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Re: 100% of [surveyed] economists were dead wrong about yiel

Again I think most of the responses are along the lines 'market is too efficient, can't predict, why didn't they realize they can't predict as we BH's realize'. And that's not necessarily wrong. However, the basic reason rates haven't gone up is that growth is poor, has not responded to the stimula...
by richard
Sat Oct 25, 2014 1:07 pm
 
Forum: Investing - Theory, News & General
Topic: 100% of [surveyed] economists were dead wrong about yields
Replies: 33
Views: 3573

Re: 100% of [surveyed] economists were dead wrong about yiel

This is not a sarcastic question. I am genuinely curious. Is there any demonstrable case in which an economist offers real value? If an astrologer says that people should wear red sweaters, that might increase the demand for red sweaters. But it has nothing to do with whether there is a valid reaso...
by richard
Sat Oct 25, 2014 12:41 pm
 
Forum: Investing - Theory, News & General
Topic: 100% of [surveyed] economists were dead wrong about yields
Replies: 33
Views: 3573

Re: Google Docs

How did you access Sidney's document?

Google writes that "Anyone who is given the link to the file or folder can access it."
by richard
Sat Oct 25, 2014 12:34 pm
 
Forum: Personal Consumer Issues
Topic: Google Docs
Replies: 6
Views: 450

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

<> :?: Which leads to my second question about expected return forecasts: Are these forecasts fact or simply someone's opinion? What do you mean? How would (or wouldn't) a prediction of the future be a fact? "Simply someone's opinion" is a rather dismissive characterization. Forecasting m...
by richard
Sat Oct 25, 2014 9:31 am
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

Re: Elder Law attorney (Trusts, Medicaid, nursing homes)

An elder law attorney just told me that NY recently changed the rules on pooled trusts, making it much more difficult to satisfy Medicaid's income limits (for either a nursing home or home care). I understand how an irrevocable trust can decrease net worth to satisfy Medicaid's net worth test, but h...
by richard
Sat Oct 25, 2014 8:48 am
 
Forum: Personal Finance (Not Investing)
Topic: Elder Law attorney (Trusts, Medicaid, nursing homes)
Replies: 30
Views: 1705

Re: Bond fund, why such high returns?

If you would hold a bond fund which buys high quality bonds for lets say, a duration of 10 years. Would it be theoretically possible to have a negative return if you would held the fund for a duration of 10 years? Interest rates might rise, and the fund's value therefore fall, in the tenth year. Lo...
by richard
Fri Oct 24, 2014 7:03 am
 
Forum: Investing - Help with Personal Investments
Topic: Bond fund, why such high returns?
Replies: 13
Views: 1534

Re: Phone for Europe trip

flyingaway wrote:Do you need a different SIM card for a different European country?

It's usually cheaper to get a local, but many plans allow roaming. The EU is cutting roaming costs, but they're still higher than local.
by richard
Thu Oct 23, 2014 2:16 pm
 
Forum: Personal Consumer Issues
Topic: Phone for Europe trip
Replies: 23
Views: 1124

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

grok87 wrote:auction yield was 0.985%. actually relatively close to the 1% i was hoping for this morning.

The current market yield is 0.97%, up sharply since yesterday. Both stock prices and bond yields are up today, a level of optimism not seen for a week or two.
by richard
Thu Oct 23, 2014 1:39 pm
 
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 6478

Re: US Chip & Signature --> Chip & PIN 2020

PINs can be changed with Chip & PIN cards, at least most versions. You have to go to an appropriate machine, such as an ATM with the necessary facilities. Unfortunately, the US lacks the infrastructure.
by richard
Thu Oct 23, 2014 9:52 am
 
Forum: Personal Finance (Not Investing)
Topic: US Chip & Signature --> Chip & PIN 2020
Replies: 24
Views: 1294

Re: Squaring the Circle

You have essentially contradictory goals. Investing may be thought of as a trade-off between current spending and, through your portfolio, future spending. More of one usually means less of the other. In order to increase both you'd need to take more risk, but more risk means the distinct possibilit...
by richard
Thu Oct 23, 2014 7:40 am
 
Forum: Personal Finance (Not Investing)
Topic: [Wants current income and to leave an estate]
Replies: 9
Views: 712

Re: Yes, 100% of economists were dead wrong about yields

I don't know who they surveyed, but many of the economists I follow have been predicting low yields. The most common mistakes appear to be: 1) Fed is drastically increasing base money, so inflation will explode and with it nominal yields. I've been hearing this for at least five years, but it makes ...
by richard
Thu Oct 23, 2014 7:05 am
 
Forum: Investing - Theory, News & General
Topic: 100% of [surveyed] economists were dead wrong about yields
Replies: 33
Views: 3573

Re: Three Possible Outcomes for Future Investment Returns

1) The real question is today's prices compared to future earnings. For bonds, this is relatively easy - we know how much interest a bond will pay in the future (at least, if it's a very high quality bond such as a treasury). For stocks this is harder and we assume past earnings (typically past year...
by richard
Thu Oct 23, 2014 6:59 am
 
Forum: Investing - Theory, News & General
Topic: Three Possible Outcomes for Future Investment Returns
Replies: 32
Views: 2251

Re: Leon Cooperman giving the same advice as Warren

... Inflation certainly has the potential to hurt investments. Fears are overblown, IMO. Every indication is that central banks have the tools to stop inflation and are eager to do so, even at the cost of employment and economic growth. See the US and especially Europe. Even central banks trying to...
by richard
Tue Oct 21, 2014 9:30 am
 
Forum: Investing - Theory, News & General
Topic: Leon Cooperman giving the same advice as Warren
Replies: 47
Views: 3239

Re: Leon Cooperman giving the same advice as Warren

... If you're a long-term investor, a collapse in bond prices would be excellent news. If rates stay low, you get low returns. If rates rise, principal value goes down, but the increased interest makes up for it after a while, then you get the benefits of a higher returns going forward. ... I see t...
by richard
Mon Oct 20, 2014 7:29 pm
 
Forum: Investing - Theory, News & General
Topic: Leon Cooperman giving the same advice as Warren
Replies: 47
Views: 3239

Re: Why not 100% Stocks?

letsgobobby wrote:
Yesterdaysnews wrote:I decided to go 100% stock in my portfolio after I paid off my house. Seems like a no brainer to me. House is kinda like a big bond anyways.

Though in a true crisis/left tail event pretty hard to rebalance from.

Hard to rebalance from in any event, especially if you want to remain debt free.
by richard
Mon Oct 20, 2014 4:14 pm
 
Forum: Investing - Theory, News & General
Topic: Why not 100% Stocks?
Replies: 274
Views: 20560

Re: Leon Cooperman giving the same advice as Warren

"...Don't fear interest rates rising, fear if they don't rise..." [/quote] If you're a long-term investor, a collapse in bond prices would be excellent news. If rates stay low, you get low returns. If rates rise, principal value goes down, but the increased interest makes up for it after ...
by richard
Mon Oct 20, 2014 4:12 pm
 
Forum: Investing - Theory, News & General
Topic: Leon Cooperman giving the same advice as Warren
Replies: 47
Views: 3239

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

<>FWIW: I don't have a problem with the argument that one should plan on low returns for a while going forward since valuations of stocks (and bonds) are not favorable. I just have a problem with all the false precision of what that means (for example save more, wait a bit to retire, etc. vs fiddle...
by richard
Mon Oct 20, 2014 9:55 am
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

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

Richard Yes, exactly, and it is based on history, results from study by Asness. Even when forecast low returns still possibility of very high real returns, and vice versa. Larry, do you have a title, link or other means of finding the Asness study? On MCS, I continue to wonder what MCS gets you com...
by richard
Mon Oct 20, 2014 8:22 am
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

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

few thoughts First, there is clearly no exact "science" here --the best models only explain about 40% of the future outcomes. But of course this should not be a surprise, for if the models explained 100% then there would be no risk. And for those who haven't thought this through, no risk ...
by richard
Sun Oct 19, 2014 3:08 pm
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

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

THIS is why projecting expected returns is important to me - in your 20s and 30s it doesn't matter much, but I'm 54 and contemplating early retirement, and it is REALLY important to have a point of view on what sort of lifestyle/legacy my portfolio will support - conservatively applying a lot of di...
by richard
Sun Oct 19, 2014 2:56 pm
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

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

I tend to prefer e/p over Gordon because with e/p you don't have to estimate future earnings growth.

Arnott and Asness claim that higher dividends equal higher earnings growth. http://www.rallc.com/Production%20conte ... Growth.pdf
by richard
Sun Oct 19, 2014 5:50 am
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

Re: Anyone cancelling travel plans?

You have a much larger chance of dying from furniture tipping over than from Ebola. How freaked out should you be: Council on Foreign Relations scholar Micah Zenko found that tip-over kills about as many Americans per year as terrorism does, and injures many more. In theory, then, you should be just...
by richard
Sat Oct 18, 2014 2:18 pm
 
Forum: Personal Consumer Issues
Topic: Anyone cancelling travel plans?
Replies: 117
Views: 6296

Re: Debit Card was hacked. Should I just use cash from now

Credit cards provide lots of protection. As I understand, there's not as much legal (or practical) protection for debit cards, so I wouldn't use a debit card. Carrying cash has its own risks.

The imminent move towards chip cards should help with the hacks.
by richard
Sat Oct 18, 2014 9:33 am
 
Forum: Personal Finance (Not Investing)
Topic: Debit Card was hacked. Should I just use cash from now on?
Replies: 54
Views: 3309

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

Using life expectancy gives a false precision, too. Life expectancies are averages. The individual wouldn't be very good at determining them aside from using the average. I doubt the average investor would ever come up with an AA if the instructions started out with "First, determine you're li...
by richard
Sat Oct 18, 2014 9:26 am
 
Forum: Investing - Theory, News & General
Topic: Why do people use age instead of life expectancy?
Replies: 43
Views: 2914

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

<>Reader's digest version: If time varying valuations are critical to investors then time varying valuations are critical to simulations. If they are not critical to simulations then they are not critical to investors. <>First, currently we use the CAPE 10 and the Gordon Model, weighting each 50%. ...
by richard
Sat Oct 18, 2014 9:08 am
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

Re: Why not 100% Stocks?

One thing I don't quite understand is why not weight the portfolio almost exclusively in stocks. Their return over the long haul seems to greatly trump Bonds, CDs, etc. What role do bonds play in a portfolio, except perhaps access to liquidity. If my short term cash needs are not large, shouldn't I...
by richard
Sat Oct 18, 2014 6:32 am
 
Forum: Investing - Theory, News & General
Topic: Why not 100% Stocks?
Replies: 274
Views: 20560

Re: Long term return forecast

I have 2 related questions: Does the prediction of low returns going forward infer anything about inflation expectations? What, if anything, would a low inflation future mean for sustainable withdrawl rates? Very low inflation seems to be associated with a very slow economy, which tends to mean low...
by richard
Sat Oct 18, 2014 5:59 am
 
Forum: Investing - Theory, News & General
Topic: Long term return forecast [Research Affil. Expected returns]
Replies: 33
Views: 2336

Re: Long term return forecast

lol...no one can predict future returns...PERIOD! I use these reports as TP. Of course some people can predict future returns. If nothing else, there are enough predictions that some turn out to be accurate by sheer luck. The e/p ratio (the inverse of p/e) has explained about 40% of the variation i...
by richard
Sat Oct 18, 2014 5:52 am
 
Forum: Investing - Theory, News & General
Topic: Long term return forecast [Research Affil. Expected returns]
Replies: 33
Views: 2336

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

Valuation ratios have done a better job of predicting returns than other methods, including relying on historical returns. For example, Vanguard found "We confirm that valuation metrics such as price/earnings ratios, or P/Es, have had an inverse or mean-reverting relationship with future stock ...
by richard
Fri Oct 17, 2014 4:45 pm
 
Forum: Investing - Theory, News & General
Topic: How to think about expected returns--continuing discussion
Replies: 99
Views: 6743

Re: Headed for a 300+ point loss today?

If the market is down due for no good reason or due to emotional selling, it's a buying opportunity. If the market is down because future growth prospects are impaired and the new price rationally reflects this (or doesn't yet fully reflect this), it's not a great buying opportunity. Why do all the ...
by richard
Fri Oct 10, 2014 4:16 pm
 
Forum: Investing - Theory, News & General
Topic: Headed for a 300+ point loss today?
Replies: 430
Views: 28458

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

Given grok87's goals, the 30-year TIPS reduces uncertainty because he knows exactly how many inflation-adjusted dollars he will have when he needs the money in 30-years. Right, reducing uncertainty that impacts our well being reduces risk. In finance we accept a risk/reward trade off. And each of u...
by richard
Tue Oct 07, 2014 10:43 am
 
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 6478

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

Doc wrote:Another approach to the same result is to buy a ten and roll it three times or some combination of the same. That way you don't lock in the low 1% yield for thirty years.

Ten years from now you might wish you'd locked in 1.1% real.
by richard
Tue Oct 07, 2014 9:16 am
 
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 6478

Re: Estimating Future Investment Returns — On a Napkin

Why do you regard the Gordon Equation as superior to earnings yield (e/p)? The Gordon equation is essentially a rewrite of the formula for a growing perpetuity: pv = d / (r - g). [dividend yield, discount rate and growth]. The problem with Gordon is that it requires you to estimate future growth. Ea...
by richard
Mon Oct 06, 2014 10:15 am
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4786

Re: Estimating Future Investment Returns — On a Napkin

Do you believe using a simple formula to predict the future mean return is somehow going to be significantly better than an estimate of the past mean return? How would that happen? Thanks, Rod. I now see where you are coming from. My general takeaway from your comments is that there appears to be s...
by richard
Sun Oct 05, 2014 5:02 pm
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4786

Re: Inserting a Shortened Form of a Hyperlink(URL)

Do you mean something like this

this forum

Code: Select all
[url=http://www.bogleheads.org]this forum[/url]
by richard
Sun Oct 05, 2014 11:42 am
 
Forum: Forum Issues and Administration
Topic: Inserting a Shortened Form of a Hyperlink(URL)
Replies: 15
Views: 825

Re: Buffett Has 100% Equities in his Pensions Funds

I'm not being sarcastic as I ask this question, but just curious, what would it take to really see that bonds are a losing proposition and abandon them and swallow hard and take short term risk in stocks for a better outcome in the future. In a way, by ignoring Buffett we are saying we are smarter....
by richard
Sun Oct 05, 2014 11:03 am
 
Forum: Investing - Theory, News & General
Topic: Buffett Has 100% Equities in his Pensions Funds
Replies: 39
Views: 2709

Re: Buffett Has 100% Equities in his Pensions Funds

JohnnyFive wrote:Yet another investor (much smarter than the usual investor) who says it's ok to be 100% stocks. Who'd've thunk it?

Berkshire aren't 100% stocks. They aren't even 60/40.
by richard
Sun Oct 05, 2014 10:13 am
 
Forum: Investing - Theory, News & General
Topic: Buffett Has 100% Equities in his Pensions Funds
Replies: 39
Views: 2709

Re: Estimating Future Investment Returns — On a Napkin

I asked how much $10,000 would end up over 10-years. The answer was this method doesn't work for 10 years. But that's what I want to know about. The fundamental Gordon Equation (dividends + earnings/dividend growth) works fine over 10 years or any other period, as it's just a simple compound return...
by richard
Sun Oct 05, 2014 9:59 am
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4786

Re: Buffett Has 100% Equities in his Pensions Funds

According to Berkshire's annual report, as Dec 31, 2013, total fair value of pension assets were $13.3 billion, of which $7.8 billion were equity securities. See http://www.sec.gov/Archives/edgar/data/1067983/000119312514078778/d656225d10k.htm and search for: Fair value measurements of Plan assets a...
by richard
Sun Oct 05, 2014 9:17 am
 
Forum: Investing - Theory, News & General
Topic: Buffett Has 100% Equities in his Pensions Funds
Replies: 39
Views: 2709

Re: Estimating Future Investment Returns — On a Napkin

Another method for estimating future returns is just e/p (the inverse of the p/e ratio). A Vanguard study found this to be the most reliable method, explaining about 40% of the time variation in net-of-inflation returns. Regular p/e and Shiller's p/e10 did about equally well. https://personal.vangua...
by richard
Fri Oct 03, 2014 6:05 pm
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4786

Re: Shiller: Anxiety Driving up the Stock Market

"You might think this should be the reverse, that the stock market should go down when people are anxious. People are anxious because of (geopolitical unrest), because of inequality, and people are worried about being replaced by a computer. All these things are on people's minds." But be...
by richard
Fri Oct 03, 2014 6:19 am
 
Forum: Investing - Theory, News & General
Topic: Shiller: Anxiety Driving up the Stock Market
Replies: 42
Views: 4632

Re: Obese airline passenger

crowd79 wrote:This is a thread that belongs in the FlyerTalk forums :)

It already there. Many many times :-)
by richard
Sun Sep 28, 2014 9:50 pm
 
Forum: Personal Consumer Issues
Topic: Obese airline passenger
Replies: 62
Views: 4867

Re: what is risk?

Which is riskier: 1) Certain to miss your goal by a large margin. 2) May miss your goal by a large margin, may exceed your goal by a large margin. Under Bob's definition, 2 is riskier - it has more "Uncertainty of outcomes". I find it hard to believe anyone would prefer 1. If so, does tha...
by richard
Sun Sep 28, 2014 9:49 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4390

Re: what is risk?

Which is riskier: 1) Certain to miss your goal by a large margin. 2) May miss your goal by a large margin, may exceed your goal by a large margin. Under Bob's definition, 2 is riskier - it has more "Uncertainty of outcomes". I find it hard to believe anyone would prefer 1. If so, does tha...
by richard
Sun Sep 28, 2014 8:12 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4390

Re: what is risk?

<snip>If I want to have $70,000 per year in real income in retirement but my annual rate of planned savings, number of years I plan to work, and my conservative investments will only result in income of $55,000 to $60,000 at most, I am not at risk of missing my goal. I am going to miss my goal with...
by richard
Sun Sep 28, 2014 11:29 am
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4390

Re: what is risk?

Which is riskier: 1) Certain to miss your goal by a large margin. 2) May miss your goal by a large margin, may exceed your goal by a large margin. Under Bob's definition, 2 is riskier - it has more "Uncertainty of outcomes". I find it hard to believe anyone would prefer 1. If so, does that...
by richard
Sun Sep 28, 2014 8:44 am
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4390

Re: rebalancing conundrum/paradox/irony

<snip>Work your plan, letsgobobby. As I recall, you have a pretty good one. If you haven't already done it, add a paragraph in your plan that prohibits changes without 6 months consideration. Or a year's consideration might be even better. Then work your plan.<> Everyone's IPS should contain this p...
by richard
Sun Sep 28, 2014 7:29 am
 
Forum: Investing - Theory, News & General
Topic: rebalancing conundrum/paradox/irony
Replies: 83
Views: 5153

Re: rebalancing conundrum/paradox/irony

<snip>If this continues I'll have to use new contributions to buy stocks, if I want to follow my IPS and maintain my portfolio's risk profile. The paradox is my risk-managing IPS is now requiring me to buy more risky assets for the first time in 5+ years, after those risky assets have doubled or tr...
by richard
Sun Sep 28, 2014 7:24 am
 
Forum: Investing - Theory, News & General
Topic: rebalancing conundrum/paradox/irony
Replies: 83
Views: 5153
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