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Re: An inefficient market creating drag on index returns

The Russell is well known for front running for several reasons but I don't think it is unique to the russell its just much easier to study. Front running was detected in this index because: 1. They were rebalancing once a year. 2. In the 90s it was the major small cap passive benchmark so nearly a...
by ftobin
Wed Sep 03, 2014 1:12 am
 
Forum: Investing - Theory, News & General
Topic: An inefficient market creating drag on index returns
Replies: 54
Views: 3738

Re: Philosophy Differs From Strategy

commodities tend to track inflation I'm trying to imagine a world in which that isn't true. One in which, for instance, the price of oil triples without raising other prices through its effect on transportation and manufacturing costs. Probably depends on whether the commodity is consumable. For ex...
by ftobin
Tue Sep 02, 2014 5:50 pm
 
Forum: Investing - Theory, News & General
Topic: Philosophy Differs From Strategy
Replies: 33
Views: 3296

Re: Motif Investing - own the S&P500 for less

Actually, the real secret is that there is no point in slavishly trying to track any index. The fact is that if one has enough separate holdings, it really doesn't matter too much what exactly those holdings are, or in what weights. One will end up tracking the overall market regardless. (Modulo, s...
by ftobin
Wed Aug 27, 2014 4:07 pm
 
Forum: Investing - Theory, News & General
Topic: Motif Investing - own the S&P500 for less
Replies: 91
Views: 5862

Re: Motif Investing - own the S&P500 for less

Re-investing dividends adds to the money-cost -- you can't assume that the dividends are re-invested into the same stock, if you're trying to match the index. Taking time to compare your holdings to the Index after each dividend payout or a split also time-costly. Why pick arbitrarily pick the S&...
by ftobin
Wed Aug 27, 2014 9:49 am
 
Forum: Investing - Theory, News & General
Topic: Motif Investing - own the S&P500 for less
Replies: 91
Views: 5862

Re: US Equity Benchmark Options

I understand your goal for a 3-fund portfolio, but to get more mid/small-cap coverage than the S&P 500, I'd 50/50 the Russell 1000 trackers. I think you're fine with just the S&P 500 as a fine choice too, though.
by ftobin
Thu Aug 14, 2014 6:28 pm
 
Forum: Investing - Theory, News & General
Topic: US Equity Benchmark Options
Replies: 4
Views: 225

Re: Do Ex-US funds rebalance to maintain Dev:EM ratio?

Market cap determines weight.
by ftobin
Thu Aug 14, 2014 10:42 am
 
Forum: Investing - Theory, News & General
Topic: Do Ex-US funds rebalance to maintain Dev:EM ratio?
Replies: 12
Views: 606

Re: Grade Vanguard's performance: is 77% an A?

I'm very curious to know which funds underperfomed their peer group. I also would love to see the same numbers broken down into active vs. indexed.
by ftobin
Thu Aug 14, 2014 10:33 am
 
Forum: Investing - Theory, News & General
Topic: Grade Vanguard's performance: is 77% an A?
Replies: 10
Views: 752

Re: Mutual-fund-only accounts more secure, in one way?

I'll take that answer to mean you know of no such cases, where somebody's brokerage account was hijacked and email intercepted to prevent them finding out same day (if paying attention). I'd be extremely surprised of a site like TD Ameritrade didn't know of circumstances when brokerage accounts wer...
by ftobin
Wed Aug 13, 2014 8:53 pm
 
Forum: Investing - Theory, News & General
Topic: Mutual-fund-only accounts more secure, in one way?
Replies: 17
Views: 1553

Re: Mutual-fund-only accounts more secure, in one way?

The last sentence though is key. Are there real examples of people having their accounts hijacked and email intercepted to prevent them knowing? I submit that compromising your email is a first step towards compromising other accounts. Also, I recommend not underestimating the savviness of attacker...
by ftobin
Wed Aug 13, 2014 6:01 pm
 
Forum: Investing - Theory, News & General
Topic: Mutual-fund-only accounts more secure, in one way?
Replies: 17
Views: 1553

Re: Mutual-fund-only accounts more secure, in one way?

Which is a very real risk, hijacked brokerage accounts, hijacking of email accounts to block confirms, or people just not paying attention to email to look at confirms? Not a flippant question, since I personally can protect myself from the first, by paying attention, if the second isn't true. Hija...
by ftobin
Wed Aug 13, 2014 4:48 pm
 
Forum: Investing - Theory, News & General
Topic: Mutual-fund-only accounts more secure, in one way?
Replies: 17
Views: 1553

Re: Mutual-fund-only accounts more secure, in one way?

'Pump and dump' using hijacked accounts is an interesting idea but I don't think it's that plausible unless you know the victims don't monitor their email (for confirmations) or email could also be taken over (which is back to the other ways you could steal from somebody by taking over email also)....
by ftobin
Wed Aug 13, 2014 2:23 pm
 
Forum: Investing - Theory, News & General
Topic: Mutual-fund-only accounts more secure, in one way?
Replies: 17
Views: 1553

Re: Mutual-fund-only accounts more secure, in one way?

You understand the situation well.
by ftobin
Wed Aug 13, 2014 8:56 am
 
Forum: Investing - Theory, News & General
Topic: Mutual-fund-only accounts more secure, in one way?
Replies: 17
Views: 1553

Re: Vanguard computer security

Like other financial institutions, Vanguard is regularly targeted— hundreds of thousands of times a day —by cyber criminals who want that data. One word: WHOA! To be honest, these are probably not actually login attempts, but likely just probes of web services, looking for holes. Anyone's website g...
by ftobin
Mon Aug 11, 2014 4:01 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard computer security
Replies: 67
Views: 3768

Re: Dilbert Creator: If everyone indexed...

I think that Scott Adams' thesis is that if the costs did not go to the leeches, they would accrue to the investors. I also think that's what he was trying to point out, but I disagree with it. The "leeches" would be investing the money as well -- the money they "leech" doesn't ...
by ftobin
Fri Aug 08, 2014 10:23 am
 
Forum: Investing - Theory, News & General
Topic: Dilbert Creator: If everyone indexed...
Replies: 28
Views: 3278

Re: Dodge & Cox - Global Bond Fund on the way

nisiprius wrote:The point is that BNDX, the orange line, did NOT drop.

Ah, I had only noticed the black VTI lines, not the more subtle BNDX line.
by ftobin
Fri Aug 01, 2014 4:29 pm
 
Forum: Investing - Theory, News & General
Topic: Dodge & Cox - Global Bond Fund on the way
Replies: 46
Views: 6402

Re: Dodge & Cox - Global Bond Fund on the way

nisiprius wrote:Image

I think you've posted VTI, Total US Stock Market. This would probably affect the Emerging Markets Bond index, VWOB, which I do see dropping.
by ftobin
Fri Aug 01, 2014 3:34 pm
 
Forum: Investing - Theory, News & General
Topic: Dodge & Cox - Global Bond Fund on the way
Replies: 46
Views: 6402

Re: Anyone Switched to Vanguard Account Upgrade?

Vanguard's current system is an exception to the rest of the industry. They are just a little slower than most others. A low cost business model has some drawbacks at times. When I was with T Rowe Price, they had a separation between their mutual fund accounts and brokerage, like Vanguard. I just c...
by ftobin
Wed Jul 30, 2014 12:01 pm
 
Forum: Investing - Theory, News & General
Topic: Anyone Switched to Vanguard Account Upgrade?
Replies: 20
Views: 2911

Re: parking money

Preserving capital in nominal terms is a chimera. Did you mean preserving capital in real terms is a chimera? Preserving in nominal terms is easy -- just deposit it into Treasury Direct Zero-Percent Certificate of Indebtedness. https://www.treasurydirect.gov/indiv/help/TDHelp/help_ug_152-CofILearnM...
by ftobin
Mon Jul 28, 2014 4:08 pm
 
Forum: Investing - Theory, News & General
Topic: parking money
Replies: 7
Views: 1378

Re: A case against Index Funds in India

a. they used 14 years of data but they said "the minimum number of years needed to rule out luck in favor of skill was twenty years" How's that even possible? I think their point was that over 14 years, "[t]wenty-four of the fifty funds had zero or negative alpha, and none of the rem...
by ftobin
Wed Jul 23, 2014 5:50 pm
 
Forum: Investing - Theory, News & General
Topic: A case against Index Funds in India
Replies: 32
Views: 1828

Re: A case against Index Funds in India

avalpert wrote:What the author of that piece demonstrated is that one shouldn't be looking to him for investment advice.
....
He actually should be ashamed of himself for publishing that bit at all.

I feel that way about most financial articles. :-)
by ftobin
Wed Jul 23, 2014 4:01 pm
 
Forum: Investing - Theory, News & General
Topic: A case against Index Funds in India
Replies: 32
Views: 1828

Re: SEC Adopts Money Market Fund Reform Rules

Does anyone know what qualifies an institutional fund as such? I had thought it's merely a marketing term for funds which have lower fees and higher investment minimums.
by ftobin
Wed Jul 23, 2014 3:56 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Adopts Money Market Fund Reform Rules
Replies: 52
Views: 3007

Re: A case against Index Funds in India

What if a fund consistently beat the market not by luck but by skill? Can you still say the indexing works? We argue indexing works not only because the index fund is the 70 percentile (top 30%, and by mathematics certainty) but also because an active fund cannot consistently beat the index. Even i...
by ftobin
Wed Jul 23, 2014 3:49 pm
 
Forum: Investing - Theory, News & General
Topic: A case against Index Funds in India
Replies: 32
Views: 1828

Re: A case against Index Funds in India

Mercer found in its study that over three years, the median (middle value of all observations in the sample listed from smallest to largest) of large-cap funds delivered excess returns of 3.8% after taking into account the fund's fee . The upper quartile of these funds (the value that has 75% of th...
by ftobin
Wed Jul 23, 2014 2:21 pm
 
Forum: Investing - Theory, News & General
Topic: A case against Index Funds in India
Replies: 32
Views: 1828

Re: Vanguard not vigilant about taxes?

What if Medtronic was bought by a larger US company? Wouldn't the shareholders still have to pay capital gains tax on the acquisition price? Yes. So why doesn't the New York Times feel that mutual fund shareholders are "paying the price" when a domestic company acquired another one? When ...
by ftobin
Wed Jul 23, 2014 10:12 am
 
Forum: Investing - Theory, News & General
Topic: Vanguard not vigilant about taxes?
Replies: 15
Views: 1692

Re: A case against Index Funds in India

However, I will not use indexing in emerging markets with corruptions (I'm not saying India is. I have no idea.). One of the key requirements for indexing to work is efficient market. If not, it's easy to beat the market and indexing (even with diversification effect) will not work. This is not tru...
by ftobin
Wed Jul 23, 2014 10:00 am
 
Forum: Investing - Theory, News & General
Topic: A case against Index Funds in India
Replies: 32
Views: 1828

Re: NYT Editorial: Hidden Cost of Trading Stocks

When trading mutual funds you aren't going out to an exchange to buy/sell shares, which is where the charge/rebates happens. By the way, it's good to remember that most brokers pay the fees when you cross the spread on an exchange, and don't pass them on to you. This can be $0.003 per share. Some da...
by ftobin
Mon Jun 23, 2014 4:56 pm
 
Forum: Investing - Theory, News & General
Topic: NYT Editorial: Hidden Cost of Trading Stocks
Replies: 4
Views: 917

Re: How important is an ETF volume?

I wouldn't be concerned with volume unless the ETF was in danger of going under. Vanguard international small cap, VSS, has low volume as well.

What matters is liquidity and spread. I see a spread of 0.10%, and $250K on the offer. I wouldn't be worried. VSS has much less on the bid/offer.
by ftobin
Fri Jun 13, 2014 11:07 am
 
Forum: Investing - Theory, News & General
Topic: How important is an ETF volume?
Replies: 4
Views: 391

Re: Which Vanguard Short Treasury Fund

Strangely, the Treasury-only fund has an average rating of AA, while the more-general government-bond index fund is AAA.
by ftobin
Wed Jun 11, 2014 3:31 pm
 
Forum: Investing - Theory, News & General
Topic: Which Vanguard Short Treasury Fund
Replies: 38
Views: 3040

Re: VWAP and other "not held" orders

Do other Bogleheads use VWAP or other similar orders? If so, when do you choose to do so over placing a standard limit or market order? Is this worth worrying about at all? I would if I could, but most brokerages don't seem to support them for the stocks/ETFs they'd be useful in. Most large-cap ETF...
by ftobin
Sun Jun 08, 2014 4:01 am
 
Forum: Investing - Theory, News & General
Topic: VWAP and other "not held" orders
Replies: 2
Views: 363

Re: No BOSVX or DFSVX -- what other SCV choices?

SLYV also tracking the S&P 600 Value. That's why I'm puzzled as to why it is so special spread-wise. Ah, I overlooked that. I'd guess that SLYV has such low voume it's not on MM's radar yet. Unless the SSGA, the ETF sponsor, starts providing incentives for someone maintain a tighter quote, it m...
by ftobin
Sat May 31, 2014 9:05 pm
 
Forum: Investing - Theory, News & General
Topic: No BOSVX or DFSVX -- what other SCV choices?
Replies: 54
Views: 3022

Re: No BOSVX or DFSVX -- what other SCV choices?

Does anybody know why it would be the SLYV would trade with a much larger spread than VIOV? They both have about the same daily volume, VIOV is even smaller in terms of assets under management, but SLYV's average spread is .24% while VIOV's is .08%. IJS is .05% (all according to etf.com). VIOV and ...
by ftobin
Sat May 31, 2014 12:36 am
 
Forum: Investing - Theory, News & General
Topic: No BOSVX or DFSVX -- what other SCV choices?
Replies: 54
Views: 3022

Re: GoPro IPO

Just as with any stock, yes, it might have great growth potential, but what price are you willing to pay? If the IPO opening price was double, would you still be buying?
by ftobin
Fri May 23, 2014 12:04 pm
 
Forum: Investing - Theory, News & General
Topic: GoPro IPO
Replies: 30
Views: 2973

Re: eBay Hit with Security Breach, Change Password!

For what it's worth, Ebay and Paypal both support Two-Factor Authentication: https://www.paypal.com/cgi-bin/webscr?c ... ey-outside
by ftobin
Wed May 21, 2014 2:27 pm
 
Forum: Personal Consumer Issues
Topic: eBay Hit with Security Breach, Change Password!
Replies: 19
Views: 1572

Re: How much of the value premium do vanguard ETFs pick up?

The value premium is not monotonic, it doesn't increase steadily as you go down in price to book deciles. It's heavily concentrated in the smallest stocks. Correct me if I'm wrong, but I think what you're describing is that they are monotonic -- always increasing as P/B decreases -- just not linear.
by ftobin
Thu May 15, 2014 10:45 am
 
Forum: Investing - Theory, News & General
Topic: How much of the value premium do vanguard ETFs pick up?
Replies: 17
Views: 1009

Re: What % of stock market "drive" is gambling?

Even though he was never going to trade on the information, he wanted that hit of adrenaline on the drive home as he learned if the S&P 500 (and thus his account) was up or down for the day. What's funny is that while listening to the radio today, they only mentioned the numbers for the Dow Jon...
by ftobin
Thu Apr 24, 2014 10:08 pm
 
Forum: Investing - Theory, News & General
Topic: What % of stock market "drive" is gambling?
Replies: 44
Views: 5198

Re: How is your Tax-Advantage Portfolio Different?

1) Are there specific investments (if I owned them), that are better if inside a Roth rather than a SEP IRA? No, however Roth IRA space is limited and IMO precious. If you load up Roth IRA with very aggressive holdings, you can experience catastrophic declines in Roth IRA balances. For example, I h...
by ftobin
Mon Apr 21, 2014 5:54 pm
 
Forum: Investing - Theory, News & General
Topic: How is your Tax-Advantage Portfolio Different?
Replies: 20
Views: 1838

Re: Help me understand Michael Lewis' "Flash Boys"

adios_logic wrote:I was referring to IEX's 350 microsecond delay.

Jargon-filled response: The delay is to allow for IEX's NBBO to update so that resting passive peglims don't end up with effectively midspread/aggressive executions from incoming snipes on an NBBO move.
by ftobin
Sat Apr 05, 2014 2:27 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

Surprisingly, the Pinksheet market operates more fairly in this regard. Pinksheets locks in the target MM's obligation when your order is placed. Can you explain a little more? In Pinksheets, for the most part, exchanges don't play a part. Each market maker routes orders to other makers through a c...
by ftobin
Sat Apr 05, 2014 2:19 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

There's nothing technologically challenging or ground-breaking here. Well established synchronization approaches are taught to engineers in their very first digital logic design course. Potential problem areas have been identified and studied to death and there's a rich vocabulary of terms includin...
by ftobin
Sat Apr 05, 2014 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

Do you think that the smallest several exchanges on this list are adding or extracting value? Brokers basically have to connect and pay their membership and connection fees under Reg NMS. http://batstrading.com/market_summary/ To be fair, with the smaller exchanges, they normally don't have liquidi...
by ftobin
Fri Apr 04, 2014 11:59 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

The idea of Thor was to try to trade on all 8 exchanges at about the same time. This allowed them to avoid leaking the trade information of each exchange that allowed you and others to update your prices. The idea behind Thor is obvious and other people were already doing it... because it was obvio...
by ftobin
Fri Apr 04, 2014 10:49 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

Allow trades to cross only at quantized intervals of time across all exchanges simultaneously, and immediately publish all trades that happened. I like your term "quantized intervals" :) For everyone's knowledge, the usage of a "cross" (in contrast to continuous trading) is some...
by ftobin
Fri Apr 04, 2014 10:18 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

I really am not trying to be Cpt. HFT, but I guess I will be for sake of discussion! Jack's house analogy has some issues. The situation would be more like this, there are 2 houses for sale, both for $100. You walk over to one house and buy it for $100. Your neighbor sees you do that, figures you m...
by ftobin
Fri Apr 04, 2014 6:15 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

Minor point: I think you're conflating RBC and IEX. Thor was developed by Katsuyama, the star of the Lewis book, and his crew while he was at RBC, and it was patented (somehow successfully) by RBC. Katsuyama later left RBC to create IEX. I don't know that IEX has rights to use Thor (maybe you do?),...
by ftobin
Fri Apr 04, 2014 6:09 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

What drove the RBC (Royal Bank of Canada) to create Thor to avoid front running from HFTs? And why did the underlying team go create IEX (investors exchange) to prevent the same? Well, everyone is trying to create systems to get themselves the best execution. Thor is such an implementation, and the...
by ftobin
Fri Apr 04, 2014 6:00 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

nisiprius wrote:Do high-frequency traders get to cancel their orders for free?

Everyone does.
by ftobin
Fri Apr 04, 2014 5:42 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

So: 1) if using the SIP is optional, what was supposed to be the point of regulation NMS? 2) Is Hunsader correct that what the exchanges are doing is not just unfair, but "actually illegal under Reg NMS?" The point of RegNMS was to ensure that you were always executed within the NBBO. Exc...
by ftobin
Fri Apr 04, 2014 5:29 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

If the SIP doesn't have the actual best price, how do you know whether Fidelity got it for you? Fidelity is saying they'll provide NBBO price that they know from the SIP when your order enters. It might be a millisecond or too slow, but that's fine. Your order just getting to Fidelity probably took...
by ftobin
Fri Apr 04, 2014 5:25 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

manwithnoname wrote:Jack Bogle has no problem with HFT.

People from the institutional world have only very, very slowly come to know what occurs in market microstructure.
by ftobin
Fri Apr 04, 2014 5:20 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464

Re: Help me understand Michael Lewis' "Flash Boys"

the SEC is slow, so what? the rules are still valid. Remember, the rules are not specific. That's what FINRA and compliance departments add to. The SEC provides general rules, like best-ex. It's not a specific rule. But you have to be abiding by it -- your compliance department is supposed to enfor...
by ftobin
Fri Apr 04, 2014 5:19 pm
 
Forum: Investing - Theory, News & General
Topic: Help me understand Michael Lewis' "Flash Boys"
Replies: 174
Views: 29464
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