Search found 535 matches

by Akiva
Tue Jul 30, 2019 6:09 am
Forum: Investing - Theory, News & General
Topic: "Yes, You Can Time the Market!"
Replies: 68
Views: 21516

Re: "Yes, You Can Time the Market!"

There's a lot to unpack here. "Market timing" has a technical econometric definition and it means that your returns are asset specific and exclusively rely on prediction about that asset's price level. This is overly narrow. E.g. Much of technical analysis relies in predicting things like the volitility of prices. But because momentum is a thing, you have to adjust for that. More or less, the claim is that you aren't adding anything beyond what we know in general about behavior overall. Rebalancing works because it keeps your allocation effective by keeping you from ending up with risk exposure you can't tolerate. (And because it reduces risk, it increases returns indirectly). My "ideal" portfolio would be value averaged...
by Akiva
Tue Jul 30, 2019 5:51 am
Forum: Investing - Theory, News & General
Topic: John Bogle's "Philosophical Disagreement" with Eugene Fama
Replies: 104
Views: 13366

Re: John Bogle's "Philosophical Disagreement" with Eugene Fa

NPR interviewed Shiller and Fama on bubbles. Fama said it drove him nuts that people used a term the could not define beyond prices going up a lot. Shiller tried to define it. He said it was when price went up a lot and (1) people talked about it (2) people who did not own the thing going up got envious, and (2) it's reported in the news. So, remember, if prices go up a lot and it generates no buzz, then it ain't a bubble. Does that ever happen? The defining characteristic of a bubble is that it can, and will, burst. We therefore can't know if there was a bubble except in hindsight. Further, this means we have no way of acting on it in a timely fashion. This is massive thread necro. But I don't think that's accurate. Prices can go up and d...
by Akiva
Fri Feb 17, 2017 4:47 pm
Forum: Personal Consumer Issues
Topic: How to recognize self-help, pop-statistics, “Big Idea” books?
Replies: 4
Views: 885

Re: How to recognize self-help, pop-statistics, “Big Idea” books?

Outside of finance, the thing to look for is a meta-analysis. That is a statistical analysis of all of the science on a given topic. So you'll know what the bulk of the evidence says. A good example of this in education is Hattie's _Visible Learning_. Anything that can cite a meta-analysis is likely good. If it can't do that, then you at least want something that can be scientifically confirmed. So you want to think about how you know that what is being claimed has objective truth. What would you need to do to confirm this for yourself? What did the author or the scientists he's citing do? What kind of statistical support does this claim have? This kind of critical thinking gets easier the more you read and the more you know. It's also easi...
by Akiva
Tue Jan 14, 2014 10:42 am
Forum: Investing - Theory, News & General
Topic: "Alternative Indexing Strategies" talked in the latest Money
Replies: 27
Views: 4511

Re: "Alternative Indexing Strategies" talked in the latest M

Any diehard mind commenting on the diagram in page 74 of this issue? See http://www.bogleheads.org/forum/viewtopic.php?f=10&t=129589&newpost=1920177 The article is "the new face of stock picking". The diagram says "a test of alternative index strategies found that they all had an edge". Basically, it says "Equal Weighting", "Value Tilting", "Low Volatility", "Fundamental Indexing", heck even "Monkey throwing darts", all beat "Traditional Index", annually by 1.5% to 2%, from year 1964 to 2012. That is an impressive beat! The diagram is drawn from this paper: http://www.iinews.com/site/pdfs/JPM_Summer2013_RALLC.pdf‎ I will try to upload the image of the d...
by Akiva
Tue Jan 14, 2014 10:35 am
Forum: Investing - Theory, News & General
Topic: Mean Variance Optimization - real-world performance?
Replies: 13
Views: 1887

Re: Mean Variance Optimization - real-world performance?

"Modern portfolio theory" uses mean-variance optimization to come up with an optimized portfolio for a given level of risk or return. It does this by looking at historical data to compute correlations between different asset classes, and then using these correlations to come up with as diverse a portfolio as possible for a given desired level of risk or return. Obviously, this is highly dependent on the correlation coefficients used in the optimization. Well, I think you misunderstand how this would be used. You don't just go get historical values and assume they'll continue into the future. Rather, you use fairly sophisticated statistical techniques to model risks and expected returns and *predict* them. Risk is in principle pre...
by Akiva
Tue Jan 14, 2014 10:23 am
Forum: Investing - Theory, News & General
Topic: this asset class is (undervalued / overvalued): what metric?
Replies: 5
Views: 1684

Re: this asset class is (undervalued / overvalued): what met

When reasonably reliable experts say that "Gold is pretty high nowadays" or "REITs are really undervalued", what metric do they tend to use to judge a given asset class? There's a good book by Ilmanen about expected returns. Basically there are a small number of phenomena that account for pretty much all of the returns of a diversified portfolio. Setting aside obvious risk premiums, like the fact that stocks return more than bonds because they are riskier or that small-caps return more because they are less liquid, there are four basic effects: 1. The value effect -- "cheap" assets tend to outperform more "expensive" ones. 2. The momentum effect -- recent performance tends to continue into the future...
by Akiva
Mon Jan 06, 2014 6:05 pm
Forum: Investing - Theory, News & General
Topic: Why Include Bonds in a Portfolio?
Replies: 74
Views: 7270

Re: Why Include Bonds in a Portfolio?

Nope. 100% stock still has the highest expected return. Talking dollars in your pocket. Do you have any data to back this up? See the link posted by harikaried in the fifth post in this thread. The curves never slope downward on the right side. Edit: Unless you're in a strange period where bonds outperform stocks. That post is arithmetic returns against volatility. As I already pointed out, you can't get arithmetic returns. Because of compounding effects, you only get geometric returns which are always lower than arithmetic ones. Having more diversification makes the "hit" you take against arithmetic returns smaller. And for some small bond allocation, you should earn you more in higher geometric returns by virtue of that. I agre...
by Akiva
Mon Jan 06, 2014 4:49 pm
Forum: Investing - Theory, News & General
Topic: Somebody's making money off commodities - but it ain't you
Replies: 13
Views: 2096

Re: Somebody's making money off commodities - but it ain't y

Natural gas, for example is completely homogeneous and easily storable. But there simply isn't enough storage to arbitrage things because the cost of building the additional storage hasn't been justified by the returns available. On top of this, natural gas producers are legally unable to turn off their production in response to changes in demand and the shortage of pipeline capacity means that the price can vary widely in some parts of the country due to an inability to get it from point A where it is stored to point B where it is needed. So even though this is storable, it doesn't act like a storable commodity. (Though widespread use of LNG may change this.) Crude oil is the opposite. There's actually very little storage capacity for WTI...
by Akiva
Mon Jan 06, 2014 4:30 pm
Forum: Investing - Theory, News & General
Topic: Why Include Bonds in a Portfolio?
Replies: 74
Views: 7270

Re: Why Include Bonds in a Portfolio?

Diversification is a free lunch. Some small bond allocation (say 10%) would improve your results (and not just your sharpe ratio). Not if by results you mean the amount of dollars in your bank account. Adding a small amount of stocks to 100% bond portfolio does indeed have the magical result of improving both expected return and volatility. Adding bonds to a 100% will lower expected return. I think that's only on an arithmetic basis. The reduction in volatility plus the bonus you get from rebalancing should result in your geometric gains being closer to your arithmetic ones by enough to more than offset the loss of expected arithmetic gains. (But my calculations are very back of the book.) Nope. 100% stock still has the highest expected re...
by Akiva
Mon Jan 06, 2014 4:05 pm
Forum: Investing - Theory, News & General
Topic: Why Include Bonds in a Portfolio?
Replies: 74
Views: 7270

Re: Why Include Bonds in a Portfolio?

Diversification is a free lunch. Diversification is not a free lunch. Diversification prevents you from losing all of your lunch. If I have one lunch container which I leave at home, I have lost all of my lunch. If I divide my lunch into 10 containers: 7 are ok, one gets mold, a squirrel eats half the pecans out of one, and I leave one at home, I will not go hungry. You may have meant to say that rebalancing is a free lunch, but it is really just buying low and selling high. It is a technique, and does not fall under the "free lunch" category (which is typically attributed to someone getting an advantage over the market as a whole due to the market missing something and being inefficient.) I mean what I say. If you have a diversi...
by Akiva
Mon Jan 06, 2014 4:00 pm
Forum: Investing - Theory, News & General
Topic: Somebody's making money off commodities - but it ain't you
Replies: 13
Views: 2096

Re: Somebody's making money off commodities - but it ain't y

wshang wrote:Wasn't this subject beaten all to h*ll in an earlier smackdown thread between Larry and Rick?
Yeah. I'm not really sure what the point of this thread is supposed to be.
by Akiva
Mon Jan 06, 2014 4:00 pm
Forum: Investing - Theory, News & General
Topic: Somebody's making money off commodities - but it ain't you
Replies: 13
Views: 2096

Re: Somebody's making money off commodities - but it ain't y

akiva the 0 expected real return is correct IMO. Just as there are hedgers (producers) who need insurance and willing to pay for it, there are consumers as well that need insurance and willing to pay for it. Hard to know which side will dominate and lead to contango or backwardation It used to be that the producers dominated because changes in say price of wheat impacts farmers lot more than a price rise would cause price of bread to go up impacts consumers. But now you have institutional demand at play here. Well, this wasn't the argument being made in the linked article. The research they are attacking involves long-short commodities exposure instead of the long-only that you are talking about. And if you are long-short, you are planning...
by Akiva
Mon Jan 06, 2014 3:36 pm
Forum: Investing - Theory, News & General
Topic: Why Include Bonds in a Portfolio?
Replies: 74
Views: 7270

Re: Why Include Bonds in a Portfolio?

Imperabo wrote:
Akiva wrote:
Diversification is a free lunch. Some small bond allocation (say 10%) would improve your results (and not just your sharpe ratio).
Not if by results you mean the amount of dollars in your bank account. Adding a small amount of stocks to 100% bond portfolio does indeed have the magical result of improving both expected return and volatility. Adding bonds to a 100% will lower expected return.
I think that's only on an arithmetic basis. The reduction in volatility plus the bonus you get from rebalancing should result in your geometric gains being closer to your arithmetic ones by enough to more than offset the loss of expected arithmetic gains. (But my calculations are very back of the book.)
by Akiva
Mon Jan 06, 2014 1:03 pm
Forum: Investing - Theory, News & General
Topic: Somebody's making money off commodities - but it ain't you
Replies: 13
Views: 2096

Re: Somebody's making money off commodities - but it ain't y

http://servowealth.com/resources/articles/somebodys-making-money-commodities-it-aint-you This "article" doesn't show any understanding of the relevant academic research and includes many false statements. Claim #1 - Commodities have stock-like returns. Fact : We can’t be sure that commodity returns are anything more than 0%! Commodities earn a premium b/c the investor is providing insurance to hedgers. Claim #2 - Commodities provide excellent diversification. Fact: There are much better diversifying asset classes elsewhere. Diversification is diversification. If you have one asset with zero correlation, it doesn't make a second asset that also has zero correlation less favorable. Claim #3 - Commodities offer an inflation hedge. F...
by Akiva
Mon Jan 06, 2014 12:56 pm
Forum: Investing - Theory, News & General
Topic: Why Include Bonds in a Portfolio?
Replies: 74
Views: 7270

Re: Why Include Bonds in a Portfolio?

Lets say there is a Long Term Investor, 28yrs Old, that doesn't listen to any Noise, that has a 100% Stock Portfolio, that doesn't need this money for 40+ Years, that Doesn't Panic Sell During Severe Market Crashes (only adds money), That is OK with the risk of an AA of 100% Equities, that has an automatic investment plan monthly of a certain % of income, that is looking for the best Long Term Return on every $ invested. Why would this investor want Bonds in his portfolio??? Diversification is a free lunch. Some small bond allocation (say 10%) would improve your results (and not just your sharpe ratio). Also, depending on your portfolio size, there may be *other* ways to take on additional risk that could be better. E.g. if you have enough...
by Akiva
Mon Jan 06, 2014 12:41 pm
Forum: Investing - Theory, News & General
Topic: (In)efficient markets, utility curves, and investing risk
Replies: 16
Views: 1621

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

It seems to be common among Bogleheads to advocate against putting money into equities when saving for goals less than five years away, but not when saving for long-term things like retirement. The problem is, this only makes sense if either (a) Your utility curves on future consumption are not isoelastic, or (b) Stock market returns (logarithmically adjusted) have a negative autocorrelation function . For what it is worth, and I am not expressing my personal opinion on whether or to what extent it is true , or whether it can be relied on for the future. But it is at least very widely believed that stock market returns have displayed an effect called "mean reversion." It took me a while to convince myself that the term, as used i...
by Akiva
Mon Jan 06, 2014 12:38 pm
Forum: Investing - Theory, News & General
Topic: Are AQR's Profitability "Core" Funds purely Active Mgmt?
Replies: 14
Views: 2307

Re: Are AQR's Profitability "Core" Funds purely Active Mgmt?

larryswedroe wrote:Here are some good papers on MOM The Momentum premium long side vs. short side: "The Role of Shorting, Firm Size and Time on Market Anomalies" Israel, Moskowitz, 2011
Trading Costs of Asset Pricing Anomalies" Frazzini, Israel, Moskowitz, 2012
"How Tax Efficient are Equity Styles" Israel, Moskowitz, 2011
The last addresses MOM and tax efficiency, not as bad as most think because capture lots of ST losses

Larry
Are the tax issues small enough that you could see using the AQR core funds in a taxable account, or would you rather split out the momentum exposure via one of their tax-managed momentum funds and then use a regular value fund?
by Akiva
Sun Jan 05, 2014 12:23 pm
Forum: Investing - Theory, News & General
Topic: Are AQR's Profitability "Core" Funds purely Active Mgmt?
Replies: 14
Views: 2307

Re: Are AQR's Profitability "Core" Funds purely Active Mgmt?

AQR introduced a small and large cap momentum fund in 2009. (AMOMX, ASMOX). Both have failed to capture a momentum premium for the period of being "live" ( PortfolioVisualizer FF Regression on Size and Value for AMOMX and ASMOX ) Before investing with the approach you outline, I'd want a full understanding of why these funds failed to capture a momentum premium over the past 4 1/2 years. I haven't looked closely at this, but they construct their momentum factor a bit differently than the Fama-French one. (See this PDF on this site for details.) So the poor performance in that regression may just be an artifact of the different construction methods. As for these funds being active, they aren't active in the same sense that a stock...
by Akiva
Sun Jan 05, 2014 11:49 am
Forum: Investing - Theory, News & General
Topic: (In)efficient markets, utility curves, and investing risk
Replies: 16
Views: 1621

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

It seems to be common among Bogleheads to advocate against putting money into equities when saving for goals less than five years away, but not when saving for long-term things like retirement. The problem is, this only makes sense if either (a) Your utility curves on future consumption are not isoelastic, or (b) Stock market returns (logarithmically adjusted) have a negative autocorrelation function . http://www.norstad.org/finance/risk-and-time.html If (a) is true, then your allocation should depend more on dollar amount invested than on time horizon (adjusted for employment income), in which case the "five year rule" (or "X year rule" for some X) is NOT a good one even as a rule of thumb , and if (b) is true, then &q...
by Akiva
Sun Jan 05, 2014 11:29 am
Forum: Investing - Theory, News & General
Topic: Investment Returns 1802-2012 (look at gold)
Replies: 24
Views: 5351

Re: Investment Returns 1802-2012 (look at gold)

His chart of real returns for various investment asset classes, adjusted for inflation, shows what would have happened if you had invested one dollar in 1802 and held it through Dec. 31, 2012. The results: One dollar invested in Treasury bills would now be worth $282. One dollar invested in long-term bonds would now be worth $1,632. One dollar invested in the U.S. stock market would now be worth $706,199. One dollar invested in gold would now be worth $4.50. One dollar placed under a mattress would now be worth only five cents, its value eroded by inflation. I didn't think gold would have performed so poorly (relatively speaking). The data is from Jeremy Siegel. http://www.ricedelman.com/cs/education/article?articleId=4260&utm_source=S...
by Akiva
Thu Jan 02, 2014 9:59 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

3. You keep demanding that I make an argument about monetary policy despite my repeated explanations that such a post is against this forum's rules and isn't relevant to the decision. I don't know what you want me to do here. If I post it, the moderators will just delete it. So it isn't like your demand can be satisfied. I said make an argument for why deflation is not a problem for Bitcoin and therefore it is a reasonable investment and not just speculation. I presented arguments like that, both for and against, as best I understand them. No one deleted them. I think as long as it sticks to the question of Bitcoin as an investment, it should be okay. You're just refusing to take a position. You didn't present an argument. You cited some a...
by Akiva
Thu Jan 02, 2014 7:34 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

I am well aware of the saltwater/freshwater division within economics. I said nothing about freshwater economists, so I'm not sure how you can say I made a claim about them. That being said, it seems we do have different takes on how dominant different positions are (I'm not taking Wikipedia as an authority on the matter). Of course, many economists do not fall neatly into one camp or another. And I think the number of economists who think that deflation is not a problem at all are pretty small. Even Milton Friedman believed in monetary policy and central banks, after all. So let's not mix up the freshwater economists with the Austrian school, as is often mistakenly done. Austrian economists are much more on the fringe than some people lik...
by Akiva
Thu Jan 02, 2014 2:32 pm
Forum: Investing - Theory, News & General
Topic: Small caps overvalued?
Replies: 55
Views: 11393

Re: Small caps overvalued?

Note: near the very begining of the article you cite it actually notes that in stock investing there is a different definition from the stats definition and quotes Seigel. That is the article discusses the stronger form as what is meant in stock investing. The link does not back you up. FWIW: it is not uncommon for different disciplines to use different definitions for the same word. Well, I disagree with wikipedia's assessment. Furthermore, we use statistics to talk about investing and using the same word to mean two different things is a recipe for equivocation. The "mean reversion" that most people are talking about is just the value effect at work. (And you can build a portfolio that gets good exposure to the value factor by ...
by Akiva
Thu Jan 02, 2014 11:45 am
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

The difference between the S&P and the total market is not very large b/c they are both market cap weighted and most of the US market cap is in the S&P. Furthermore, I was talking about the 90s. I pointed out that the market was going up in the 80s for a different reason and that it kept going up in the 90s for the same reason. So it seems silly to say that "the internet" had anything to do with this. If the market goes up in one decade and also goes up in the following decade, it must be for the same reason? That fallacy is obvious enough I won't waste any more time on it. And the S&P 500 is like Total Stock, except for the parts it doesn't have, like small cap and some of the NASDAQ. Which just happens to be where y...
by Akiva
Wed Jan 01, 2014 8:45 pm
Forum: Investing - Theory, News & General
Topic: Small caps overvalued?
Replies: 55
Views: 11393

Re: Small caps overvalued?

Note: near the very begining of the article you cite it actually notes that in stock investing there is a different definition from the stats definition and quotes Seigel. That is the article discusses the stronger form as what is meant in stock investing. The link does not back you up. FWIW: it is not uncommon for different disciplines to use different definitions for the same word. Well, I disagree with wikipedia's assessment. Furthermore, we use statistics to talk about investing and using the same word to mean two different things is a recipe for equivocation. The "mean reversion" that most people are talking about is just the value effect at work. (And you can build a portfolio that gets good exposure to the value factor by ...
by Akiva
Wed Jan 01, 2014 11:50 am
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

Look, you guys are making this unnecessarily complicated and getting this thread way too far off topic by ignoring my substantive points and griping about tangential off-topic things. As far as making an investment decision goes, all of this economics stuff is going to be irrelevant to the decision. I've tried explaining this multiple ways, but maybe an illustration will help: Let's say that you think that *if* say Surda is right, then there's a 50% chance that Bitcoin will appreciate by 10x. In order for say Krugman's analysis to shift your investment decision, you have to be more than 80% confident in it. If instead you think that the chances of a 10x gain are actually 75%, you'd need be be at least 87% confident. Alternatively, If you th...
by Akiva
Tue Dec 31, 2013 9:53 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

If the theory has no more explanatory power than a properly calibrated "randomness" model, than I don't think you have any basis to say that it "works" for purposes of making predictions. You keep asserting that, but I don't think it's actually correct. Some models, as Valuethinker points out, in certain circumstances have held up much better than others. The issue is not how they've held up relative to one another. It's whether or not any of them have the ability to give you actionable investment information. This is a straightforward statistical question and the answer is that they don't. At least not in this area. I agree that there's no sense in debating them. My point is that for every idea that predicts one thing,...
by Akiva
Tue Dec 31, 2013 5:54 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing the Permanent Portfolio
Replies: 28
Views: 3882

Re: Rebalancing the Permanent Portfolio

StarbuxInvestor wrote:
Akiva wrote:
Helloeeze wrote:PRPFX went down 9.88 percent in one day. Does that have something to do with distributions for year end? It's quite disturbing.
Probably. But PRPFX isn't following the "permanent portfolio" allocation that people are talking about in this thread either.
How far off do you view it to be?
This post says that it includes a 10% allocation to Swiss Francs, a 5% allocation to silver, and only a 35% allocation to fixed income. It is also a high-free active fund instead of the passive approach people are talking about here. So "not remotely comparable" is probably about right.
by Akiva
Tue Dec 31, 2013 1:58 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing the Permanent Portfolio
Replies: 28
Views: 3882

Re: Rebalancing the Permanent Portfolio

Helloeeze wrote:PRPFX went down 9.88 percent in one day. Does that have something to do with distributions for year end? It's quite disturbing.
Probably. But PRPFX isn't following the "permanent portfolio" allocation that people are talking about in this thread either.
by Akiva
Tue Dec 31, 2013 1:53 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

Actually the reddit comment told us nothing. I clicked on it for an incisive analysis of why Paul Krugman is wrong re bitcoin, and instead got the old trope 'Paul Krugman is politically biased and his defenders cannot defend him'. Then you missed the point. That's an almost word for word rephrasing of Krugman's article except modified to talk about Krugman instead of Bitcoin. The fact that changing the subject of some sentences around makes it a very bad anti-Krugman rant highlights the point that his article didn't have much of an argument to begin with. Sorry I am being dense here it appears. Or you are being elliptical. I clicked on this 'incisive' criticism of Krugman, and found nothing more than the usual anti-Krugman rant. No new ana...
by Akiva
Tue Dec 31, 2013 11:45 am
Forum: Investing - Theory, News & General
Topic: duration timing
Replies: 26
Views: 2192

Re: duration timing

I do not understand duration timing. Its based on the thought that rates must go up. Which is true to some extent perhaps. I'm not sure if this counts as "duration timing", but the idea with adjusting the duration of your bond portfolio is as follows. The forward curve tells you expected yields on bonds of various maturities and is a passable predictor of where rates will be in a year. Right now the curve slopes upward, so if you buy a 5 year bond today, you'll get it's yield and some capital appreciation as it "rolls down" the yield curve. So you can go in and calculate the implied yields on the bonds of different maturities under the assumption that you are going to buy now, hold for a year, then sell and do it all ov...
by Akiva
Tue Dec 31, 2013 11:38 am
Forum: Investing - Theory, News & General
Topic: Permanent Portfolio - A Sympathetic Boglehead's Perspective
Replies: 204
Views: 36094

Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

jhd1945 wrote:Here is the Morningstar return chart YTD
That fund doesn't follow what people here mean by "Permanent Portfolio", so it's performance can differ dramatically.
by Akiva
Tue Dec 31, 2013 11:28 am
Forum: Investing - Theory, News & General
Topic: Formula Investing International Funds liquidated
Replies: 1
Views: 548

Re: Formula Investing International Funds liquidated

. In 2010 a set of US and International mutual funds were established following Joel Greenblatt's 'magic formula' (re: The Little Book that Beats the Market). After 2+ years the two International funds have been liquidated. What happened to long-term investing/committment, and the fund managers belief in their own set of 'magic formula' products? http://www.formulainvestingfunds.com/documents/Supplement_and_Prospectus_Formula_Investing_Funds_10-30-2013_v2_Intl.pdf Robert . There was research about how his "magic formula" worked and basically it's a way of getting a value and quality tilt. (And much like the small cap and value effects are stronger together, the same is true of quality and value.) So maybe the cancelled the funds ...
by Akiva
Tue Dec 31, 2013 11:18 am
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

From 1980 through 1999, the S&P went from 108 to 1469. If you break it out, ~376 of that is attributable to a small number of "megacap" companies whose valuations got insanely high (and then unwound in the crash). Another ~440 of that was due to lower inflation and lowered expectations about inflation. Only ~302 is attributable to increased earnings. And while *computers* might have contributed to raising productivity to make those earnings happen, I think the internet had basically nothing to do with that since the earnings were going up well before the internet took off and didn't go up faster afterwards. That's possibly true but mostly irrelevant: we were talking about the total market in the 1990s, not large cap in the 19...
by Akiva
Mon Dec 30, 2013 9:29 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

Another interesting recent post from Krugman about Bitcoin and it's flaws, from an economic point of view: http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/. It's also worth following the link to Charlie Stross' post about what's wrong with Bitcoin: http://www.antipope.org/charlie/blog-static/2013/12/why-i-want-bitcoin-to-die-in-a.html. Stross is polemical, but he also knows economics and points out several relevant problems. The issue I have with both of these articles is that they aren't saying anything new. You can easily find articles in the pro-bitcoin camp explaining why these objections might not be valid dating from times when far less well known people were making these objections. Neither author responds to any of this...
by Akiva
Mon Dec 30, 2013 5:31 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

TSM did rather well in the 90s (better, after the crash, then being concentrated in technology stocks). It that's being colossally wrong I can only hope to be that wrong in the future. That's true, but entirely irrelevant. The issue is whether TSM has exposure to Bitcoin -- and the answer is that it doesn't. Back in the tech bubble, it only had exposure to the internet companies that IPO'ed (and IPOs are almost always bad investments as the eventual outcome showed). And seeing as no Bitcoin companies have IPOed yet, you have no exposure. It's irrelevant only if you believe that the performance of TSM in the 90s had nothing to do with the internet. I don't believe that, and I don't really think you do either. From 1980 through 1999, the S&a...
by Akiva
Mon Dec 30, 2013 3:18 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

What you are saying is the equivalent of going back to the 90s and saying that the internet isn't that big of a deal because if it amounts to anything, it will impact the whole economy and existing companies will figure out ways to make a profit. Sears, Barnes and Noble, etc. will benefit from online retailing. The newspaper companies will benefit from online content distribution. Blockbuster will benefit from online movie rental. Etc., etc. And *all* of this would have been colossally wrong. And it isn't just this one innovation. Every disruptive technology works like this. Disruptive innovations don't work to the benefit of existing players and they allow for new entrants into the market. Furthermore, they create entirely new markets tha...
by Akiva
Mon Dec 30, 2013 12:35 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

So contra what someone else said, you can't actually invest in Bitcoin services right now (and "Total Stock Market" has no exposure). That's taking a very narrow, short term view of the matter. If digital currencies do amount to anything, we can expect a fair amount of creative destruction that will ripple across the whole economy. Amazon would probably figure out a way to profit, and you can certainly buy their stock. If you're looking for ways to make a killing in the short term by being smarter than the market, this is probably not the best forum to ask for advice. It isn't clear how Amazon is going to benefit from this technology. It's clear that some existing firms would be hurt if it caught on, but the firms that will benef...
by Akiva
Mon Dec 30, 2013 12:14 pm
Forum: Investing - Theory, News & General
Topic: Women Better Investors Than Men?
Replies: 69
Views: 6150

Re: Women Better Investors Than Men?

EternalOptimist wrote:That's what US News reported last week based on a number of studies.

http://money.usnews.com/money/blogs/On- ... s-than-men
Generally speaking, men over-trade (and pay to much in commissions) and do things that have the effect of giving them negative momentum exposure (they hold losers and sell winners while women tend to do the opposite). This has been known for some time.

The *interesting* thing is that recent studies have shown that women *still* outperform after controlling for these effects, and that the difference even holds true among professional investors.
by Akiva
Mon Dec 30, 2013 12:05 pm
Forum: Investing - Theory, News & General
Topic: Vanguard recommending international bond....
Replies: 46
Views: 9593

Re: Vanguard recommending international bond....

I don't like this fund for two reasons 1. Hedging , which costs money (I don't think it's cheap either, but I wonder if experts could weigh in on this facet) and invalidates the reasons for wanting international bonds in the first place 2. How the fund weights foreign countries? In a perverse way, a country which issues more debt will become a bigger part of the fund (capped at 20 percent) even though when a country starts issuing a large amount of debt that is usually a bad sign. I would prefer a real gdp weighted international bond fund, re-balanced annually or so. I know some international bond funds that do not hedge, not sure vis a vis #2. Whether or not hedging makes sense depends on what you are trying to do with the foreign bonds. ...
by Akiva
Mon Dec 30, 2013 11:52 am
Forum: Investing - Theory, News & General
Topic: Do you think Warren Buffet was being irresponsible
Replies: 31
Views: 4499

Re: Do you think Warren Buffet was being irresponsible

I don't think Warren Buffett is irresponsible. He expresses his opinions and describes the principles by which he manages his company. His goals are different from the goals of individual investors. Buffett must generate value for his shareholders. In contrast, individual investors balance their human capital, financial assets, spending needs, and risk tolerance. Luck plays an important role in one's investment history. Buffett was lucky in many ways, but individual investors are not guaranteed to get similar to the Buffett's outcomes even if they replicated his actions. Therefore, his note is interesting and not irresponsible, but it should not be used as a guide for one's own financial management. Victoria It's also worth noting that Buf...
by Akiva
Mon Dec 30, 2013 11:47 am
Forum: Investing - Theory, News & General
Topic: Another free FF3 site
Replies: 3
Views: 861

Re: Another free FF3 site

pradador wrote:Hello, I made the website so I can probably help you out. The short answer is that I have to load funds into the local database before they are accessible rather than hitting the various financial APIs in realtime. That being said, if you post/PM me a list of fund symbols you're interested in I can load them directly for you!
Are you planning on adding "newer" factors like quality and low-beta at some point?
by Akiva
Mon Dec 30, 2013 11:40 am
Forum: Investing - Theory, News & General
Topic: Sector Funds
Replies: 9
Views: 1434

Re: Sector Funds

By reading through post here I"ve noticed that many are for not holding the Vanguard Precious Metals + Mining fund.REITS seem to be accepted.The Health Fund gets praise because of it"s past and present performance.The Energy Fund is pretty quiet.Why is it that some sectors seem to be OK to invest in while not others.Should"nt Bogleheads reject all four of these sector funds in their portfolios? REITs are special b/c of the tax situation, b/c many "core market" funds exclude them, and b/c real estate is a larger part of the economy than the market cap of the REITs would imply. The other sector funds are more "specialized". They aren't totally useless, but for the typical Boglehead investor, they aren't nec...
by Akiva
Mon Dec 30, 2013 11:18 am
Forum: Investing - Theory, News & General
Topic: Question about Fama French regression
Replies: 8
Views: 997

Re: Question about Fama French regression

When you do a factor regression, you are asking the computer to tell you how much of the variability of the portfolio can be explained by a fixed allocation to your risk factors. If the manager changed his portfolio around during the time of the regression, you'll get some kind of "average" exposure out of PV's regression. If his shifting around helped things, he'll have a positive alpha and if it hurt, he'll have a negative alpha. There are other kinds of regressions and more elaborate models you can use to ask what the impact of these kinds of shifts was, but they are probably too involved to be worth your time. This is helpful. Can I assume that the fixed allocation you mentioned is the managers allocation? If he didn't change...
by Akiva
Mon Dec 30, 2013 11:14 am
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

I've enjoyed many of the comments about bit coins (BCs) specifically, but would it not make more sense and be less speculative to invest in services that target BCs? If anything, those services would have a more far reaching application (and hopefully appeal) than bit coins. Well, there are two issues with this. First off, all the companies making these services are still start-ups and so you can't invest in them unless you were already invested in a venture capital fund that bought into them. Second off, if you think back to the internet, there were a lot of companies that plenty of smart people thought were going to be a big deal, but the vast majority of them failed. And a huge portion of the companies that turned out to be big internet...
by Akiva
Fri Dec 27, 2013 9:59 am
Forum: Investing - Theory, News & General
Topic: Theoretical best way to sell individual stock shares?
Replies: 12
Views: 1436

Re: Theoretical best way to sell individual stock shares?

boggler wrote:I need to sell some individual stock so I can invest the money in low cost Vanguard funds. What is the best way to do this, of the following options? I want to get the best possible price and minimize the time out of the market. The shares are held at vanguard and I want to invest in Vanguard traditional mutual funds.

-Place a market order so that it executes at the market open.
-Place a market order at some arbitrary time during the day.
-Place a limit order at the ask at some arbitrary time during the day.
-Place an order to execute at the closing price. How do I do this?
-Something else?

Thanks.
This depends on how many shares you have, how liquid the stock is, and what the bid-ask spread is.
by Akiva
Thu Dec 26, 2013 9:26 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

Butterfly Labs has an FAQ . Conspicuously missing among the questions is this one: Q: Why does Butterfly Labs sell its products, instead of keeping them and using them to mine bitcoins for itself? Does anyone know whether Butterfly Labs has ever answered this question (and was the answer convincing?) The answer is simple -- mining barely makes money b/c it's a giant arms race right now. Selling the mining equipment is much more profitable. The people who are making money mining are in locations with very cheap electricity and in colder climates (so that cooling is more affordable) with plenty of space, etc. The mining business has razor thin margins so only specialists will make money. That's why several people have said not to do it. But ...
by Akiva
Thu Dec 26, 2013 1:35 pm
Forum: Investing - Theory, News & General
Topic: The Goals of Traders and Investors Are Light-Years Apart
Replies: 2
Views: 740

Re: The Goals of Traders and Investors Are Light-Years Apart

pcsrini wrote:Good read on Wall Street's obsession with high speed automated trading, and how this is different from investing.

http://www.nytimes.com/2013/12/24/your- ... apart.html
I don't think this is particularly informative. And there's some misinformation there as well.
by Akiva
Thu Dec 26, 2013 1:27 pm
Forum: Investing - Theory, News & General
Topic: Investing (not speculating) in Bitcoin
Replies: 119
Views: 18090

Re: Investing (not speculating) in Bitcoin

The issue is that cryptocurrencies are "platform goods" (i.e. they have a strong network effect). The value isn't so much in the currency, but in the fact that other people are using it. So from the standpoint of investing, the idea is that having a (very small) exposure to bitcoin gives you exposure to the bitcoin economy that this new technology enables. No other crypto-currency gives you that because they are all just clones with a few parameters tweaked. Wouldn't you rather buy in before something gets popular? You are missing the point. Bitcoin is already popular and so it would take a hell of a lot for something to displace it. Many other cryptocurrencies have some feature differences. None of which are substantive. (as an ...
by Akiva
Thu Dec 26, 2013 10:35 am
Forum: Investing - Theory, News & General
Topic: buying index puts vs dollar cost averaging
Replies: 10
Views: 1404

Re: buying index puts vs dollar cost averaging

If you wanted to get some downside protection, you could sell out of the money calls and buy equivalent out of the money puts. (This is a net-zero transaction.) Assuming you have an underlying stock position, this will cap your gains and limit your losses. But I'm not really sure that this is a good idea either. This type of cashless collar isn't usually a good investment with index options due to skewness. The implied volatility, and hence price, of the lower strike which is being bought for protection is higher than that of the upper strike, which is being sold. Part of this is due to the popularity of buying puts for portfolio insurance. Cashless collars are more popular with large concentrated individual stock positions. Yeah. Maybe I ...