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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: 3145

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: 3145

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: 20354

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: 3145

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: 64
Views: 4647

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: 64
Views: 4647

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: 64
Views: 4647

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: 64
Views: 4647

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: 64
Views: 4647

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: 6180

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: 3197

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: 2901

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: 64
Views: 4647

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: 20354

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: 27
Views: 1740

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: 27
Views: 1740

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: 64
Views: 4647

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: 28364

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: 89
Views: 6077

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: 89
Views: 6077

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: 4777

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: 4777

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: 809

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: 2708

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: 2708

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: 4777

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: 2708

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: 4777

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: 4605

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: 4856

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: 4371

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: 4371

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: 4371

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: 4371

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: 5137

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: 5137

Re: what is risk?

Sharpe has said risk is the probability of doing badly in bad times.

Which comes closer to your idea of risk: your portfolio doing badly in bad times (not having money when you need it) or not being certain what your portfolio will be worth at some point in the future?
by richard
Sat Sep 27, 2014 9:47 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4371

Re: what is risk?

When Harry Markowitz developed Modern Portfolio Theory in the 1950s, he needed a way to quantify risk. This was before modern digital computers, so he needed a means of quantifying risk that was easy to compute. Volatility met those criteria. Since then, volatility has survived due to inertia and ea...
by richard
Sat Sep 27, 2014 9:20 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4371

Re: What is your best estimate of the SWR (Safe Withdrawal R

could someone explain the way SWR works? im trying to learn the logic behind it. when you say 4%, does that mean you can withdraw 4% every year and never run out of money (in theory) or is the principal supposed to eventually reach 0 after xx number of years? does it keep up with inflation or are y...
by richard
Sat Sep 27, 2014 6:37 am
 
Forum: Investing - Theory, News & General
Topic: What is your best estimate of the SWR (Safe Withdrawal Rate)
Replies: 77
Views: 4000

Re: What is your best estimate of the SWR (Safe Withdrawal R

The word planning is emphasized because of the great uncertainties in the stock and bond markets. Mid-course corrections likely will be required, with the actual dollar amounts withdrawn adjusted downward or upward relative to the plan. The investor needs to keep in mind that selection of a withdra...
by richard
Sat Sep 27, 2014 6:31 am
 
Forum: Investing - Theory, News & General
Topic: What is your best estimate of the SWR (Safe Withdrawal Rate)
Replies: 77
Views: 4000

Re: What is your best estimate of the SWR (Safe Withdrawal R

How do you make reasonable assumptions about the returns of stocks and bonds going forward without look at past returns? All the predictions I've read about lower returns in the future are based on something like PE10 and make the claim "when things looked like this in the past, here's how the...
by richard
Fri Sep 26, 2014 7:50 pm
 
Forum: Investing - Theory, News & General
Topic: What is your best estimate of the SWR (Safe Withdrawal Rate)
Replies: 77
Views: 4000

Re: Bill Gross moving from PIMCO to Janus, Monday

heyyou wrote:"Who knows? Who cares?"
Firesign Theater

The stockholders of Allianz (PIMCO's parent), Janus and holders of Gross's funds. Reportedly bond prices are down in part due to concerns that people getting out of Gross's funds will be disrupt markets due to their volume.
by richard
Fri Sep 26, 2014 12:09 pm
 
Forum: Investing - Theory, News & General
Topic: Bill Gross moving from PIMCO to Janus, Monday
Replies: 113
Views: 10009

Re: History of U.S. Inflation — Appearances Can Be Deceiving

Remember that one person's spending represents another person's income. In the aggregate, spending equals income. Higher inflation means more income. There are, of course, distributional issues. Very high inflation can be a serious problem, but the Fed certainly has the tools and eagerness to preven...
by richard
Fri Sep 26, 2014 12:02 pm
 
Forum: Investing - Theory, News & General
Topic: History of U.S. Inflation — Appearances Can Be Deceiving
Replies: 16
Views: 2409

Re: Risk and the Trinity Study

randomguy wrote:<snip>Can we have a worse decade than the 1929-1938, 1966-1975, or 2000-2009 and what are you odds of picking the worst 3 years out the last 90 to retire in?

The process would be much easier if we knew the answers to these questions. The problem is that we don't.
by richard
Tue Sep 23, 2014 2:38 pm
 
Forum: Investing - Theory, News & General
Topic: Risk and the Trinity Study
Replies: 33
Views: 1911

Re: Risk and the Trinity Study

If the Trinity Study is correct, then 100/0 or 75/25 stocks/bonds is best or ties for best in all 30-year scenarios: http://www.bogleheads.org/wiki/File:TrinityTable3.jpg Except the next 30 years are unknown. So, the best allocation for next "30-year scenarios" is that which: • We can kee...
by richard
Tue Sep 23, 2014 2:36 pm
 
Forum: Investing - Theory, News & General
Topic: Risk and the Trinity Study
Replies: 33
Views: 1911

Re: Does Equity Risk Decrease over Time?

Does Equity Risk Decrease over Time? Can someone please define "Equity Risk"? L. Risk is the chance you won't have enough money when you need it. Equity risk is the effect of equities on risk. We don't know what the future will bring. We don't know how well the past predicts the future. W...
by richard
Tue Sep 23, 2014 11:35 am
 
Forum: Investing - Theory, News & General
Topic: Does Equity Risk Decrease over Time?
Replies: 51
Views: 2696

Medicaid, irrevocable trusts & income limits

Many people place assets into an irrevocable trust in order to reduce net worth so that they will be eligible for Medicaid. However, Medicaid also has an income limit. How do people deal with the income limit, especially as the trusts all seem to be set up to pass through all income from the underly...
by richard
Sat Sep 20, 2014 8:58 am
 
Forum: Personal Finance (Not Investing)
Topic: Medicaid, irrevocable trusts & income limits
Replies: 10
Views: 789

Re: Inflation Bonds - Staying the Course?

There is likely not a major risk of substantial unexpected inflation. This means inflation protection should be inexpensive, so why not buy some? The Fed is having trouble reaching its 2% inflation target and is under tremendous pressure to push for lower inflation, even though this would hurt emplo...
by richard
Thu Sep 18, 2014 10:41 am
 
Forum: Investing - Theory, News & General
Topic: Inflation Bonds - Staying the Course?
Replies: 43
Views: 3191

Re: summary of two new papers on low volatility

A number of academic papers have demonstrated within the last few years that low-volatility stocks have provided greater returns than higher-volatility stocks. As I’ve mentioned before, these findings run counter to economic theory, which predicts that higher expected risk is compensated with a hig...
by richard
Sat Sep 06, 2014 9:58 am
 
Forum: Investing - Theory, News & General
Topic: summary of two new papers on low volatility
Replies: 15
Views: 1226
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