Search found 416 matches

by rmelvey
Tue Jun 23, 2015 2:45 pm
Forum: Investing - Theory, News & General
Topic: Cyclical EDV holdings? [Vanguard Extended Duration ETF]
Replies: 10
Views: 933

Re: Cyclical EDV holdings?

I can't speak to the market timing aspect but when holding long bonds combined with stocks be aware that your portfolio's Achille's heel is a supply shock inflation. This is when the supply curve unexpectedly shifts left. If you want to hedge that the long bond/stock portfolio pairs well with CCF fu...
by rmelvey
Wed May 27, 2015 10:13 am
Forum: Investing - Help with Personal Investments
Topic: Best options when Roth is not an option
Replies: 10
Views: 667

Re: Best options when Roth is not an option

Do you have a ROTH 401k available through your employer? Those don't have the income limit
by rmelvey
Tue May 26, 2015 11:33 am
Forum: Personal Finance (Not Investing)
Topic: CDs between Bank Accounts
Replies: 4
Views: 373

Re: CDs between Bank Accounts

Good points. The transfers from Ally up to a year in advance seems perfect. Thanks for the thoughts everyone
by rmelvey
Tue May 26, 2015 10:40 am
Forum: Personal Finance (Not Investing)
Topic: CDs between Bank Accounts
Replies: 4
Views: 373

CDs between Bank Accounts

Hi everyone, I get a large portion of my total compensation in annual lump sums. I want a disciplined way to spread this over the year. Ideally I want to purchase CDs that mature each month and have them deposit into my Bank of America checking account. Bank of America's yields are pretty bad though...
by rmelvey
Fri May 15, 2015 10:40 am
Forum: Investing - Theory, News & General
Topic: Best Asset Allocation if you've "won the game"
Replies: 86
Views: 9023

Re: Best Asset Allocation if you've "won the game"

I really like the vanguard target retirement income fund. The nice thing about having it all in one fund is that you don't see the individual pieces moving which is easier on your psychology. If you want go the extra mile something like 90% vanguard retirement income and 10% gold is a pretty bulletp...
by rmelvey
Thu May 14, 2015 8:03 am
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 755
Views: 117170

Re: Should I use margin to buy a balanced fund?

Hi rob thanks for the expedited education/wisdom I really appreciate it. Are you saying that you didn't have to pay interest on the borrowed cash used to settle the futures because you had collateral in the form of stocks/bonds? Or is the money borrowed in the securities account not accruing interes...
by rmelvey
Thu May 14, 2015 6:53 am
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 755
Views: 117170

Re: Should I use margin to buy a balanced fund?

Comeinvest,

After more research I don't think it works the way I had hoped. I think I would need to use futures for all three positions which is unfortunately much less tax efficient.
by rmelvey
Wed May 13, 2015 7:49 pm
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 755
Views: 117170

Re: Should I use margin to buy a balanced fund?

Hmm good point I hadn't thought about daily cash settlement. I guess the best way would be futures contracts for all three positions so I always had enough cash.
by rmelvey
Wed May 13, 2015 5:46 pm
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 755
Views: 117170

Re: Should I use margin to buy a balanced fund?

I have never traded futures so I am still trying to figure out all of the pitfalls. It was my understanding that as long as I have enough collateral to cover the margin requirements I would be fine. Even if gold went to zero in that scenario as long as (hypothetically) my other assets stayed flat I ...
by rmelvey
Wed May 13, 2015 5:09 pm
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 755
Views: 117170

Re: Should I use margin to buy a balanced fund?

I have contemplated a leveraged risk parity strategy as well. I am exploring using options express as a broker because you can buy stocks, bonds, and futures through them (which is great because you can use your stocks and bonds as the collateral). I am going to start paper trading a strategy that i...
by rmelvey
Fri Mar 27, 2015 8:59 pm
Forum: Investing - Theory, News & General
Topic: Interest in multi asset class investing and crises
Replies: 11
Views: 982

Re: Interest in multi asset class investing and crises

True of weak diversifers, but high quality long duration bonds typically have a positive skew in crises that offsets equities negative skew. Just look at a chart of tlt against vti. A nearly perfect deflation hedge
by rmelvey
Thu Jan 08, 2015 9:00 pm
Forum: Investing - Theory, News & General
Topic: a good etf total return website
Replies: 3
Views: 780

Re: a good etf total return website

I love etfreplay I just wish they had more tickers
by rmelvey
Tue Jan 06, 2015 2:11 pm
Forum: Investing - Theory, News & General
Topic: Can you make money betting on random coin flips?
Replies: 296
Views: 18460

Re: Can you make money betting on random coin flips?

Chiming in (I made the post with the chart.) I will make a small twist to the game that illustrates why focusing on geometric returns (through positioning sizing / managing volatility) is crucial. Imagine a game where you you put up $1 dollar with a 50/50 chance of it going to $3 or going to $0. Onc...
by rmelvey
Tue Dec 09, 2014 10:14 am
Forum: Investing - Theory, News & General
Topic: Harvey paper says re-balancing adds risk
Replies: 73
Views: 5469

Re: Harvey paper says re-balancing adds risk

when stocks are moving up, rebalancing decreases risk (moving stocks to bonds). When stocks are moving down, rebalancing adds risk (moving bonds to stocks). As pointed out upthread, the goal is to maintain risk at a fairly constant level. You are not getting to the heart of the idea though because ...
by rmelvey
Tue Dec 09, 2014 10:10 am
Forum: Investing - Theory, News & General
Topic: Harvey paper says re-balancing adds risk
Replies: 73
Views: 5469

Re: Harvey paper says re-balancing adds risk

I rebalance religiously, but I understand the argument that it adds risk during an extreme environment. If any one of the assets goes to zero the whole portfolio approaches zero as you keep shoveling money into the asset that is declining. Think about a portfolio that is 50% Russia and 50% US stock ...
by rmelvey
Tue Nov 25, 2014 8:47 pm
Forum: Investing - Help with Personal Investments
Topic: Commodity Index Fund(s)
Replies: 7
Views: 1014

Re: Commodity Index Fund(s)

The only practical commodities to hoard are gold and silver because they don't spoil and take up minimal storage space. Everything else should really be done through futures. Separately, don't try to get caught up in the marketing of commodity "index" funds. They don't exist. The only prod...
by rmelvey
Wed Oct 29, 2014 8:39 pm
Forum: Investing - Theory, News & General
Topic: A Backtest of the Dividend Growth Model, 1871-2010
Replies: 70
Views: 5190

Re: A Backtest of the Dividend Growth Model, 1871-2010

TJSI,

Earnings can definitely be incorporated into the DDM.

ROE*(1-Payout Ratio) = Sustainable Growth Rate
EPS*Payout= Dividend per Share

Yes you are taking the PV of the dividend cash flows, but they are derived from earnings using the payout ratio and ROE.
by rmelvey
Wed May 21, 2014 7:48 pm
Forum: Investing - Theory, News & General
Topic: commodities and multi-asset class portfolios
Replies: 65
Views: 3982

Re: commodities and multi-asset class portfolios

When calculating the skewness of the portfolio are you doing it based off of the log returns? If not, a 5% loss is not equivalent to a 5% gain and so it makes sense that one would prefer positive skew because large negative returns kill the effect of compounding. However, if doing this based off of ...
by rmelvey
Wed Jan 01, 2014 10:46 am
Forum: Investing - Theory, News & General
Topic: (In)efficient markets, utility curves, and investing risk
Replies: 16
Views: 998

Re: (In)efficient markets, utility curves, and investing ris

I think putting more can into equities for longer time horizons can be justified if you go outside of the EMH. You can break down equity returns into the investment return (dividend payments) and the speculative return (changes in the multiple paid for a dollar of dividends). The actual investment r...
by rmelvey
Tue Dec 31, 2013 11:11 am
Forum: Investing - Theory, News & General
Topic: Rebalancing the Permanent Portfolio
Replies: 28
Views: 2087

Re: Rebalancing the Permanent Portfolio

That article has its facts wrong. The PP was never down 15% in 2013. I wouldn't trust their opinion on the portfolio if they can't calculate its returns properly.
by rmelvey
Tue Dec 31, 2013 10:25 am
Forum: Investing - Theory, News & General
Topic: Rebalancing the Permanent Portfolio
Replies: 28
Views: 2087

Re: Rebalancing the Permanent Portfolio

I am using the PP and have been for the last 3 years. Today I sold some stocks, bought gold, and bought LTT. It does feel contrarian, but I am okay with that. The portfolio didn't have a great year, but every strategy has some down years. If anyone out there is rebalancing into gold, take a look at ...
by rmelvey
Sat Dec 28, 2013 5:21 pm
Forum: Investing - Help with Personal Investments
Topic: The Case for High Yield Bonds
Replies: 24
Views: 2161

Re: The Case for High Yield Bonds

I don't own them, but they are part of the market portfolio. Not owning them is somewhat of a tilt. I can see the benefits (mainly peace of mind that you are getting your fair share) from owning the market portfolio which would warrant a representative allocation to HY bonds.
by rmelvey
Tue Jul 23, 2013 7:33 pm
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 3461

CFA Results

Anyone else take the CFA? Results came out today. I passed level one :D
by rmelvey
Fri Jul 12, 2013 11:46 am
Forum: Personal Consumer Issues
Topic: Suggestions for Switzerland trip
Replies: 7
Views: 594

Re: Suggestions for Switzerland trip

I am in Zurich right now. So far my favorite part of the city is the old industrial district that is becoming more of an artist spot. Lots of cool shops in the arches of the old viaduct.
by rmelvey
Fri Jul 12, 2013 2:33 am
Forum: Personal Consumer Issues
Topic: [Can you recommend]A spectacular movie, and a terrible movie
Replies: 161
Views: 11847

Re: A spectacular movie, and a terrible movie

I thought Crash was very terrible as well. The worst part is that I was telling my sociology professor how bad the acting and premise was.. turns out she loved it! :|
by rmelvey
Sat Jul 06, 2013 5:24 am
Forum: Investing - Theory, News & General
Topic: TIPS question
Replies: 12
Views: 1355

Re: TIPS question

hudson, There might be a risk premium associated with taking the inflation risk. So if inflation comes in just as expected, the nominal bond would outperform. With that said, TIPS are fantastic for someone who is saving for retirement. They are the closest thing to a "risk free" asset so I...
by rmelvey
Wed Jul 03, 2013 5:51 pm
Forum: Investing - Help with Personal Investments
Topic: How do I TLH gold?
Replies: 12
Views: 934

Re: How do I TLH gold?

The gold ETFs have a totally different legal structure from GTU. They are not very close to being identical at all. That would be a good pair to swap in and out of for TLH.
by rmelvey
Fri Jun 21, 2013 12:39 am
Forum: Investing - Theory, News & General
Topic: Saving money for ~1 year - how to invest?
Replies: 31
Views: 2320

Re: Saving money for taxes - invest it?

You should invest it... but in T-Bills :wink:
by rmelvey
Thu Jun 20, 2013 9:18 am
Forum: Investing - Theory, News & General
Topic: The Perfect Storm for the Permanent Portfolio?
Replies: 5
Views: 809

Re: The Perfect Storm for the Permanent Portfolio?

The thing is, in the short run tapering is no good for any asset except for cash. No major asset class is up today. The PP can not work magic. For someone that is in a PP, departing from a PP almost necessarily means moving to something less diversified which runs the risk of blowing up later.
by rmelvey
Tue Jun 18, 2013 1:27 pm
Forum: Investing - Theory, News & General
Topic: Does your bond fund own any stocks?
Replies: 6
Views: 614

Re: Does your bond fund own any stocks?

I think an even sneakier example of this is when bond funds own bonds that act like stocks because the credit quality is so low. Makes it really hard to understand your risk allocation.
by rmelvey
Tue Jun 11, 2013 3:02 am
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

Another important thing to keep in mind is that gold and silver have been perfectly investable in since the early 1970s. I think squabbling over the commodity indices is missing the bigger picture. One can use gold and silver as a proxy for the commodity universe and understand the diversification s...
by rmelvey
Fri Jun 07, 2013 2:10 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

rmelvey, Can you do this for commodities? And explain how, if one ignores ex-post returns, one can be sure the macro theory was correct, and applied correctly? use simple macro theory to understand the diversifying properties of certain investments, ignoring their ex-post correlation coefficients W...
by rmelvey
Fri Jun 07, 2013 1:48 pm
Forum: Investing - Theory, News & General
Topic: Today's WSJ: Old School Stock Picker Struggles w Index Craze
Replies: 17
Views: 2383

Re: Today's WSJ: Old School Stock Picker Struggles w Index C

Active management is what makes indexing work. Rick Ferri Hah, much more succinct than my post :) There are few arbitrage opportunities because people think that there are arbitrage opportunities. Contrarily, if everyone thought that there were no arbitrage opportunities, they would be plentiful. T...
by rmelvey
Fri Jun 07, 2013 1:29 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

I feel like most of the commodity detractors in this thread here haven't internalized the difference between a supply shock and a demand shock. Citing the 2008 crisis as a reason to not hold commodities is a prime exhibit of this. If you hold the stock market: -bonds offer a demand shock hedge -comm...
by rmelvey
Fri Jun 07, 2013 1:21 pm
Forum: Investing - Theory, News & General
Topic: Today's WSJ: Old School Stock Picker Struggles w Index Craze
Replies: 17
Views: 2383

Re: Today's WSJ: Old School Stock Picker Struggles w Index C

Personally, I think that active managers play a crucial role in keeping the markets sane. I especially respect value investors, who IMO, help the markets function as they are supposed to. With that said, I index because it makes sense from a cost perspective. When you index, you basically have all o...
by rmelvey
Wed Jun 05, 2013 7:51 pm
Forum: Investing - Theory, News & General
Topic: Heavy Reading
Replies: 12
Views: 1665

Re: Heavy Reading

If you want to dive really deep into the non-normality of markets than I would check out Benoit Mandelbrot's book "The (mis)Behavior of markets." He proposes a way of describing the stock market using fractal mathematics. In one of the final models he proposed before he died, he suggested ...
by rmelvey
Wed Jun 05, 2013 12:18 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

Hi Larry, Since monetary policy has such a huge affect on the bond market (explicitly altering the short end of the curve, and implitly changing the long end because of pure expectations hypothesis), couldn't one make the argument that gold is the better inflation hedge in the context of a diversifi...
by rmelvey
Tue Jun 04, 2013 2:00 pm
Forum: Investing - Theory, News & General
Topic: Holding all world currencies in a cap-weighted index fund
Replies: 3
Views: 325

Re: Holding all world currencies in a cap-weighted index fun

Well, I am not sure the OP is referring to holding money under the mattress. Probably at very least held in interest bearing cash equivalents. BWZ is the best proxy for an international ST debt portfolio, although you can't backtest it very far. Personally I wouldn't count on currency diversificatio...
by rmelvey
Tue Jun 04, 2013 12:09 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

Hi Larry, I just did a little messing around in simba's spreadsheet and I would appreciate your thoughts... I looked at excess returns (above the T-Bill return) for stocks, commodities, gold, and inflation. With respect to inflation (in excess of the T-Bill rate) gold has a beta of 5.4, commodities ...
by rmelvey
Mon Jun 03, 2013 1:39 pm
Forum: Investing - Theory, News & General
Topic: Argument for a 100% stock allocation for 20 yr horizon
Replies: 112
Views: 8875

Re: Argument for a 100% stock allocation for 20 yr horizon

Yes I think it varies depending upon the job/field. For most young people the present value of their human capital is the most valuable asset they own. I think it makes sense to get a rough grasp on the approximate equity beta of their human capital before deciding on a stock/bond mix. For example, ...
by rmelvey
Mon Jun 03, 2013 12:52 pm
Forum: Investing - Theory, News & General
Topic: Argument for a 100% stock allocation for 20 yr horizon
Replies: 112
Views: 8875

Re: Argument for a 100% stock allocation for 20 yr horizon

I think human capital has a risk/reward profile similar to a junk bond. The coupon payments give the appearance of stability, but in a nasty recession they dry up very quickly. For me, incorporating human capital into the mix prompts me to take less equity risk, not more.
by rmelvey
Mon Jun 03, 2013 12:23 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

"Causation" would be great if you knew what caused what, but I'm not convinced you do. I don't "expect" much of assets, because my observation is that whenever I check out statements about how various investments "tend to" act--even statements with "causality"...
by rmelvey
Sun Jun 02, 2013 2:30 pm
Forum: Investing - Theory, News & General
Topic: Total International Bond Fund
Replies: 4
Views: 826

Re: Total International Bond Fund

I think they decided to go hedged because they didn't want their bond funds to become a proxy for speculative currency bets. Making it hedged makes it more boring, creating a sticker asset base. I am not sure how I feel about it. Part of me thinks that foreign currency exposure feels risker than it ...
by rmelvey
Sun Jun 02, 2013 2:22 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

March, 2013, Consumer Reports Money Advisor : But the thing is: either you have to believe there are simple stay-the-course strategies that just work, or you believe that you need to be agile and understand the markets and do some kind of white-water slalom through them. Well, in the first place, I...
by rmelvey
Sun Jun 02, 2013 2:11 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9168

Re: How Commodities Can Help a Portfolio

March, 2013, Consumer Reports Money Advisor : Worth the trouble? We created two hypothetical portfolios that were worth $100,000 at the beginning of 2008. We invested one in an traditional mix of 60 percent stocks and 40 percent bonds. The other contains 51 percent stocks, 34 percent bonds, and 15 ...
by rmelvey
Sun Jun 02, 2013 11:03 am
Forum: Investing - Theory, News & General
Topic: Argument for a 100% stock allocation for 20 yr horizon
Replies: 112
Views: 8875

Re: Argument for a 100% stock allocation for 20 yr horizon

The idea of time horizon having anything to do with risk tolerance is actually extremely controversial in the academic community. I think everyone should check out Zvi Bodie, and at least try to come up with a decent counter argument to his thoughts on the subject. Thus far, I haven't seen a decent ...
by rmelvey
Thu May 30, 2013 5:42 pm
Forum: Investing - Theory, News & General
Topic: DFA Growth funds?
Replies: 47
Views: 5571

Re: DFA Growth funds?

I said it in the last thread on this, but I think it's worth reiterating. P/E = (P/B) / (ROE) You can see P/B as a proxy for what the academics call "value" and and ROE as a proxy for "quality." There is really nothing new with combining these two metrics. P/E is already a perfec...
by rmelvey
Thu May 30, 2013 11:39 am
Forum: Investing - Theory, News & General
Topic: Fed tigthening? What to do? How markets act
Replies: 41
Views: 3049

Re: Fed tigthening? What to do? How markets act

Hi Larry, Fed tightening brings up something I have meaning to ask you... :happy I was wondering if you could shed some more light on why you don't like the barbell strategy. Your other article on pure expectations theory makes me think you understand some of the subtle benefits of a barbell. I like...
by rmelvey
Thu May 30, 2013 11:31 am
Forum: Investing - Theory, News & General
Topic: trading costs matter
Replies: 13
Views: 1094

Re: trading costs matter

I am a big believer in Mr. Bogle's "costs matter hypothesis." That is why I stick with total market indices :D

So, DFAs approach to getting market exposure makes sense to me because they are largely sticking with that hypothesis. I just find their ERs a wee bit high personally.
by rmelvey
Wed May 29, 2013 11:19 am
Forum: Investing - Theory, News & General
Topic: Do Commodities Hedge Against Inflation?
Replies: 63
Views: 3658

Re: Do Commodities Hedge Against Inflation?

I guess I lack the standard deviation-aversion gene or something, because I'd tend to accept a moderate overall short or medium term fluctuation risk in a long-term portfolio before I'd sleep well introducing CCFs (some sort of derivative based on commodity speculation, right?) to theoretically low...

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