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by grayfox
Tue May 12, 2015 10:50 am
Forum: Personal Finance (Not Investing)
Topic: New Math for Retirees and the 4% Withdrawal Rule
Replies: 89
Views: 9742

Re: NYT article on 4% retirement

We let these guys off too easily. The reduction in consensus estimates for "safe" or "sustainable" withdrawal rates between 1994 and 2015 invalidates the idea and methodology of trying to estimate these rates. While taking a couple of Stanford courses on Retirement & Pension...
by grayfox
Tue May 12, 2015 8:01 am
Forum: Personal Finance (Not Investing)
Topic: New Math for Retirees and the 4% Withdrawal Rule
Replies: 89
Views: 9742

Re: NYT article on 4% retirement

555 wrote:But then your strawman will get all dusty. :oops:


Strawman…or Tinman?
by grayfox
Mon May 11, 2015 3:16 am
Forum: Investing - Theory, News & General
Topic: Skeptical of consistent dividend growth
Replies: 18
Views: 1622

Re: Skeptical of consistent dividend growth

I did some analysis one day and came to the result that the amount of money you could withdraw from a portfolio only depended on the Total Return . How much return came from dividends or capital gains did not matter. It will stick my neck out and state that this is an indisputable mathematical fact....
by grayfox
Mon May 11, 2015 2:48 am
Forum: Personal Finance (Not Investing)
Topic: New Math for Retirees and the 4% Withdrawal Rule
Replies: 89
Views: 9742

Re: NYT article on 4% retirement

We let these guys off too easily. The reduction in consensus estimates for "safe" or "sustainable" withdrawal rates between 1994 and 2015 invalidates the idea and methodology of trying to estimate these rates. While taking a couple of Stanford courses on Retirement & Pension...
by grayfox
Fri May 08, 2015 4:47 am
Forum: Investing - Theory, News & General
Topic: 1929 was a great year to buy stocks
Replies: 92
Views: 5051

Re: 1929 was a great year to buy stocks

Imagine that you're a long-term investor. You have a lump sum that you will need for your retirement in 30 years and you know that you won't need the money until then. Would you have been better off buying stocks in November 1929 right before the great depression? Or would you have been better off ...
by grayfox
Fri May 08, 2015 3:11 am
Forum: Investing - Theory, News & General
Topic: Returns of Bond Funds when interest rates go up
Replies: 19
Views: 2554

Re: Returns of Bond Funds when interest rates go up

So then the expected return after 2D-1 years is the initial yield. That is good to know. But the actual return after 2D-1 years depends on the specific sequence of interest rate changes? Then I guess we do NOT know what the actual return will be because we don't know the future sequence of rates. So...
by grayfox
Thu May 07, 2015 4:22 am
Forum: Investing - Theory, News & General
Topic: Returns of Bond Funds when interest rates go up
Replies: 19
Views: 2554

Re: Returns of Bond Funds when interest rates go up

The generalized principle is that the excess return over starting yield should equal zero when the number of years equals 2 times the duration minus 1 (2D – 1)." Further, Leibowitz emphasizes that most bond funds behave this way, thus, if one were to purchase the Vanguard Total Bond Market Ind...
by grayfox
Mon Mar 02, 2015 11:04 pm
Forum: Investing - Theory, News & General
Topic: Yale Endowment Report 2014
Replies: 45
Views: 4923

Re: Yale Endowment Report 2014

As I recall that's what tripped up the Beardstown Ladies Investment Club some years ago. Remember that one? Yeah, that was pretty funny. I assume that Yale wouldn't do that. But it seems like it would be worthwhile showing how much they added vs. how much they paid out. Not to mention, how much in ...
by grayfox
Mon Mar 02, 2015 10:05 pm
Forum: Investing - Theory, News & General
Topic: Yale Endowment Report 2014
Replies: 45
Views: 4923

Re: Yale Endowment Report 2014

The report shows 2014 value was 23,894.8. 2013 value was $20,780.0 2014 Spending was $1,041.5 Using the formula (p1 + d0) / p0 - 1, I calculate the 2014 return as 0.2000144 or 20.0% (The report shows 20.2%. Close enough.) But doesn't Yale get new contributions each year? They are constantly soliciti...
by grayfox
Mon Feb 09, 2015 8:06 pm
Forum: Investing - Help with Personal Investments
Topic: Global Minimum Volatility?
Replies: 40
Views: 3187

Re: Global Minimum Volatility?

OK, thanks. So how is variance and covariance estimated? Just looking at historical variance and covariance, or some complicated model that looks at different factors that contribute to return? http://www.msci.com/products/indexes/strategy/factor/minimum_volatility/ Barra Global Equity Model (GEM2)...
by grayfox
Mon Feb 09, 2015 2:09 pm
Forum: Investing - Help with Personal Investments
Topic: Global Minimum Volatility?
Replies: 40
Views: 3187

Re: Global Minimum Volatility?

Global Minimum Variance Portfolio (GMVP) is straight out of Modern Portfolio Theory (MPT). But rather than finding the Tangency Portfolio (TP), which has maximum Sharpe slope, GMVP is the tip of the Markowitz bullet. http://upload.wikimedia.org/wikipedia/commons/e/e1/Markowitz_frontier.jpg Finding t...
by grayfox
Sun Feb 01, 2015 11:56 am
Forum: Investing - Theory, News & General
Topic: Initial SEC yield and subsequent 5yr and 10yr returns
Replies: 142
Views: 7949

Re: Initial SEC yield and subsequent 5yr and 10yr returns

I thought I would post the results for another bond fund: Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares ( VWITX ). I used the same scale as the chart for VFITX to allow direct comparison. I am posting both here for comparison. http://www.lagunabeachbikini.com/images/2015/investing/VFITX...
by grayfox
Wed Jan 28, 2015 8:30 pm
Forum: Investing - Theory, News & General
Topic: Initial SEC yield and subsequent 5yr and 10yr returns
Replies: 142
Views: 7949

Re: Initial SEC yield and subsequent 5yr and 10yr returns

Some Bogleheads like to describe a bond fund as analogous to a CD ladder. If it was like CD ladder, VFITX would hold bonds in about equal percentages from 10 down to 0 years. And the expected return might be the YTM or SEC Yield. So the CD ladder is a poor model for VFITX. The bond fund managers ar...
by grayfox
Wed Jan 28, 2015 12:42 pm
Forum: Investing - Theory, News & General
Topic: Initial SEC yield and subsequent 5yr and 10yr returns
Replies: 142
Views: 7949

Re: Initial SEC yield and subsequent 5yr and 10yr returns

BTW, as of today VFITX has SEC Yield = 1.30% and Duration = 5.2 years.
The 5 year Treasury has yield 1.61%
Penfed has a 5-year CD with APY = 1.61%
Bankrate.com shows a 2.32% 5-year Jumbo CD at CIT Bank.

For a 5-year holding period, which would you choose?
by grayfox
Wed Jan 28, 2015 12:31 pm
Forum: Investing - Theory, News & General
Topic: Initial SEC yield and subsequent 5yr and 10yr returns
Replies: 142
Views: 7949

Re: Initial SEC yield and subsequent 5yr and 10yr returns

We all know that if you hold a bond to maturity, the return is the Yield-to-Maturity YTM. For a bond fund, SEC Yield is analogous to YTM. So I had always thought that, on average, you would get the SEC Yield from a bond fund if the holding period was duration years. In other words, expected return o...
by grayfox
Tue Jan 27, 2015 1:30 pm
Forum: Investing - Theory, News & General
Topic: Initial SEC yield and subsequent 5yr and 10yr returns
Replies: 142
Views: 7949

Re: Initial SEC yield and subsequent 5yr and 10yr returns

I looked at this same issue last year. Actually, I looked at various forecasting models for both stock funds and bond funds. For stock funds I looked at DDM, CAPE and FCF models. For bond funds, the SEC-YIeld model. I wanted to evaluate the accuracy of these various forecasting models. In other word...
by grayfox
Thu Dec 04, 2014 4:44 pm
Forum: Investing - Theory, News & General
Topic: [Shiller's] data set and the Facts of the Matter
Replies: 14
Views: 1762

Re: [Shiller's] data set and the Facts of the Matter

If I am not mistaken, does not everybody calculate the total annualized return for the year by reinvesting the dividends and comparing the starting value on Jan 1 to the ending value on Dec 31? They do not average any price data. fd Some take starting value on July 1 and ending value on June 30th. ...
by grayfox
Thu Dec 04, 2014 7:06 am
Forum: Investing - Theory, News & General
Topic: [Shiller's] data set and the Facts of the Matter
Replies: 14
Views: 1762

Re: [Shiller's] data set and the Facts of the Matter

Prices can change by a lot every day, which means that there's a lot of high-frequency information in price data. If the sample period is one month and there are frequencies of 1-week, 1-day or 1-hour, then the sample rate is much less than those high frequencies which can give erroneous results. Fi...
by grayfox
Wed Dec 03, 2014 7:18 am
Forum: Investing - Theory, News & General
Topic: [Shiller's] data set and the Facts of the Matter
Replies: 14
Views: 1762

Re: [Shiller's] data set and the Facts of the Matter

Thanks for all your thoughtful comments so far -- I have not seen anything on this more technical issue that I brought up. but the problem seems to stem from the standard way we apply Portfolio returns using discrete simple return data on an annualized basis vs the way Schiller "cut" up t...
by grayfox
Tue Nov 25, 2014 4:13 am
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

All models are wrong, but some are useful. -- George E.P. Box If someone says that this model is wrong, it doesn't really add anything. Everyone knows the model is wrong, that point is not even debatable. The relevant question is: Is this model useful? But then you must ask: "Useful for what?&...
by grayfox
Tue Nov 25, 2014 3:10 am
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

http://i.imgur.com/3xGfpH2.png This charts is very interesting. I'm just looking at the blue line. If I am understanding it, it shows how much speculative return added to or subtracted from the investment return. For example, around 2000, spec return added +5% p.a. over the previous 30 years to the...
by grayfox
Sun Nov 23, 2014 1:54 pm
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

What's that you say? You think my analysis in balderdash? Is it a joke? Ok, then you are welcome to present your own case, or pose an argument for why my case is faulty. Uncertainty only exists in the human mind - its not intrinsic to the physical world*. Your analysis is as valid as anybody's. Tha...
by grayfox
Sun Nov 23, 2014 12:00 pm
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

Here's an interesting case. I went back to December 1999 when Shiller PE was 44.19. So I used 1/PE10 (0.02262955, 0.20) for stocks. I've read that, in 1999, 30-year TIPS had real YTM = 4%. So I used (0.0400, 0.00) for bonds. Here is the output of the gordoni2's python script: stocks: gm=1.0222 am=1....
by grayfox
Sun Nov 23, 2014 11:50 am
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

Valuation is the wild card.
I bet if I knew what the Shiller PE will be in future, I could narrow the forecast down quite a bit.
by grayfox
Sun Nov 23, 2014 7:56 am
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

OK, this is starting to make sense. If I run the python script with historical return for stocks (6.8%, 20%) and bond (0%, 0%), it should say what the chance was historically of getting less than 0% real return. stocks: gm=1.0674 am=1.0853 sd=0.1998 bonds: gm=1.0001 am=1.0001 sd=0.0000 elapsed years...
by grayfox
Sat Nov 22, 2014 12:27 pm
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

The worst 30-year real return was 1.90%. Less than 1% over 30-years is not impossible, but it's not very unlikely. Nowhere near 25% chance. I am curious to see what your simulation says. I will guess less than 5% OK, I ran the python script with this change: # bonds = AssetClass(1.019, 0.10) bonds ...
by grayfox
Sat Nov 22, 2014 12:11 pm
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

I would like to know how Mr Shiller generated stock market data starting year 625 (=2012 -29 - 1358). That, or what types of Shenanigans did you do to produce 1358, 30-year periods of S&P returns. Data is monthly returns from 1871 to present. This is just the actual 30-year return for each mont...
by grayfox
Sat Nov 22, 2014 5:16 am
Forum: Investing - Theory, News & General
Topic: Will stocks beat bonds over next 30 years?
Replies: 65
Views: 6401

Re: Will stocks beat bonds over next 30 years?

30-year TIPS currently have YTM = 1.00% If you buy a 30-year TIPS and hold to maturity you will get pretty close to 1.00% real return. The only variation is due to the interest-on-interest which is pretty small with coupon of 1.375. I am going to round the SD of return on TIPS to zero and say that y...
by grayfox
Thu Nov 20, 2014 3:18 am
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 150
Views: 21061

Re: Small cap value premium

But you are asking about the small-cap premium. So I did the same thing for S&P 500 VFINX (mostly large cap) vs the small-cap NAESX. $1,000 invested every month since 1980. http://www.lagunabeachbikini.com/images/2014/investing/ValVFINX.NAESX1980-2014log.png Wow! Investments in small-cap stocks ...
by grayfox
Thu Nov 20, 2014 3:10 am
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 150
Views: 21061

Re: Small cap value premium

I apologize as I know this topic has been discussed in detail. But I am still having trouble wrapping my mind around why or how a particular sector or style box can outperform indefinitely. ... Why exactly should we expect SCV equities to out perform TSM? Thanks It seems to me that if equity risk p...
by grayfox
Wed Nov 19, 2014 3:57 pm
Forum: Personal Consumer Issues
Topic: Daily Telegraph: World War One Archive
Replies: 116
Views: 11417

Re: Daily Telegraph: World War One Archive

Brooklyn Daily Eagle Thursday Nov 19, 1914 page 15 col 1 DAY IN WALL STREET Opening of Stock Exchange for Bond Transactions Delayed by Dealers Protest The Stock Exchange was closed the morning of July 31, a few minutes before 10 o'clock, the usual opening time, and there has been no trading of any ...
by grayfox
Wed Nov 19, 2014 12:04 pm
Forum: Investing - Theory, News & General
Topic: Jack Bogle: expect 7% annualized for the foreseeable future
Replies: 42
Views: 7893

Re: Jack Bogle: expect 7% annualized for the foreseeable fut

Vanguard's study of forecasting found e/p to be the most reliable method, explaining about 40% of the variation in ten year real returns. Using Shiller's ten year p/e was about as reliable. Current p/e is around 20x, so that implies a 5% real return. https://personal.vanguard.com/pdf/s338.pdf A stu...
by grayfox
Mon Nov 17, 2014 3:39 am
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 71
Views: 9796

Re: Yield Curve Investigations

http://s26.postimg.org/gkwf8oypl/FRB_spot_and_n_year_forward_yield_curves_10_year.png Kevin So you could say that in the steady state that the yield curve is flat, i.e. rates are the same across all maturities. In other words, if nothing were to change, we would eventually reach the steady state of...
by grayfox
Mon Nov 17, 2014 3:21 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

Since you're graphing something that's expected to grow exponentially, the vertical axis should be logarithmic, not linear. Then the black curve would be a straight line, and the blue curve would have larger deviations to the left, and smaller ones to the right. (Note how the Great Depression looks...
by grayfox
Sun Nov 16, 2014 6:59 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

Now I am beginning to understand. It's starting to make sense.
by grayfox
Sun Nov 16, 2014 6:30 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

You win. Now listen to this story on npr In One Alabama County, Nearly 1 In 4 Working-Age Adults Is On Disability Factories and mills have closed and the U.S. economy has left behind millions of workers who now find themselves unfit or unqualified for the jobs that remain. For many, going on disabil...
by grayfox
Sun Nov 16, 2014 6:05 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

If they lose, both lawyer and claimant get nothing. If they win, the government awards $10,000, the lawyers is paid $4,000 and the claimant is left with $6,000 vs. the government awards the lawyer $4,000 and the the claimant is awarded $6,000 That sounds like a distinction without a difference. For ...
by grayfox
Sun Nov 16, 2014 5:38 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

Please provide a source for this incredible statement about legal fees. Fees are regulated by the government and paid out of any back award as contingent fees. I know . I am an attorney and the lawyer who handled my wife's case was paid out of the back payments. The fees are contingent and caps are...
by grayfox
Sun Nov 16, 2014 5:22 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

She should have contacted Binder & Binder. You need to listen to the 60 Minutes and NPR shows. I already provided the links.
by grayfox
Sun Nov 16, 2014 4:59 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

12 million Americans are receiving disability. See the 60 Minutes episode Disability, USA . NPR also did a special series on it: unfit for work: the startling rise of disability in america npr says it's 14 million. If your benefits are denied by SSA, just go to one of the law firms that advertise on...
by grayfox
Fri Nov 14, 2014 8:23 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

In short, there are two, and only two , ways that the global economy can grow — either by 1) an increase in the (working-age) population or, 2) an increase in the productivity of that population. That's it, there is no other magic fairy dust. The simplified formula is : http://i.imgur.com/aQ3EgjP.j...
by grayfox
Fri Nov 14, 2014 8:02 am
Forum: Investing - Theory, News & General
Topic: Junk bond fund NAVs
Replies: 91
Views: 8937

Re: Junk bond fund NAVs

Yes, the risk premium is the Expected return minus the risk-free rate. That's why I included the 5-year CD at 2.3%. I can get 2.3% risk -free 5-year return at a bank. Then the question is what is the Expected 5-year return of VWEHX when SEC Yield = 4.71%? From looking at past SEC Yield and actual 5-...
by grayfox
Fri Nov 14, 2014 5:00 am
Forum: Investing - Theory, News & General
Topic: Global Growth and Expected Returns — Why So Low?
Replies: 35
Views: 3853

Re: Global Growth and Expected Returns — Why So Low?

I started becoming aware of this issue, at least for the U.S., in 2011. Back in 2011, I plotted U.S. Real GDP from 1929-2010 and fitted an exponential trend line. The black line is 3.5% exponential growth trend. The blue line is the actual RGDP. http://www.lagunabeachbikini.com/images/2011/investing...
by grayfox
Wed Nov 12, 2014 2:51 pm
Forum: Investing - Theory, News & General
Topic: Junk bond fund NAVs
Replies: 91
Views: 8937

Re: Junk bond fund NAVs

3. But treasury rates are very low too, and stock (US particularly) PE10 quite high. You must have somehow gotten the idea that I am against VWEHX. All I have been looking at is the frequent claim: If you hold a bond fund for the duration, you will get approximately the SEC Yield. Often "appro...
by grayfox
Wed Nov 12, 2014 3:20 am
Forum: Investing - Theory, News & General
Topic: Junk bond fund NAVs
Replies: 91
Views: 8937

Re: Junk bond fund NAVs

Now you-all got me looking at VWEHX. :P Vanguard High-Yield Corporate Fund Investor Shares ( VWEHX ) Historical Returns: VWEHX Barclays US Corp High Yield Year Capital Ret Income Ret TR TR 2013 –1.31% 5.85% 4.54% 7.44% 2012 7.38% 6.97% 14.36% 15.81% 2011 –0.18% 7.31% 7.13% 4.98% 2010 4.20% 8.19% 12....
by grayfox
Tue Nov 11, 2014 7:18 am
Forum: Investing - Theory, News & General
Topic: astonishing performance of US markets vs others
Replies: 50
Views: 5623

Re: astonishing performance of US markets vs others

Just one man's opinion I suspect that the international market now better reflects the structural corruption and unreliability of financial reports from many countries. the OW Bunker Bankruptcy is indicative of many of the problems since it is a mix of European and Asian operations Thsi was a billi...
by grayfox
Tue Nov 11, 2014 6:27 am
Forum: Investing - Theory, News & General
Topic: astonishing performance of US markets vs others
Replies: 50
Views: 5623

Re: astonishing performance of US markets vs others

When I compared veu or vwo vs spy over the past 5 years I was surprised to see how much better US markets (eg spy) have done. Have been painfully re-balancing by selling spy and buying more international markets. Would like to hear others viewpoint on whether such out-performance has happened in th...
by grayfox
Tue Nov 11, 2014 5:51 am
Forum: Investing - Theory, News & General
Topic: Junk bond fund NAVs
Replies: 91
Views: 8937

Re: Junk bond fund NAVs

Another thing about defaults in speculative bonds is that the losses come in spurts, usually during recessions. You can go for years with almost no bankruptcies and defaults. Then a recession comes and the default rate spikes up. I read somewhere that the rate jumped to 12% during the credit crisis....
by grayfox
Tue Nov 11, 2014 4:42 am
Forum: Investing - Theory, News & General
Topic: BND or a CD
Replies: 119
Views: 11239

Re: BND or a CD

Next set of charts is for 10-year rolling returns: http://s26.postimg.org/424sv4r7d/initial_yield_and_10_year_return_10_year_bond.png Note that R^2 is much higher at 0.90, but that there are some significant deviations of 10-year return from initial yield. Yes, this is making more and more sense. I...
by grayfox
Mon Nov 10, 2014 8:01 am
Forum: Investing - Theory, News & General
Topic: BND or a CD
Replies: 119
Views: 11239

Re: BND or a CD

I am starting to think that my next estimate of confidence interval for VFITX 5-year return for might be something like: (SEC Yield + BIAS) +/- 1.5% If future rates trend down like they did 1994-2013, maybe BIAS = +1.5% If future rates trend up like they did 1960-1980, maybe BIAS = -1.5% If rates ar...

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