject to AMT). The "tax cost" is that tax-exempt bonds generally pay lower interest rates than similar taxable bonds...
by baw703916
Sun Sep 28, 2014 1:48 pm
 
Forum: Investing - Help with Personal Investments
Topic: VXUS and Muni Bonds tax efficiency
Replies: 9
Views: 689

Re: Is VXF tax efficient?

According to Morningstar, VXF has over 30% of potential capital gains exposure. How does that affect a new purchase within a taxable account? This is not a serious concern for an ETF or mutual fund with an ETF class. An active fund with a larger potential capital gains exposure would be expected to...
by baw703916
Sat Sep 27, 2014 10:17 pm
 
Forum: Investing - Help with Personal Investments
Topic: Is VXF tax efficient?
Replies: 11
Views: 669

Re: EmergDoc has Surpassed 10,000 posts!

Congratulations!

Apart from the number, the information content, both here an in WCI, is excellent. Thanks for sharing your knowledge and insights with us.
by baw703916
Sat Sep 27, 2014 11:22 am
 
Forum: Local Chapters and Bogleheads Community
Topic: EmergDoc has Surpassed 10,000 posts!
Replies: 22
Views: 2101

Re: How stocks perform in recessions

nisiprius wrote:In case I am being too straight-faced about the joke, :wink: just as with recessions it is a lot easier to recognize the down years in hindsight than in foresight.


But the inverted yield curve has predicted 10 out of the last 7 recessions, or something like that. :)
by baw703916
Mon Sep 22, 2014 7:47 pm
 
Forum: Investing - Theory, News & General
Topic: How stocks perform in recessions
Replies: 13
Views: 1361

Re: how to prevent medical expense catastrophe?

The insurance companies could easily solve this problem by putting a clause in the preferred provider agreement stating that after pre-approval for a medical procedure, an in-network physician or hospital is not allowed to involve anyone outside of network unless there's an unforeseen medical neces...
by baw703916
Mon Sep 22, 2014 10:36 am
 
Forum: Personal Finance (Not Investing)
Topic: how to prevent medical expense catastrophe?
Replies: 174
Views: 7500

Re: how to prevent medical expense catastrophe?

The insurance companies could easily solve this problem by putting a clause in the preferred provider agreement stating that after pre-approval for a medical procedure, an in-network physician or hospital is not allowed to involve anyone outside of network unless there's an unforeseen medical necess...
by baw703916
Mon Sep 22, 2014 9:30 am
 
Forum: Personal Finance (Not Investing)
Topic: how to prevent medical expense catastrophe?
Replies: 174
Views: 7500

Re: Financial Psychology - Mind Over Money

VictoriaF wrote:Kahneman, Ariely, and other prominent BE researchers freely admit that the knowledge of cognitive biases has not protected them from making every mistake in the book.


Hopefully they at least ended up with plenty of marshmallows.
by baw703916
Tue Sep 16, 2014 5:39 pm
 
Forum: Investing - Theory, News & General
Topic: Financial Psychology - Mind Over Money
Replies: 77
Views: 3601

Re: Bond Fund Duration ?

The duration does depend on how much interest is paid. The duration of a zero coupon bond is quite a bit longer than that of a bond which pays interest before maturity.

The duration of a bond fund depends only on its holdings, not on whether an investor in the fund reinvests dividends.
by baw703916
Tue Sep 16, 2014 5:32 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Fund Duration ?
Replies: 13
Views: 887

Re: Good hobby for a bright/obsessive 9 year old?

He sounds quite a bit life I was a that age. Some things that I enjoyed: -Astronomy. At the time there was a kit where you could grind your own mirror for a reflector telescope. Talk about something that involved a significant time commitment! Not sure if they still have those. -A microscope. Didn't...
by baw703916
Tue Sep 16, 2014 5:27 pm
 
Forum: Personal Consumer Issues
Topic: Good hobby for a bright/obsessive 9 year old?
Replies: 73
Views: 3060

Re: Financial Psychology - Mind Over Money

Don't make behavioral mistakes!
by baw703916
Tue Sep 16, 2014 4:24 pm
 
Forum: Investing - Theory, News & General
Topic: Financial Psychology - Mind Over Money
Replies: 77
Views: 3601

Re: What evidence would prove the Boglehead mentality wrong?

The concept of a rate of return makes no sense without exponential growth. It's not meaningful to discuss one investment style vs. another except in terms of the expected return, which implicitly assumes continued economic growth. It depends on what you mean by "the Boglehead mentality". D...
by baw703916
Tue Sep 16, 2014 12:24 pm
 
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 109
Views: 7626

Re: What evidence would prove the Boglehead mentality wrong?

The basic laws of mathematics would have to be proven incorrect? Is the assumption that exponential economic growth can continue forever valid? Especially if population stops growing exponentially? I'm not saying the assumption might not be valid, but I'm not 100% convinced we can just assume that ...
by baw703916
Tue Sep 16, 2014 12:07 pm
 
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 109
Views: 7626

Re: You may want to rethink the odds of ever needing LTCi

This is odds of ltc not ltci Well, more precisely, the odds of needing LTC for a length of time for which having LTCi would make the difference of not having to spend down all your assets and go on Medicaid. It only works if you don't have too little, but not too much, money, and end up needing LTC...
by baw703916
Mon Sep 15, 2014 8:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: You may want to rethink the odds of ever needing LTCi
Replies: 89
Views: 8677

Re: 100% Small and Value Tilting

This chart shows the YTD performance of each of the holdings of he SV ETF RZV. It has 147 stocks, and a handful of them have done really well, the others, not so much: This is a real world example of something Larry has pointed out on a few occasions: in SV, a disproportionate share of the total per...
by baw703916
Sun Sep 14, 2014 10:50 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Small and Value Tilting
Replies: 72
Views: 4567

Re: You may want to rethink the odds of ever needing LTCi

You also need to consider the difference in long term care costs and what your normal retirement budget is since many(but not all) of your other expense will be reduced if you go into a nursing home. If you end up having to pay $70,000 a year for nursing home (or whatever it cost in your area) but ...
by baw703916
Sun Sep 14, 2014 1:06 pm
 
Forum: Personal Finance (Not Investing)
Topic: You may want to rethink the odds of ever needing LTCi
Replies: 89
Views: 8677

Re: An Interesting Correlation

I've posted on EDV in other threads' I'll summarize my thoughts here. -The correlation coefficient between long Treasuries and equities is substantially negative over the last several years largely because of 2008 (when everybody was fleeing to the safety of bonds issued by the entity which prints t...
by baw703916
Sun Sep 14, 2014 12:50 pm
 
Forum: Investing - Theory, News & General
Topic: An Interesting Correlation
Replies: 22
Views: 2058

Re: Inherited tIRA-benefits to liquidating?

The key oversight here is very common: people forget that tax-deferred savings are tax-deferred. Hence the mythology about "capital gains being taxed at regular income tax rates". You pay the regular income tax rate today or you defer it to the withdrawal age. Either way, you pay regular ...
by baw703916
Sun Sep 14, 2014 11:16 am
 
Forum: Investing - Help with Personal Investments
Topic: Inherited tIRA-benefits to liquidating?
Replies: 14
Views: 889

Re: You may want to rethink the odds of ever needing LTCi

Nisi,

One difference is that with homeowner's insurance, you pretty much know what the maximum loss is (more or less the value of your house). With LTC, it's pretty much open ended, but the insurance doesn't actually cover the tail.
by baw703916
Sat Sep 13, 2014 9:21 pm
 
Forum: Personal Finance (Not Investing)
Topic: You may want to rethink the odds of ever needing LTCi
Replies: 89
Views: 8677

Re: Reminder: estimated taxes due Monday

You're welcome, linenfort. Ybsybs, I have to pay state estimated taxes also. One thing to note is even though they are paid "quarterly" it really isn't. The dates are April 15, June 15, Sept. 15, and Jan. 15 of the following year. So intervals of three months, two months, three months, and...
by baw703916
Sat Sep 13, 2014 8:54 pm
 
Forum: Personal Finance (Not Investing)
Topic: Reminder: estimated taxes due Monday
Replies: 17
Views: 1177

Re: Inherited tIRA-benefits to liquidating?

Thanks, all, for your thoughts. baw703916, the pro-rata rule doesn't apply to non-spousal inherited IRAs, from what I can see; however, with a spousal inherited IRA, that's a really good point. Another reason for the superiority of the Roth inherited IRA! what I was thinking of was a situation wher...
by baw703916
Sat Sep 13, 2014 8:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: Inherited tIRA-benefits to liquidating?
Replies: 14
Views: 889

Re: You may want to rethink the odds of ever needing LTCi

This is odds of ltc not ltci Well, more precisely, the odds of needing LTC for a length of time for which having LTCi would make the difference of not having to spend down all your assets and go on Medicaid. It only works if you don't have too little, but not too much, money, and end up needing LTC...
by baw703916
Sat Sep 13, 2014 7:34 pm
 
Forum: Personal Finance (Not Investing)
Topic: You may want to rethink the odds of ever needing LTCi
Replies: 89
Views: 8677

Re: You may want to rethink the odds of ever needing LTCi

Also, LTCi doesn't really cover tail risk anyway.
by baw703916
Sat Sep 13, 2014 7:18 pm
 
Forum: Personal Finance (Not Investing)
Topic: You may want to rethink the odds of ever needing LTCi
Replies: 89
Views: 8677

Re: Inherited tIRA-benefits to liquidating?

What if the RMD put you over the income limit for a Roth contribution, and the pro-rata rule makes the backdoor Roth unfeasible?
by baw703916
Sat Sep 13, 2014 5:31 pm
 
Forum: Investing - Help with Personal Investments
Topic: Inherited tIRA-benefits to liquidating?
Replies: 14
Views: 889

Reminder: estimated taxes due Monday

I just remembered yesterday that I need to pay my "quarterly" estimated taxes, passing along a reminder for others.

Brad
by baw703916
Sat Sep 13, 2014 4:34 pm
 
Forum: Personal Finance (Not Investing)
Topic: Reminder: estimated taxes due Monday
Replies: 17
Views: 1177

Re: Buffett: Modern investment theory is horse-pucky

Did your professor also mention Galloping Gertie ? I don't remember him doing so but I watched a great documentary on it. To be fair to the designers they were really pushing the state of the art at that time, still it stands as a pretty substantial warning not underestimate the value of safety fac...
by baw703916
Sat Sep 13, 2014 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: 100% Small and Value Tilting

"Deep value" often has a higher P/E than generic slowly-growing companies. This is because it includes companies that are having significant problems, which often means they are losing money. Conversely, dividend strategies as a value proxy tend to screen out growth companies (because the...
by baw703916
Sat Sep 13, 2014 1:45 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Small and Value Tilting
Replies: 72
Views: 4567

Re: 100% Small and Value Tilting

Agreed on the Vanguard small value index fund. While I own it, the majority of my small value exposure will be in PXSV. I don't really understand how PXSV is constructed. While it seems to load heavily on factors in regression tests, the portfolio in PXSV doesn't seem to be much more valuey than VI...
by baw703916
Sat Sep 13, 2014 12:41 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Small and Value Tilting
Replies: 72
Views: 4567

Re: Buffett: Modern investment theory is horse-pucky

How is anything relevant to an unpredictable future?
by baw703916
Fri Sep 12, 2014 11:27 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: 100% Small and Value Tilting

Don't you hate it when your SV "only" increases in value by a factor of five over a 15 year period?
by baw703916
Fri Sep 12, 2014 12:06 am
 
Forum: Investing - Theory, News & General
Topic: 100% Small and Value Tilting
Replies: 72
Views: 4567

Re: Citi: Just use leverage for 10% bond returns

all of a sudden junk bonds become more reasonable to buy - so one stupid times another stupid thing makes the solution - must be math using irrational numbers to get that working out. ..take the risk on the stock side and not the bond side.. I am absolutely not recommending that anybody do this, no...
by baw703916
Thu Sep 11, 2014 6:49 pm
 
Forum: Investing - Theory, News & General
Topic: Citi: Just use leverage for 10% bond returns
Replies: 28
Views: 3059

Re: Citi: Just use leverage for 10% bond returns

stratton wrote:If you want to see the effects of bond leverage, about 5x or 6x, just follow some mortgage reits.

A mortgage reit ETF is MORT.

Paul


Hilarious ticker symbol if you speak French. :)
by baw703916
Thu Sep 11, 2014 6:33 pm
 
Forum: Investing - Theory, News & General
Topic: Citi: Just use leverage for 10% bond returns
Replies: 28
Views: 3059

Re: Buffett: Modern investment theory is horse-pucky

Sure, I realize the difference between hypothesis and theory. I don't remember anyone ever using the term "efficient market theory" though. Ever ? I stand corrected. :) Fama does seem to be one of the more opinionated figures in finance. I remember an interview form a few years back in wh...
by baw703916
Thu Sep 11, 2014 1:23 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: Buffett: Modern investment theory is horse-pucky

All [MPT] does is tell you what the optimum portfolio would have been in the past, and it turns out that the efficient frontier curve and the optimum portfolio are even less stable than "performance" (i.e. return). MPT doesn't do that. The optimal portfolio for the past is all Cisco, foll...
by baw703916
Thu Sep 11, 2014 12:42 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: Buffett: Modern investment theory is horse-pucky

"Investing is not a science."--John C. Bogle, Clash of the Cultures. By the way, just when and how did the efficient market hypothesis become the "Efficient Market Theory?" Nisi, When was "efficiency market theory" used in this thread? I'm not seeing it. I believe that...
by baw703916
Thu Sep 11, 2014 12:36 pm
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: Buffett: Modern investment theory is horse-pucky

I think theres a simple test: If you can't make an argument in finance without complex math, you have no business making it with complex math. Complex math is only useful because sometimes, thoughts need to be complicated on their way to becoming simple. Perhaps in finance, but there are many field...
by baw703916
Thu Sep 11, 2014 11:21 am
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: Buffett: Modern investment theory is horse-pucky

Nisi,

When was "efficiency market theory" used in this thread? I'm not seeing it. I referred to MPT (modern portfolio theory) in my post--that is a real thing (Sharpe et al.). I'm not sure what "modern investment theory" is, a misnomer for MPT?

Brad
by baw703916
Thu Sep 11, 2014 11:14 am
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: Buffett: Modern investment theory is horse-pucky

MPT is a useful framework for thinking about investments and markets, even though it is almost certainly not correct in every detail. As one speaker at an engineering conference I attended said in a plenary lecture, "A theory doesn't have to be right to be useful." Not completely right, an...
by baw703916
Thu Sep 11, 2014 10:45 am
 
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 9758

Re: Citi: Just use leverage for 10% bond returns

I guess I should clarify that my reason for posting this article wasn't particularly whether Citi (or Bloomberg for that matter) is behaving irresponsibly--you can find some analyst to support almost any position. Or whether chasing yield in this way is a good idea--it's pretty much a Boglehead trui...
by baw703916
Thu Sep 11, 2014 10:24 am
 
Forum: Investing - Theory, News & General
Topic: Citi: Just use leverage for 10% bond returns
Replies: 28
Views: 3059

Re: A 'really good book' you did NOT enjoy

"It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife." I made it past the first sentence. Does it get better? What is "a good fortune"? All fortunes are good, no? And isn't this an example of overuse of the comma? ...
by baw703916
Wed Sep 10, 2014 11:55 pm
 
Forum: Personal Consumer Issues
Topic: A 'really good book' you did NOT enjoy
Replies: 226
Views: 10979

Re: What type of assets can a lawyer see that you have?

What's to prevent someone from filing a bogus lawsuit simply for the purpose of discovering someone's assets as a prelude to identity theft?
by baw703916
Wed Sep 10, 2014 8:51 pm
 
Forum: Personal Finance (Not Investing)
Topic: What type of assets can a lawyer see that you have?
Replies: 32
Views: 4046

Re: What's the riskiest Bogleheadish asset?

Christine_NM wrote:
baw703916 wrote:
EmergDoc wrote:Frontier microcap value?

Fund name, please?


That was its name. Fund is gone. That's as risky as it gets. Bit of EmergDoc humor there. :happy


The joke in my post is that there has yet to be a good Frontier fund of any type!
by baw703916
Wed Sep 10, 2014 8:41 pm
 
Forum: Investing - Theory, News & General
Topic: What's the riskiest Bogleheadish asset?
Replies: 81
Views: 7101

Re: Why did REITs drop today?

If REITs are good diversifiers, they're supposed to drop when the rest of the market goes up. :)

Also, I notice that while VNQ (U.S. REIT ETF) is down, VNQI (international) is up. Yay for diversification.
by baw703916
Wed Sep 10, 2014 8:28 pm
 
Forum: Investing - Theory, News & General
Topic: Why did REITs drop today?
Replies: 26
Views: 4106

Re: What's the riskiest Bogleheadish asset?

Gambler wrote:lol.. and take a guess on how Nasdaq (QQQ) did during the tech bubble :P


It's almost back to where it was in the 2000 high...
by baw703916
Wed Sep 10, 2014 12:29 am
 
Forum: Investing - Theory, News & General
Topic: What's the riskiest Bogleheadish asset?
Replies: 81
Views: 7101

Citi: Just use leverage for 10% bond returns

http://www.bloomberg.com/news/2014-09-09/don-t-hate-credit-just-use-leverage-for-10-returns-says-citi.html Citibank has found an amazing solution for the problem of low interest rates in bonds: just use lots of leverage to get the return you want!! Stop complaining junk-bond yields are too low. Inst...
by baw703916
Wed Sep 10, 2014 12:25 am
 
Forum: Investing - Theory, News & General
Topic: Citi: Just use leverage for 10% bond returns
Replies: 28
Views: 3059

Re: What's the riskiest Bogleheadish asset?

Trying to take the question in the spirit in which I think the poster meant it, I would say REITs are the "winner," with emerging markets stock a close runner-up, because in 2008-2009, Vanguard REIT Index (VGSIX) dropped more than Vanguard Small-Cap Value Index (VISVX), or DFA US Micro Ca...
by baw703916
Tue Sep 09, 2014 11:46 pm
 
Forum: Investing - Theory, News & General
Topic: What's the riskiest Bogleheadish asset?
Replies: 81
Views: 7101

Re: What risk-return really means

If you buy a dollar bill for 60 cents, it's riskier than if you buy a dollar bill for 40 cents, but the expectation of reward is greater in the latter case. The greater the potential for reward in the value portfolio, the less risk there is. Buffett That's true, but it requires 1) you to know that ...
by baw703916
Tue Sep 09, 2014 7:53 pm
 
Forum: Investing - Theory, News & General
Topic: What risk-return really means
Replies: 41
Views: 2335

Re: A 'really good book' you did NOT enjoy

protagonist wrote:Hugh Grant redeemed himself by appearing in Cloud Atlas.


Redeemed himself for what?
by baw703916
Tue Sep 09, 2014 7:43 pm
 
Forum: Personal Consumer Issues
Topic: A 'really good book' you did NOT enjoy
Replies: 226
Views: 10979
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