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by larryswedroe
Sun Jan 19, 2020 8:42 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1753
Views: 291444

Re: QSPIX - thoughts on interesting fund

Just a few thoughts for my last post First, to repeat the really wrong thoughts on PCRIX, but commodities in general, the classic mistake is that the poster and so many others make the mistake of thinking first in terms of isolated performance, not the impact on a portfolio. Second, they make the mistake of resulting, one of the worst and most common errors made by investors causing abandonment of well thought out plans. So when commodities were recommended by me they were recommended as a hedge (insurance) against two specific risks, not a return strategy, given the expected real return I estimated was about 1% or so, based on collateral return, not commodities which have zero real expected return. The two risks were unexpected inflation a...
by larryswedroe
Sat Jan 18, 2020 12:43 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1753
Views: 291444

Re: QSPIX - thoughts on interesting fund

Basically we are hearing a lot of gobbledygook to explain the simple fact that when you bet against the market you get your head handed over to you. It's just that simple. Some people always think they are smarter than the market, including even those who claim to be passive, think they have a better mouse trap because they looked at tons of data and ran it through computer models. Except they just got fooled by randomness. This is just a load of nonsense. No one is betting AGAINST THE MARKET. In fact the funds typically have no market exposure at all, showing how absurd the comment it. The funds, including the one run by Vanguard are based on many decades of evidence showing premiums (just like market beta) that are persistent across many...
by larryswedroe
Sat Jan 18, 2020 8:08 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1753
Views: 291444

Re: QSPIX - thoughts on interesting fund

"So a normal contango reflects the cost of storage and borrowing rate. The collateral makes up the borrowing rate. Correct? How do I know when the storage cost is reasonable and when it is too large? Any actual percentage number for the DJ commodity index itself?" Yes you have it correct. You can see normal when the spread is more than minimal amount above interest rate. But with any EASILY storable commodity like GOLD, you can ignore the contango as it will virtually always be about the interest rates and nothing else. Oil and other not easily storables can shift dramatically due to shortages of capacity for example. Last I checked oil was at very slight contango after being in backwardation for a while. BTW, Vanguard's commodity...
by larryswedroe
Fri Jan 17, 2020 4:44 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1753
Views: 291444

Re: QSPIX - thoughts on interesting fund

Few quick answers AQR does publish an attribution analysis which is very transparent and detailed and we go over it every quarter with them to make sure the fund is doing what it is supposed to. As to contango, have to understand that by definition there should always be contango on average equal to the carry arbitrage. So the interest rate but cost of storage. But futures holds collateral and earns interest on that, at least making back the carry cost. And with some commodities like gold the storage costs are close to zero. So what you look for is what you might think of is "abnormal" contango, contango beyond the carry (interest differential). As to value, in commodities it's long commodities with poor returns over past five yea...
by larryswedroe
Fri Jan 17, 2020 2:39 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1753
Views: 291444

Re: QSPIX - thoughts on interesting fund

Angst, first with PCRIX what happened was I got rid of it LONG ago because they became active with the collateral and even though outcome at the time was positive they did not hold to what the fund was supposed to do, and didn't want that risk. Second cash flows led to persistent contango and IMO it's simply not prudent to ignore valuations. Especially when the research showed that CCF has negative returns when in contango, and it was big. On average it had been slight backwardation with some periods of contango but not persistent. The popularity led to persistent contango which made rolls expensive. So I got out. Note that contango has basically gone now, as people exited after poor performance---which is what I expected would be the case,...
by larryswedroe
Fri Jan 17, 2020 1:06 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1753
Views: 291444

Re: QSPIX - thoughts on interesting fund

Few quick thoughts. A) value is about 1/3 of the portfolio of the fund, and that is clearly stated, but value is also across stocks, bonds, commodities and currencies. As it turned out what was cheap far underperformed what was expensive for the last two years That is all we are talking about 2 years. From 2014-17, the fund returned about 7%, about the long term return expected with a vol of much less than expected at less than 7, and thus a very high Sharpe ratio, basically one, much higher than expected. And since the value premium was negative during that period clearly the fund doesn't have a "big" bet on value in stocks. It's just that the last two years have seen massive negative premium in value stocks, almost a record, and...
by larryswedroe
Fri Jan 17, 2020 9:33 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1753
Views: 291444

Re: QSPIX - thoughts on interesting fund

To try to be helpful. This action IMO is just another classic example of the mistakes of both resulting and recency, chasing performance. The fund is doing exactly what it is supposed to be doing and has done poorly recently basically because value (across all asset classes, but mostly equities) has done very poorly, with near the worst drawdown in history, with spreads in value vs. growth near or at the 100% percentile. So now bailing out AFTER bad performance when spreads are widest and expected premiums the largest. It's like Warren Buffett saying I'm selling value because for three years it has performed so poorly. Actually two of the four sleeves have been profitable, just that value has performed so poorly, certainly expected to happe...
by larryswedroe
Tue Jan 14, 2020 9:36 pm
Forum: Investing - Theory, News & General
Topic: Tributes to Jack Bogle
Replies: 266
Views: 42601

Re: In honor of my personal hero John C. Bogle

Thought you would all enjoy the following Vanguard Founder, John C. (Jack) Bogle, 1929-2019 Investing Public Speaks Out in FOJ Survey Commenters on Jack Bogle Alan Blinder, Gordon S. Rentschler Memorial Professor of Economics and Public Affairs Princeton University blinder@Princeton.EDU “Bogle’s relentless voice, sharp pen, and indefatigable energy have been prodding the mutual fund industry in particular, and the financial industry more generally, to embrace higher business, fiduciary and ethical standards for decades.” May, 2010, Forward to, Don’t Count on It Phyllis Borzi, Former Assistant Secretary, Department of Labor 2009-2017 borziphy@gmail.com Jack’s vision and leadership created a new investor class. He never ceased to speak out fo...
by larryswedroe
Mon Jan 13, 2020 8:48 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

Northern, like I said, I don't have more time to devote to this. With that said, first, and most importantly, the fund's recent returns are not due to any poor underwriting or anything else along those lines. The reinsurers they partner with had exactly the same experiences. Just happened like with all risk assets we have period where risks showed up, 17-19, just like what happened in 04-05 when reinsurers had big losses due to 7 major hurricane landings in US alone in just two years, vs. average of 1.5 per year. Then the next 11 years were great returns. And as noted the team as SRRIX running the fund is ex very senior people from the very firms they are partnering with, with deep risk experience. And as I explained they are taking the exa...
by larryswedroe
Sun Jan 12, 2020 3:00 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

Northern, I did not say they don't have any with experience running reinsurance operations and evaluating risks. Of course they have people with very senior backgrounds from reinsurers who sat on the very opposite side of the table they are sitting now. Just that they don't need the same depth of people, nor the same administrative staff supporting them that are required to run a full company that is publicly traded. This is a fund that is basically running on behalf of its clients a reinsurance company, very different. And note again that they are buying a small slice of the very same risks those actuaries at the reinsurers felt good about putting on the books. Perhaps a problem is that you seem to believe that the reinsurers are making &q...
by larryswedroe
Sun Jan 12, 2020 12:29 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

Not Jacob Thanks for taking the time. Just trying to make sure people make informed, vs. uninformed decisions, basing on things they think/believe but are not factually accurate. And feel free to email any time. BTW, here's a more simple way to think about expenses and expense ratio. Roughly the insurer's have operating expense ratio of about 1/3 of premiums they buy. The ER of SRRIX is about the same 1/3 of net premiums they buy. Note that if the figures are the same, SRRIX has a higher ROE because it doesn't have the tail risk so the reinsurer has to hold more capital against the risks. I would note also that due to the recent losses capital has fled (typical of retail investors) and that enabled SRRIX to negotiate more favorable terms wh...
by larryswedroe
Sun Jan 12, 2020 11:49 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

typical investor But then again, it doesn't have the cost of running an insurance company so they have to cede back premiums. Sorry but you have misinterpreted what I said, or tried to say. Let's try this, an insurer has more costs than a reinsurer because they have the costs of originating the business. The reinsurer doesn't have those costs. And so when it buys risks it likely isn't getting the full premium the insurer was paid. Doesn't mean they don't earn same profit. And SRRIX doesn't have ALL the costs of a reinsurer whose operating expenses, including all the actuaries needed, and all the costs of negotiating the contracts and all the costs of running publicly owned companies, and so on. SRRIX has lower costs because they don't need ...
by larryswedroe
Sun Jan 12, 2020 8:02 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

Northern I believe AQR hedges our market risk in their long-short style investments so that there is exposure to the style premium without being dominated by market beta. Misunderstanding what they do. There is no hedging whatsoever, and there are many positions which have nothing to do with the stock market. Example, they go long value and short growth, so no net exposure to market, just value factor. They go long some commodities and short others based on carry and momentum factors, they go long some currencies and short others, so not market related at all. This is one of the problems, many people criticize funds without knowing what the fund actually does, they think they know, but what they know is often wrong. I also did not dismiss c...
by larryswedroe
Sat Jan 11, 2020 7:33 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

Northern I’m more concerned with correlation to some of our fixed income assets. First, if take from equity side maybe you give up slight expected return but you cut volatility by about 80%. Good trade. Second if take from bond side you get big premium and get rid of inflation risk in return for illiquidity and some, but not huge, economic cycle risk. With the AQR fund you are paying to hedge out market risk. The ER is much higher than it would be to hold the long asset classes. That excess ER is equivalent to a higher negative carry for the hedging. You are not hedging out market risk here. You are diversifying sources of risk across multisources each with premiums and uncorrelated to both stocks and bonds and each other. As to SSRIX I was...
by larryswedroe
Sat Jan 11, 2020 4:20 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

Northern, let's try to address your points First, SRRIX basically buys quota shares in which they buy a prorata share of all the risks of the reinsurer of the types of risks they seek (like hurricane, earthquake, marine transportation, etc). So there is no "cherry picking" etc. going on. And though they have people who have worked on the other side, you don't really need actuaries in the same way when you buy a TSM fund you don't need to know anything about the stocks you are buying. In this case you are relying on the underwriters of the reinsurer who is ceding risks to you. SRRIX does not attempt , like hedge funds in this space do, to guess which are the best risks, believing their underwriters are better. Of course that also a...
by larryswedroe
Fri Jan 10, 2020 8:46 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Rising Rates Increase Worries
Replies: 114
Views: 23090

Re: Larry Swedroe: Rising Rates Increase Worries

Just to be helpful here re the comment about scandalous fees. I completely agree that if funds like LENDX and SRRIX were buying publicly available securities the fees charged would be scandalous. Reason is that a passive buy the market strategy should be cheap to run. However, these funds are nothing like that. They are more like the equivalent of an investment in private equity with LENDX running a bank and SRRIX running a reinsurance company. And once you view it from that perspective the fees are much more appropriate. Would I like to see them lower? Of course. But there is little competition, and what is important is are you receiving value (expected returns) for the risk taking. Obviously I believe so as I have personally very signific...
by larryswedroe
Mon Jan 06, 2020 6:33 pm
Forum: Investing - Theory, News & General
Topic: Schiller's article on CAPE in NYT today
Replies: 147
Views: 13679

Re: Schiller's article on CAPE in NYT today

Just a historical note, Shiller was just a bit early
98-08 S&P returned real negative of -1.4
99-11 of -0.7 and
00-12 of -0.7
Larry
by larryswedroe
Mon Jan 06, 2020 11:03 am
Forum: Investing - Theory, News & General
Topic: Schiller's article on CAPE in NYT today
Replies: 147
Views: 13679

Re: Schiller's article on CAPE in NYT today

Packer Of course g can change more or less than rates. And real rates now about 0, vs. historical +2 in US, so that has pushed up valuations some, as G while lower is not 2% lower. Now of course one might ask is that 0 real rate likely to persist? Should you rely on it when forecasting returns? And also for sovereign investors, yes there are other factors which I have written about like changes in FASB rules on writing off intangibles faster (so CAPEs now higher) and lower dividend payouts (slight impact upward, about .5). But most of the variation unexplained by CAPE comes from changes in discount rate (risk premium). Which of course is not predictable. But we do see perfect correlation of higher highs the higher the ratio and lower lows a...
by larryswedroe
Mon Jan 06, 2020 8:03 am
Forum: Investing - Theory, News & General
Topic: Schiller's article on CAPE in NYT today
Replies: 147
Views: 13679

Re: Schiller's article on CAPE in NYT today

Couple of things to consider 1. We had large corporate tax cut, driving EPS say 25%. That means that the earnings before the tax cut, that are in the CAPE 10, are understating earnings because they had different tax rate. That means, assuming the corp tax rate remains unchanged that the current P/E or CAPE 3 would be better metric. So more like perhaps 20 than 31. That implies about 5 real return. 2. The CAPE 1, 5,6, 7, 8 all have about the same explanatory power, about 40%. The rest is due to changes in risk premium (not predictable). But saying the CAPE is trash is just foolish IMO. It has very significant explanatory power as evidence by a 40% r-squared. And we know higher values have led to the entire dispersion of returns shifting to t...
by larryswedroe
Sun Dec 29, 2019 12:31 pm
Forum: Investing - Theory, News & General
Topic: Question for Swedroe - Black Swans book
Replies: 47
Views: 3844

Re: Question for Swedroe - Black Swans book

Mojo
As explained in my Black Swans book, there are two perfectly good ways to use the premiums, either to take more risk in return for higher expected return, or use the premiums to diversify risks and lower beta exposure and add more safe bonds (and other uncorrelated assets).
Choice is a preference based on ability, willingness and most importantly need to take risk (marginal utility of wealth).
There are many young advisors in my firm who have been 100% equity and very high tilts and then older ones, like me that use the premiums to hold much less equity risk, concerned more about capital preservation and reducing left tail risk
Note you can always email me at lswedroe@bamadvisor.com
Hope that helps
Larry
by larryswedroe
Sat Dec 07, 2019 7:52 pm
Forum: Investing - Theory, News & General
Topic: Confused about Fama-French 5 Factor Model
Replies: 3
Views: 635

Re: Confused about Fama-French 5 Factor Model

For those interested here's piece I wrote on investment factor research
https://alphaarchitect.com/2019/11/14/t ... d-returns/

And the profitability (and quality) factor research is discussed in detail in Your Complete Guide to Factor Based Investing

Best wishes
Larry
by larryswedroe
Tue Dec 03, 2019 10:17 am
Forum: Investing - Theory, News & General
Topic: Question for Swedroe - Black Swans book
Replies: 47
Views: 3844

Re: Question for Swedroe - Black Swans book

Okay one more. I believe I have made clear that they should have similar risk-adjusted returns and that the SR is NOT the perfect measure of risk and explained why. It's possible in trying to answer a question I may have said similar SR, and that is pretty true for most public broadly diversified equity portfolios. But once you get to stocks with higher skewness and kurtosis and less liquidity and where limits to arbitrage can play a role (like in microcaps especially) then not as true. And certainly not true for illiquid investments.

Again, SR is ONE measure of risk adjusted returns but has limitations. Fine for similar investments.
Larry
by larryswedroe
Tue Dec 03, 2019 10:08 am
Forum: Investing - Theory, News & General
Topic: Question for Swedroe - Black Swans book
Replies: 47
Views: 3844

Re: Question for Swedroe - Black Swans book

LRGF, with value and MOM having negative correlations and similar risk-adjusted returns, and low correlations of the other factors (e.g, quality with market beta) should get some benefit, but the fund has very low loading on each of them, Also adding to acegolfer's points, there are limits to arbtirage and preferences by individuals for some risks over others, and liquidity constraints, that all prevent market from being perfectly "efficient. That's in addition to the point about there being other risks besides SD which I mentioned. If markets were as efficient as some think then how do you explain the god awful performance of a whole variety of "lottery stocks" as I mentioned. Which means by the way that TSM cannot be the mo...
by larryswedroe
Tue Dec 03, 2019 9:48 am
Forum: Investing - Theory, News & General
Topic: Question for Swedroe - Black Swans book
Replies: 47
Views: 3844

Re: Question for Swedroe - Black Swans book

The AQR case is not an equity fund, it's multi factor across stocks, bonds, commodities and currencies, and there is basically no market beta exposure. When you add SV to TSM you still have big part of return of SV explained by market beta, say 2/3 or more because beta is >1. The big benefit as I have said comes from using the higher expected return to LOWER market beta and add much different risk, like safe bonds. And of course cash flows (popularity) can alter things. And make any asset if too popular inefficient (overvalued) and vice versa. We know markets are not perfectly efficient or we would not have lottery stocks or bubbles like 2000 in growth stocks which was clearly, ex-ante a bubble. But yes, bottom line is IMO, one should consi...
by larryswedroe
Tue Dec 03, 2019 9:32 am
Forum: Investing - Theory, News & General
Topic: Question for Swedroe - Black Swans book
Replies: 47
Views: 3844

Re: Question for Swedroe - Black Swans book

Random This gets pretty complicated because when simply tilting to say SV that means you add some unique risks, but remember that the SV stocks have high betas. In CAPM world for example, DFSVX has market beta of about 1.2. So that is taking more beta risk than market while adding other sources of risk. You get the real benefits from adding more unique sources like using the higher expected returns to lower exposure to beta and add more safe bonds, and there you get a big benefit not only due to lower correlation but also because the tendency is for very low correlation of safe bonds to risky stocks to turn sharply negative during bear equity markets. So that pulls in left tail more than right tail (correlation is low positive in bull marke...
by larryswedroe
Tue Dec 03, 2019 8:07 am
Forum: Investing - Theory, News & General
Topic: Question for Swedroe - Black Swans book
Replies: 47
Views: 3844

Re: Question for Swedroe - Black Swans book

Hope this helps IF you believe markets efficient than must believe all risk assets have similar risk-adjusted returns, not similar returns, but similar risk-adjusted returns. Now risk isn't just SD, it includes things like liquidity risk and skewness and kurtosis, and when risks show up-does it correlate with labor capital. Assets whose risks tend to show up in bad times demand larger risk premium. (Note we know market is not perfectly efficient or we would not have all these anomalies like lottery stocks with awful returns, like small growth with low profits and high investment which have underperformed tbills). If SV had higher risk adjusted expected returns capital would flow out into TSM and prices would move to equilibrium. So if SV ri...
by larryswedroe
Sun Dec 01, 2019 1:44 pm
Forum: Investing - Theory, News & General
Topic: Purchase of Re-insurance risk outside of re-insurance funds
Replies: 33
Views: 3024

Re: Purchase of Re-insurance risk outside of re-insurance funds

Packer, first, keep in mind that you can BUY the fund daily, not restricted to quarterly. Also while cannot sell except quarterly clients do experience the returns as often as they check the NAV (:-)) And fwiw, don't think would make any difference in decision of whether to invest or not. I would add one more point, which I have made before, about overcapacity issue. The mistake IMO most are making is that yes there is certainly more capital chasing all alternatives due to zero real, or negative real, interest rates now for 10 years. That has led to "overcrowding" in all risk assets with all risk premiums down, including for stocks, especially US stocks. But also many other assets like high yield debt and REITS. So yes returns may...
by larryswedroe
Sun Dec 01, 2019 11:36 am
Forum: Investing - Theory, News & General
Topic: Purchase of Re-insurance risk outside of re-insurance funds
Replies: 33
Views: 3024

Re: Purchase of Re-insurance risk outside of re-insurance funds

Packer All interval funds have the same sell limitations. The difference is at least for us we have daily buy liquidity, though the same redemption risks. But at least we know that SRRIX is marked to market daily. You can see this if you watch the fund NAV as a storm approaches. While no losses have occurred the NAV reflects the odds of a storm landing and the estimate of its strength and the losses that would be occurred. As more information arrives and forecasts get more accurate daily the NAV moves to reflect that. So if a storm misses landing then the NAV will rise, if it hits and storm worse than expected NAV will fall. Pioneer does not follow that process and waits until losses have more certainty, until after a landing I believe. The...
by larryswedroe
Sun Dec 01, 2019 10:55 am
Forum: Investing - Theory, News & General
Topic: Purchase of Re-insurance risk outside of re-insurance funds
Replies: 33
Views: 3024

Re: Purchase of Re-insurance risk outside of re-insurance funds

Packer
One other item about buying interval funds that provide limited liquidity, the return data (and correlations) may be a mirage.
The fund run by Stone Ridge is not like say private equity without daily pricing and thus serial correlation in returns.

The fund prices risks DAILY based on industry models and the prices are audited by as well by outside firm. SR is not setting the prices itself. It makes best estimates of the losses on daily basis based on outside inputs which are reviewed (audited).

Larry
by larryswedroe
Sun Dec 01, 2019 10:07 am
Forum: Investing - Theory, News & General
Topic: Purchase of Re-insurance risk outside of re-insurance funds
Replies: 33
Views: 3024

Re: Purchase of Re-insurance risk outside of re-insurance funds

re Girya's statements The first statement about the MOST the fund will redeem is 5/20 is factually incorrect. It is the LEAST the fund will redeem. It holds liquid assets equal to 5% and also has back up lines of credit it can call on. This is SEC requirement to be an interval fund. Stone Ridge has in fact redeemed MORE THAN 5 percent several times already and will likely do so again in December as it attempts to do the right thing for its investors. They continue to bring in new assets and that can allow them to redeem more than the 5% minimum (even though they don't have to) and they can choose to not renew some contracts that mature during the year. Note also that not all investors seek to redeem. So if half ask then they can get at leas...
by larryswedroe
Thu Nov 28, 2019 6:49 pm
Forum: Investing - Theory, News & General
Topic: Stay away from Stoneridge Funds....
Replies: 158
Views: 12120

Re: Stay away from Stoneridge Funds....

BTW, re Buffett on reinsurance, One thing about Buffett is he loves to talk his book. if you want to know what he really thinks, his reinsurance company has been growing its exposure, not shrinking it as his comments would lead one to believe BTW, AVRPX is up almost 5% YTD and SRRIX is down about 2.5%. And LENDX up about 4%. So the three funds together are up 6.5% on equal weighting, or say 2%. And that is with the worst period in long time for reinsurance. Obviously not what was "expected" but hardly a disaster. And as I noted LENDX has done very well. Don't know why anyone would want to sell it. Look at the SR with returns of about 7% and SD of about 2. Of course that is higher than expected due to vol being lower than expected....
by larryswedroe
Thu Nov 28, 2019 5:30 pm
Forum: Investing - Theory, News & General
Topic: Stay away from Stoneridge Funds....
Replies: 158
Views: 12120

Re: Stay away from Stoneridge Funds....

Just another correction "As I recall these alternate funds were marketed as vehicles to produce "equity-like returns with bond-like risk and volatility." As to equity like, just to clarify, with the expected return of US stocks to be about say 4-5% percent above riskless rate that is what was expected from a portfolio of alternatives. Lendx as the least risky had the lowest expected returns. SRRIX more risky, about 2x or more volatile had higher expected returns, just the risk showed up. Abandoning because of two years of losses is about as dumb a mistake as any investor can make, it's like dumping stocks after three years of losses from 2000-02. Expected returns now much higher, just as they were for stocks in 2003. The quot...
by larryswedroe
Thu Nov 28, 2019 3:49 pm
Forum: Investing - Theory, News & General
Topic: Stay away from Stoneridge Funds....
Replies: 158
Views: 12120

Re: Stay away from Stoneridge Funds....

While I have no intention of posting, I do want to make an exception here to make a few points, providing facts. Not here to debate, just provide information that corrects totally wrong statements. First, I don't know how anyone could complain about the performance of LENDX, as it has basically done about as expected. Since inception in 6/16 fund returned 7.1% pa and with just a 1.1 duration now and volatility of about 2. Don't know any other FI that has done relatively better. YTD up about 4%. So likely end year at about 4.5% We expected 4-5% above cash and fund has certainly delivered that. And certainly this was an estimate and as with any risky asset not a guarantee in any way. Not implied or anything else. Just nonsense when someone ma...
by larryswedroe
Thu Nov 14, 2019 9:20 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe's Retirement book is #1 in WSJ listing
Replies: 13
Views: 2779

Re: Larry Swedroe's Retirement book is #1 in WSJ listing

Thanks Mel, and as I hope all Bogleheads know, I'm always happy to answer questions from readers. Just email me at lswedroe@bamadvisor.com.
That's the second time the WSJ has chosen one of my books as one of the best of the year. The first time was my first book!
Best wishes
Larry
by larryswedroe
Fri Sep 27, 2019 1:02 pm
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

psteinx Re the fee at 1.94%. I have SAID that is the ER, but one has to look at it beyond the fee itself. The reason is , as I explained, you can have two funds with the EXACT SAME positions and same holdings but one charges on AUM and other on investor assets. When you use leverage that makes the EFFECTIVE costs very different. As noted RiverNorth charges on all assets but Stone Ridge only one investor assets. So the bottom line is that while River North has much lower ER Stone Ridge has lower effective costs. And that is only on the ER. There are other things one should consider Re the falsehoods, Homer makes them all the time, virtually every time. As I have pointed out. But as I also explained here several times posters have wrongly cla...
by larryswedroe
Thu Sep 26, 2019 8:18 pm
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

Amazing how some are able to TWIST or misunderstand what I say virtually 100% of time and when I correct it no acknowledgement that they are wrong in first place Nowhere did I say one should ignore ERs. What I have said persistently is that one should consider NOT just the ERs but the value the fund brings as well. I have written about this many times. And waste of my time to have to keep repeating the explanations to people who keep repeating falsehoods, fake news. Here's simple example, two SV funds one with ER of 10bp and other with ER of 20bp. The second is more aggressive and negotiates better terms on securities lending and earns say 20bp more a year doing so. Or one keeps the lending fees or only shares them with investors and other ...
by larryswedroe
Thu Sep 26, 2019 4:57 pm
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

Nisi, you have known me via postings for very long time, why would you think I believe that at least some of the funds are immune to economic issues you raised? Of course funds like LENDX are not immune to economic cycle risks as defaults correlate with UE (though not stock prices, which can crash without UE rising). I'm sure I've discussed that here probably many times and certainly in the articles I wrote on the fund which were discussed here as well. US expected returns now lower due to VALUATIONS being higher. In case for example of SRRIX premiums now actually significantly higher than just 3 years ago, so expected returns today are likely above the 4-5% range but my estimate is over long term. AVRPX returns are dependent on realized vo...
by larryswedroe
Thu Sep 26, 2019 3:52 pm
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

Angst, no reason for you to expect it without knowing the underlying math. I know it and I believe that is very reasonable based on current yields, expenses, leverage and expected AVERAGE defaults. The fund has been operating for several years now with returns in that range DESPITE rising rates. Roughly might say something like 13% gross yield, minus 2% ER, minus 5% credit losses, plus 1% leverage benefit. So about 5% over cash. The ER based on FUND ASSETS is more like 1.35%, not 1.94 that is published because fund doesn't charge, as many do, like River North, on the leveraged assets, just investor assets. Another example of foolishness of focusing solely on ER, not effective costs. Also fund has much lower costs for servicing loans due to ...
by larryswedroe
Thu Sep 26, 2019 1:28 pm
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

Nisi, and Angst Simple explanation. With today's valuations most financial economists forecast US equity returns to be in range of 6-7% or 4-5% above cash so yes I would say 4-5% above cash is equity like returns. Which is why IMO it is totally appropriate to use that phrase, equity like returns. At least recently. And it certainly isn't misleading when you understand that historical returns are NOT appropriate for forecasting future returns. Day9. I've learned that those who post "fake news" about what I have said rarely if ever admit their error let alone apologize for posting fake news. The example you cite is perfect example, along with the original poster who stated I predicted double digit CCF and TIPS returns which clearly ...
by larryswedroe
Thu Sep 26, 2019 9:43 am
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

typical investor [OT comment removed by admin LadyGeek] Ferri of course pointed out it was simulated and the asset class has zero expected returns, but nevertheless Larry did say the PIMCO fund would have almost certainly have had double digit returns of 15.9%+. Just above that you note the index returned about 12%, not 16%. That's the first point. Second, Rick did NOT say no return expected, he said no REAL return expected and my forecast was about 1% higher!!!! And that was based on higher return to collateral than tbills used in index, not return of the Commodities. Also the return of course was over a specific period and was not a forecast of future returns. If one showed S&P returned about 19% for 20 years from 80-99 does that mean...
by larryswedroe
Wed Sep 25, 2019 7:40 pm
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

Two last comments First, re Homer's statement "You do, however, have confidence that your calculation of the ODDS is correct. That your models are correct." Just another example of a persistent misstatement of my beliefs, even after restating them Homer repeats the error I have always said these are not the odds but our best estimates of the odds, and we cannot know the odds. There is an error term around those odds as there is with the mean return estimate. As to AFAN's comments about motiviations First, one should distinguish between money managers and wealth advisors who spend most of their time on issues way beyond asset management and are not selling anything but their advise if they are a fiduciary. Finally I've posted on oc...
by larryswedroe
Wed Sep 25, 2019 8:23 am
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

Few comments First, this is totally wrong statement and cannot figure out how one could make this mistake ,"so according to this claim, expected returns of PCRIX in 2007 is double returns from DJ-AIG minus t-bill plus TIP" No return is DJ AIG plus tIps minus tbills, NOT DOUBLE. Also the fund had bit of advantage as it doesn't trade on dates that roll for the index, which the market knows is forced trading and thus has negative impact by front running, just like with index changes. Clearly in both cases TIPS and CCF I was not forecasting double digit returns. As I explained I forecasted for CCF real returns in range of about 1% or so. The quotation from the Erb and Harvey paper did in fact show that with their particular strategy, ...
by larryswedroe
Wed Sep 25, 2019 3:50 am
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

stlutz
I cannot help it if reporters make mistakes in this case no idea where he got one year from
Also the person who claimed I forecasted double digit returns to CCF said that about TIPS as well, unless I misread it. Don't have time to go back and look
by larryswedroe
Tue Sep 24, 2019 7:23 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 8323

Re: Larry Swedroe: Individual Stock Investing Increases Risk

Thought some perspective might help re this post "I don't see the logic in attempting to pick value stocks in today's markets ....that is surely searching for the needle in the haystack. Why even discuss this? It is purely speculation don't you think?" Try this I think most people would say Buffett is one of if not the best investors of all time. He is attempting to pick what he considers value stocks. Pretty smart guy. Not looking for a needle in a haystack at all. In fact buying the whole VALUE haystack with many thousands of stocks in a global only value portfolio. It has literally nothing to do with speculation, but investing based on evidence that is persistent, pervasive, robust and survives transactions costs across sectors...
by larryswedroe
Tue Sep 24, 2019 7:23 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 8323

Re: Larry Swedroe: Individual Stock Investing Increases Risk

Thought some perspective might help re this post "I don't see the logic in attempting to pick value stocks in today's markets ....that is surely searching for the needle in the haystack. Why even discuss this? It is purely speculation don't you think?" Try this I think most people would say Buffett is one of if not the best investors of all time. He is attempting to pick what he considers value stocks. Pretty smart guy. Not looking for a needle in a haystack at all. In fact buying the whole VALUE haystack with many thousands of stocks in a global only value portfolio. It has literally nothing to do with speculation, but investing based on evidence that is persistent, pervasive, robust and survives transactions costs across sectors...
by larryswedroe
Tue Sep 24, 2019 7:08 am
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

Further corrections First, I NEVER recommended combining SV with 1 year Treasuries. Typically 5 year Treasuries or intermediate fund .Where people even get these ideas is often beyond me, like I forecasted double digit returns to TIPS when the forecast has always been whatever the current yield is!!! And with CCF always with combining with adding maturity lengthening (and forgetting that I also got out due to persistent contango). Now if have say 3-5% CCF and then lengthen maturities on say 40%+ on bonds, you did about as well as not doing any CCF. Yet again we have someone repeating the criticism. I would add that CCF was to act as hedge against unexpected inflation, and we got unexpected disinflation (so would not expect to do well but lo...
by larryswedroe
Mon Sep 23, 2019 7:23 am
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

I thought I would just make few comments to correct the amazingly totally wrong statements made by several people, including Taylor about my views and what I have said or recommended First, re Taylor's about recommended all SV. I have never RECOMMENDED ALL SV. for those who have read my books, including the Only Guide to the Right Financial Plan you know I believe there is no one right portfolio, just one right for each individual. That book specifically looks at each asset class and discusses who should own more or less than the market and why, what the considerations should be, including for bonds as well as stocks and even commodities. Second, what I have suggested about SV is that is has the highest expected returns and thus investors c...
by larryswedroe
Mon Sep 23, 2019 4:11 am
Forum: Investing - Theory, News & General
Topic: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX
Replies: 119
Views: 13150

Re: Swedroe Advocates: LENDX, SRRIX, AVRPX, QRPRX/QSPRX

I thought I would just make few comments to correct the amazingly totally wrong statements made by several people, including Taylor about my views and what I have said or recommended First, re Taylor's about recommended all SV. I have never RECOMMENDED ALL SV. for those who have read my books, including the Only Guide to the Right Financial Plan you know I believe there is no one right portfolio, just one right for each individual. That book specifically looks at each asset class and discusses who should own more or less than the market and why, what the considerations should be, including for bonds as well as stocks and even commodities. Second, what I have suggested about SV is that is has the highest expected returns and thus investors c...
by larryswedroe
Mon Sep 16, 2019 6:28 am
Forum: Investing - Theory, News & General
Topic: Ex DFA CIO launches competitor which will also have ETFs
Replies: 304
Views: 56783

Re: Ex DFA CIO launches competitor which will also have ETFs

Basically value plus profitability measure, and MOM screens. The team is all ex DFA I believe.
Larry
by larryswedroe
Wed Sep 11, 2019 3:53 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: 3% is the new 4%
Replies: 699
Views: 65115

Re: Larry Swedroe: 3% is the new 4%

Will MCS isn't perfect of course and has that limitation. But don't know any better tool. And note it makes no sense to assume IMO mean reversion since we don't know what the mean is, and you only get higher expected returns if valuations fall, not stock prices. Example might be that Dems win all three seats of power and not only reverse corp income tax cut but impose even higher rates. Forgetting what might happen to valuations, but earnings would drop say 20-25%. So stock prices fall sharply but no mean reversion should be expected. And finally, one should only treat MCS output as ESTIMATE of odds of success, not actual odds. But IMO it's about best tool we have. And of course no one should use one rule like 4% without adjusting. We run n...