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Re: Question about the gordon equation

Consider Modigliani Miller, which essentially stands for the proposition that it doesn't matter how a corporation finances its activities - retained earnings or borrowings. The world is awash in capital seeking higher returns. That's one reason interest rates are so low. It doesn't appear that lack ...
by richard
Thu Apr 17, 2014 11:03 am
 
Forum: Investing - Theory, News & General
Topic: Question about the gordon equation
Replies: 2
Views: 77

Re: Japan Does not Show That Stocks are Dangerous

Would you rather invest your money in the stock market in the depths of the 1973-74 stock market when P/E's were 8 or in early 2000 when market P/E's got up to about 32? In which scenario were the future returns higher? Of course valuations matter. Valuations most likely do matter. The question is ...
by richard
Thu Apr 17, 2014 9:34 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 67
Views: 3054

Re: "At Vanguard my voice is my password"

I've used it for some time now. Works fine, even when I have a cold.

Works fine appears to mean it lets you in (no false negative). What I worry about is how well it keeps others out (I don't want false positives).
by richard
Thu Apr 17, 2014 5:44 am
 
Forum: Personal Consumer Issues
Topic: "At Vanguard my voice is my password"
Replies: 17
Views: 1360

Re: What is your net worth

would the poll have more relevance if it included age as well as net worth to put things in perspective? knowing at what point others reached or surpassed my number might be a bit depressing yet informative! Download the spreadsheet from the net worth survey thread. You can then chart age against n...
by richard
Wed Apr 16, 2014 1:31 pm
 
Forum: Investing - Theory, News & General
Topic: What is your net worth
Replies: 36
Views: 4672

Re: Looking at top 1% for actionable insight

For an "actionable insight" that applies to younger forum members wrestling with educational and career choices, for example, the fact the IRS's top one percent statistics show that big chunks of the one percent club own a small business (maybe 22%?) or own a slice of a professional servi...
by richard
Wed Apr 16, 2014 11:39 am
 
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 50
Views: 4441

Re: Japan Does not Show That Stocks are Dangerous

I'm asking very precise questions - what are the numbers at which I should stop buying, sell and resume buying? Is your answer that I should stop buying (sell?) when bond yields (which bonds?) exceed 1/CAPE? This is a great question and there are bound to be several equally good answer. When it com...
by richard
Wed Apr 16, 2014 11:19 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 67
Views: 3054

Re: Japan Does not Show That Stocks are Dangerous

What is the CAPE at which I should not buy stocks? I'm asking very precise questions - what are the numbers at which I should stop buying, sell and resume buying? Is your answer that I should stop buying (sell?) when bond yields (which bonds?) exceed 1/CAPE? A precise question about an imprecise si...
by richard
Wed Apr 16, 2014 11:09 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 67
Views: 3054

Re: What is your net worth

From the 2014 Bogleheads net worth survey
Image
by richard
Wed Apr 16, 2014 10:46 am
 
Forum: Investing - Theory, News & General
Topic: What is your net worth
Replies: 36
Views: 4672

Re: Japan Does not Show That Stocks are Dangerous

What is the CAPE at which I should not buy stocks? Should I sell my stocks if CAPE goes above this level? If so, at what level should I start buying them back? Well, there isn't a precise answer for this, but certainly there is a "loose" answer. All things being equal, the expected return...
by richard
Wed Apr 16, 2014 9:59 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 67
Views: 3054

Re: Looking at top 1% for actionable insight

Part of the issue is the top 1% are very diverse group. Spending on luxury items has a much larger effect on the bottom edge of the top 1% than the bottom edge of the top 0.1% or the 0.01%.
by richard
Wed Apr 16, 2014 9:53 am
 
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 50
Views: 4441

Re: Another take on the "rebalancing bonus"

The problem with your examples are you set them up in a non-random way, they always have some guaranteed return to the mean so you force a greater amount of buy low sell high than exists in the real world. You are arguing about a different point than I was making. Clearly you have not bothered to r...
by richard
Wed Apr 16, 2014 8:45 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 48
Views: 2551

Re: Looking at top 1% for actionable insight

Most of the relationships to being a top 1% would likely be spurious and not really actionable. Probably a lot of 1% drive BMW's - but it doesn't follow that I will become a 1% by buying a BMW. Actually the data from the IRS syncs pretty tightly with the Millionaire Next Door book... note that the ...
by richard
Wed Apr 16, 2014 8:38 am
 
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 50
Views: 4441

Re: Japan Does not Show That Stocks are Dangerous

What is the CAPE at which I should not buy stocks?

Should I sell my stocks if CAPE goes above this level? If so, at what level should I start buying them back?
by richard
Wed Apr 16, 2014 6:42 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 67
Views: 3054

Re: Looking at top 1% for actionable insight

SeattleCPA,

A major problem with looking at people who've done very well and studied what actions they have taken is that you're ignoring all those who have taken those actions but have not done very well.
by richard
Tue Apr 15, 2014 2:33 pm
 
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 50
Views: 4441

Re: Looking at top 1% for actionable insight

JuanZ wrote:Another thread were we should be mindful of survivorship bias.

Yes.

You might want to add the distinction between correlation and causation.
by richard
Tue Apr 15, 2014 1:10 pm
 
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 50
Views: 4441

Re: Looking at top 1% for actionable insight

<snip> Wealth Tier----------------------------------------Count---------Mean Net Worth Under $2 million in gross assets---------------449,000--------$1,046,619 $2 million to $3.5 million in gross assets----1,008,000------$2,593,065 $3.5 million to $5 million in gross asset------364,000--------$4,15...
by richard
Tue Apr 15, 2014 1:08 pm
 
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 50
Views: 4441

Re: Asness & Fama on Bloomberg TV NOW

"Go with Jack"
This clip is worth watching: http://www.bloomberg.com/video/professo ... 543qA.html
by richard
Tue Apr 15, 2014 12:28 pm
 
Forum: Investing - Theory, News & General
Topic: Asness & Fama on Bloomberg TV NOW
Replies: 22
Views: 1009

Re: The slackening...

JuanZ wrote:
SC Hoosier wrote:Look at the 'Greatest Generation.'

Be mindful of survivorship bias.

Think of what Isaac Newton's generation could have done with the "Greatest Generation's" press agent :P
by richard
Tue Apr 15, 2014 7:35 am
 
Forum: Personal Finance (Not Investing)
Topic: The slackening...
Replies: 55
Views: 5214

Re: Why does Vanguard use average return iso compound annual

I thought I remembered pointing this out about a year ago that they are really CAGR returns - so I am not sure why everyone thinks this is new news?<snip> Some forums have policies against duplicate threads and strong recommendations that people search before posting. We're not in that group. I'm n...
by richard
Tue Apr 15, 2014 7:22 am
 
Forum: Investing - Theory, News & General
Topic: Why does Vanguard use average return iso compound annual?
Replies: 99
Views: 4033

Re: Did not have fun this year doing my taxes- TT

Fun fact: the IRS could prepare a first draft of your taxes, which you could then check. You wouldn't have to fill in anything reported to the IRS, such as interest, dividends, wages. It would make things much simpler for most people, although obviously some have more complicated situations or would...
by richard
Tue Apr 15, 2014 6:00 am
 
Forum: Personal Finance (Not Investing)
Topic: Did not have fun this year doing my taxes- TT
Replies: 38
Views: 3194

Re: A Bubble in Value Stocks?

Pretend the economy consists of 100 similar factories. Company A owns 90 factories and companies B, C ... K each own one. Which is a more diversified portfolio - 90 shares of A and one each of B, C ... K or one share each of all eleven companies? In other words, is it more important to diversify by ...
by richard
Mon Apr 14, 2014 7:23 am
 
Forum: Investing - Theory, News & General
Topic: A Bubble in Value Stocks?
Replies: 31
Views: 2367

Re: How much is rich?

It of course depends on your definition of rich.

No significant financial worries, nice house, nice cars, regular luxury vacations?

Fly in your own jet?

Major politicians come to pay court?
by richard
Sun Apr 13, 2014 8:27 am
 
Forum: Personal Finance (Not Investing)
Topic: How much is rich?
Replies: 47
Views: 2376

Re: heartbleed - widespread internet security problem

<snip>Vanguard's site now no longer makes any claim that Vanguard never was vulnerable. It just says, effectively, that the site is not now vulnerable.<snip> Vanguard's web site includes: You may have heard about the "Heartbleed" security flaw that has exposed some websites to attackers. ...
by richard
Sat Apr 12, 2014 10:12 am
 
Forum: Personal Consumer Issues
Topic: heartbleed - widespread internet security problem
Replies: 169
Views: 15399

Re: BH Greatest Hits: PE10 predictive power

<snip>It should be obvious that the more you pay, the lower your return. Highly valuations -> lower return expectations. So that is the null hypothesis. That's not how statistics works under the standard definition of null hypothesis. "In statistical inference of observed data of a scientific ...
by richard
Sat Apr 12, 2014 6:25 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: 5 yr TIPs auction announced 4/10- any takers?

tipswatcher wrote:FYI, the 5-year TIPS yield dropped to -0.10% on Thursday, down 21 basis points in just eight days.

This is what happens when the stock market tanks. Flight to safety.

This is what happens when the market lowers its estimate of economic performance - stocks drop and interest rates drop.
by richard
Fri Apr 11, 2014 2:28 pm
 
Forum: Investing - Theory, News & General
Topic: 5 yr TIPs auction announced 4/10- any takers?
Replies: 33
Views: 2596

Re: Passport, TSA Pre-Check, and Global Entry

TSA pre-check and global entry are great for the frequent flyer and I highly recommend them. Many airlines offer pre-check to their elite flyers. The reports I've seen suggest the pre-check you get from GE is more reliable, that is you actually get to use the pre-check lanes more often with GE, than...
by richard
Fri Apr 11, 2014 8:38 am
 
Forum: Personal Consumer Issues
Topic: Passport, TSA Pre-Check, and Global Entry
Replies: 58
Views: 2419

Re: The market portfolio vs. value tilts

Fama once said the market portfolio is always efficient. If you want to increase risk in the hope of higher returns, tilt a moderate amount towards value. No free lunch. Sounds right to me. Some value fans argue that value is something of a free lunch (which goes against market efficiency) or that y...
by richard
Thu Apr 10, 2014 9:49 pm
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 2998

Re: Worth $1.6m but clueless on investments

Welcome!

You might try reading https://dl.dropboxusercontent.com/u/290 ... ou_Can.pdf and perhaps one of the books listed in http://www.bogleheads.org/RecommendedReading.php

That should help provide a some clues.
by richard
Thu Apr 10, 2014 3:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Worth $1.6m but clueless on investments
Replies: 15
Views: 3385

Re: BH Greatest Hits: PE10 predicitive power

<snip>Exactly, and my understanding is that the standard CAPE uses 10 years b/c p/e over 1 year is inferior. And it's deemed inferior because earnings over 1 year are too "noisy"; there's too much variation from year to year. That p/e in different parts of the business cycle naturally var...
by richard
Thu Apr 10, 2014 11:15 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: Fed news efficient markets quiz

Close enough.
by richard
Wed Apr 09, 2014 4:55 pm
 
Forum: Investing - Theory, News & General
Topic: Fed news efficient markets quiz
Replies: 5
Views: 415

Fed news efficient markets quiz

What time today were the Federal Reseve minutes released? How long did it take for the market to react? Did the market like what it saw? Were the minutes in line with expectations?
Image
by richard
Wed Apr 09, 2014 3:07 pm
 
Forum: Investing - Theory, News & General
Topic: Fed news efficient markets quiz
Replies: 5
Views: 415

Re: BH Greatest Hits: PE10 predicitive power

Going back to my exploration of this by-way, there is an implicit assumption that the price of risk, speculative return, etc. remains more or less constant or at least has little effect on return over the long term. This seems reasonable over the long term. There are therefore two main choices and e...
by richard
Wed Apr 09, 2014 3:00 pm
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: BH Greatest Hits: PE10 predicitive power

One major difference between the two cases is that in the first instance we had a constant underlying distribution while in the later case the underlying distribution could change over time. Yes, it will change over time. It could be that the market is more risky at some times than others, and this...
by richard
Wed Apr 09, 2014 12:40 pm
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: BH Greatest Hits: PE10 predicitive power

My simple understanding is based on the Gordon Model . Dividend Yield + Growth = Expected Return D/P + g = r Current dividend yield plus future dividend growth = future return. Put some number on it. D/P = 4%, g = 3%, r = 4 + 3 = 7 If price doubles so that D/P = 2%, then either 1) g must increase o...
by richard
Wed Apr 09, 2014 11:36 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: BH Greatest Hits: PE10 predicitive power

Here's an October 14, 2013 update on the chart from Brad DeLong http://delong.typepad.com/sdj/2013/10/campbell-shiller-regressions-future-sp-price-changes-regressed-on-ratios-of-prices-to-long-run-moving-averages-of-past-earn.html (wait, the x-axis says Current Price Divided by a Thirty-Year Moving...
by richard
Wed Apr 09, 2014 11:11 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: BH Greatest Hits: PE10 predicitive power

How does one prove dividend growth has not been forecastable by the market? Perhaps the price of risk has changed? Assuming dividend growth is not forecastable, does that necessarily mean that returns are forecastable? Why? Example: Suppose I purchase the opportunity to draw a "payoff" fr...
by richard
Wed Apr 09, 2014 10:58 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: BH Greatest Hits: PE10 predicitive power

A low PE10 may mean we are paying less for future earnings (a bargain) or it may mean that the market is predicting low earnings and is paying a full price for them. There is no way to know ex ante. But later camontgo posts a link to a 2008 paper by John Cochrane from the University of Chicago The ...
by richard
Wed Apr 09, 2014 9:55 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2759

Re: Is Alpha Dead?

We all know that investors reliably engage in bad behavior. They buy recent winners and sell recent losers. They panic when the markets drop and sell stocks altogether. They take on too much risk during good times and too little risk during bad times. Such behavior can manifestly lead to huge losse...
by richard
Tue Apr 08, 2014 1:26 pm
 
Forum: Investing - Theory, News & General
Topic: Is Alpha Dead?
Replies: 38
Views: 2014

Re: Is there a winner for every loser ?

Where do all those losses go? It can be tempting to think that the money just evaporates into thin air. But for everyone who foolishly sells losers and buys winners, there is someone wisely buying losers and selling winners. That's the way the markets work. One investor's negative alpha is another ...
by richard
Tue Apr 08, 2014 1:19 pm
 
Forum: Investing - Theory, News & General
Topic: Is Alpha Dead?
Replies: 38
Views: 2014

Re: Is Alpha Dead?

The article includes: "Unlike in other fields, such as medicine, where scientific advances have measurably improved lives, investors are not better off in this hypercompetitive world. In today's investment industry alpha (a measure of a manager's skill that arguably was always hard to find) is ...
by richard
Tue Apr 08, 2014 9:07 am
 
Forum: Investing - Theory, News & General
Topic: Is Alpha Dead?
Replies: 38
Views: 2014

Re: Could this be the season of the HFT tax?

The big problem with coming up with a remedy is finding something that won't cause the exchanges to move elsewhere with concomitant job loss. England has a stamp duty tax on stock transfers. They continue to be a major financial center. Whether the revenue from a US tax would help create more jobs ...
by richard
Mon Apr 07, 2014 6:15 pm
 
Forum: Investing - Theory, News & General
Topic: Could this be the season of the HFT tax?
Replies: 10
Views: 481

Re: Financial question about a Doctor’s Visit

<snip>BTW, many of the doctors posting here seem to say dealing with insurance is solely the patient's responsibility, especially as it relates to labs. When I call a doctor's office, approximately the first question the office person asks is my insurance information, including ID number. I then as...
by richard
Mon Apr 07, 2014 8:32 am
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Financial question about a Doctor’s Visit

I'm surprised no one has responded to my question as to what is the legal basis for the lab billing you, given that you did not authorize its use and it was solely the doctor's decision. You might try asking the lab. Patients sign forms with small print that they will pay everything if their insura...
by richard
Mon Apr 07, 2014 6:14 am
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Financial question about a Doctor’s Visit

I'm surprised no one has responded to my question as to what is the legal basis for the lab billing you, given that you did not authorize its use and it was solely the doctor's decision. You might try asking the lab. So I guess you skip out on your bills at restaurants? What legal basis does a rest...
by richard
Mon Apr 07, 2014 5:49 am
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Financial question about a Doctor’s Visit

I agree it is a good practice to make sure lab work is sent to the correct lab in order to be covered. This is what I did for my first lab work. When a result was out of range, the doctor requested for me to be retested. The fact that my 2nd and 3rd lab works were sent to out of network labs while ...
by richard
Sun Apr 06, 2014 9:38 pm
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Financial question about a Doctor’s Visit

LowER wrote:
richard wrote:
DAK wrote:Buyer beware.

The problem is that you are not the buyer in any meaningful sense, the doctor is. You are the payer.

How is the doctor the buyer? <snip>

The doctor chose the lab and chose the tests.
by richard
Sun Apr 06, 2014 12:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Financial question about a Doctor’s Visit

richard wrote:If you have not contracted with a lab or even agreed to use that lab, why is it your responsibility to pay that lab?

What is the legal basis for the lab collecting from you if you did not authorize the use of the lab?
by richard
Sun Apr 06, 2014 12:02 pm
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Financial question about a Doctor’s Visit

If you want a choice in who analyzes your blood samples have it drawn at the correct company's laboratory. I believe some labs will pay the physician for a blood draw, install a printer for lab results, or automatically put the results onto an electronic health record for easy retrieval and for com...
by richard
Sun Apr 06, 2014 11:24 am
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Financial question about a Doctor’s Visit

DAK wrote:Buyer beware.

The problem is that you are not the buyer in any meaningful sense, the doctor is. You are the payer.
by richard
Sun Apr 06, 2014 11:19 am
 
Forum: Personal Finance (Not Investing)
Topic: Financial question about a Doctor’s Visit
Replies: 77
Views: 3426

Re: Delaying Social Security - best long-term investment?

It seems like a decade or so ago there was lots of talk about SS solvency and the possibility of benefits being cuts during retirement. Is that no longer considered a risk or is the asumption that if that happens there would be nowhere to hide anywhere? The assumption is that the political power of...
by richard
Sun Apr 06, 2014 10:33 am
 
Forum: Investing - Theory, News & General
Topic: Delaying Social Security - best long-term investment?
Replies: 78
Views: 3593
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