Search found 15299 matches

by larryswedroe
Thu Feb 23, 2017 11:25 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

Zen Not aware of anything on that, but of course valuations should take those issues into account. And IMO really doesn't matter much. Earnings yields are like bond yields, they forecast future returns as well as any metric we have. Same is true in any investment, like with CAP rates in real estate....
by larryswedroe
Thu Feb 23, 2017 9:35 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

cjking I used that date as it was one with very high valuations, and that is what people are now worried about, But anyone with familiarity with the CAPE 10 knows that there is a wide band on both sides of the mean forecast, which is all that it is, not a point number, which many seem to treat it as...
by larryswedroe
Thu Feb 23, 2017 9:31 am
Forum: Investing - Theory, News & General
Topic: Peer-to-peer lending as an investment?
Replies: 7
Views: 714

Re: Peer-to-peer lending as an investment?

There are now funds available which is a far superior approach due to obvious diversification benefits, though of course have to pay for that. We use LENDX via Stone Ridge but there are other vehicles like River North and Colchis Note I have a very significant investment in this fund. We expect retu...
by larryswedroe
Wed Feb 22, 2017 6:48 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

Nisprius To make your point even stronger, in 2000 when you showed the CAPE at 44 that was before the accounting change which is worth about 4 in the CAPE 10. And it was just at the beginning of period when dividend payout propensity began to collapse, which should raise valuations as companies reta...
by larryswedroe
Wed Feb 22, 2017 2:49 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

Homer First, if you adjust for the accounting change which a model cannot predict, but investors should account for the 2.3% prediction would have been 2.6, which I would say is spectacularly good Second as to your question what you fail to understand is that the model A) assumes no change in valuat...
by larryswedroe
Wed Feb 22, 2017 1:41 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

FWIW, in January 2000 the CAPE 10 was forecasting a real return to US stocks of 2.3%, it has been 3%. I'd say that was a very good prediction.

Larry
by larryswedroe
Wed Feb 22, 2017 9:19 am
Forum: Investing - Theory, News & General
Topic: Thrill seeking and investor behavior
Replies: 1
Views: 214

Thrill seeking and investor behavior

It seems that if we have a tendency to be a thrill seeker that extends to how we invest as well. Interesting study IMO showing again the important role of behavior in investing and how our personalities can impact results. http://www.etf.com/sections/index-investor-corner/swedroe-hedge-fund-managers...
by larryswedroe
Tue Feb 21, 2017 5:14 pm
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

EH Just thought worth adding that one key finding was that investors traded less when informed of results. We know from other studies the more investors traded the worse their returns, with investors who trade the most underperforming market by about 10% a year. So clearly that almost certainly impr...
by larryswedroe
Tue Feb 21, 2017 5:09 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

will Would not say it's bogus, that's way too extreme Just need to make adjustments like I explained in my articles, about 5 in the P/E. Which still places it very high historically, and predicts relatively low real returns, well below historical average. But as I also explained that doesn't mean ov...
by larryswedroe
Tue Feb 21, 2017 2:10 pm
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

EH Again you are simply misinterpreting the results, they show they did a better job of managing the risk-adjusted returns when informed. That means that prior to that they were better off if they wanted more risk to buy passive vehicles and not pick stocks. Afterwards it was less the case. So they ...
by larryswedroe
Tue Feb 21, 2017 12:47 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

dcarste Few things. First one should avoid SG stocks anyway, or at least the ones with high investment and low profitability as they have underperformed market by like 8% a year. A figure I'm sure most are unaware of. So at very least if buying small stocks should find funds that screen them out IMO...
by larryswedroe
Tue Feb 21, 2017 12:25 pm
Forum: Investing - Theory, News & General
Topic: a close look at the low risk (low beta/low vol) anomaly
Replies: 1
Views: 151

a close look at the low risk (low beta/low vol) anomaly

http://blog.alphaarchitect.com/2017/02/21/swedroe-insights-explaining-the-low-risk-effect/ For those of you who aren't familiar with this site, alpha architect, Wes Gray has co-authored two outstanding books on value and momentum investing that I would highly recommend. Two of the best researched a...
by larryswedroe
Tue Feb 21, 2017 11:26 am
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

EH You really are missing the point entirely. What the study is showing is skill. So if in your example the stock picking by investors gave them higher actual returns but smaller alphas and lower SRs then the answer is they should have stopped picking individual stocks and just bought passive funds ...
by larryswedroe
Tue Feb 21, 2017 11:21 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

Where do people get these numbers like 85 P/E for small stocks?
M* shows DFSTX has current P/E based on prospective earnings (which makes the P/E bit lower than if based on trailing) of about 20, that's high, but nowhere near excessively high and Vanguard's NAESX is about 21.

Best wishes
Larry
by larryswedroe
Tue Feb 21, 2017 10:28 am
Forum: Investing - Theory, News & General
Topic: Investing biases and genetics
Replies: 2
Views: 217

Investing biases and genetics

now we know why some people cannot seem to help themselves (:-))

http://www.etf.com/sections/index-investor-corner/swedroe-investing-habits-affected-genetics

But it cannot all be blamed on our genes.

Best wishes
Larry
by larryswedroe
Tue Feb 21, 2017 10:20 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 121
Views: 6264

Re: Extreme Valuations, and why you should reconsider

Bit amusing as Huffman has about the worst forecasting record of anyone for last several years-- the following is from a piece I wrote back in 2014 when he was screaming about overvaluations John Hussman runs the Hussman family of mutual funds. He’s also a former professor of economics and internati...
by larryswedroe
Tue Feb 21, 2017 10:16 am
Forum: Investing - Theory, News & General
Topic: Warren Buffett v. Bogleheads
Replies: 38
Views: 3089

Re: Warren Buffet v. Bogleheads

No problem, disciplined rebalancing accomplishes exactly what Buffett is advising

The big difference is he is a big time TILTER to value/quality and not a TSM investor
Larry
by larryswedroe
Sun Feb 19, 2017 12:35 pm
Forum: Investing - Theory, News & General
Topic: Fresh Look at the "Larry Portfolio" from Portfolio Charts
Replies: 115
Views: 9825

Re: Fresh Look at the "Larry Portfolio" from Portfolio Charts

theoretical, or the costs of the margin (:-))
by larryswedroe
Sun Feb 19, 2017 12:34 pm
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

txman While the monetary BASE has increased sharply, that isn't what's important, as will noted. It's the money SUPPLY that matters. And thus you have MB X MV = MS, so base times velocity. But V is way down as bank lending fell sharply. So MB has grown about historical rates, not much above 6%. Now ...
by larryswedroe
Sat Feb 18, 2017 1:44 pm
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

ISP I have ALWAYS said a higher CAPE can be result of lower ERP, don't know how you thought otherwise. That just means expected returns are LOWER, not overvalued. I even wrote an article on that subject discussing the idea that the CAPE 10 was saying market overvalued, ala Grantham and Hussman. I ev...
by larryswedroe
Sat Feb 18, 2017 1:42 pm
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

ISP I have ALWAYS said a higher CAPE can be result of lower ERP, don't know how you thought otherwise. That just means expected returns are LOWER, not overvalued. I even wrote an article on that subject discussing the idea that the CAPE 10 was saying market overvalued, ala Grantham and Hussman. I ev...
by larryswedroe
Sat Feb 18, 2017 10:18 am
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

minimalist
It's not that we don't know anything, we do know a lot, but we don't know the future, what events will occur to cause the risk premium to change, how the economy will perform which determines earnings, etc.
Larry
by larryswedroe
Sat Feb 18, 2017 9:44 am
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

ISP Sorry but you are completely misinterpreting what I have said and it has NOTHING to do with weasel words. It's just that you keep failling to understand that it's not black or white, but that there are many things going on and it's hard to parse what is driving things. So my LAST simple example ...
by larryswedroe
Fri Feb 17, 2017 8:04 pm
Forum: Investing - Theory, News & General
Topic: Beat the market long-term? Yes, it can be done.
Replies: 133
Views: 1904

Re: Beat the market long-term? Yes, it can be done.

triceratops First the piece is about much more than DFA vs. Vanguard, but about active vs. two passive alternatives. Second, advisor fees should of course be considered, but of course it's not a one way street as I pointed out many times, unless the ONLY value of an advisor is access to DFA. If that...
by larryswedroe
Fri Feb 17, 2017 7:37 pm
Forum: Investing - Theory, News & General
Topic: Beat the market long-term? Yes, it can be done.
Replies: 133
Views: 1904

Re: Beat the market long-term? Yes, it can be done.

the following is from a summary of my findings when I looked at Vanguard active funds, 15 years ending 9/15, in my series. Draw your own conclusions • In the four asset classes for which there are comparable DFA funds, the Vanguard active funds outperformed in one. • In the five asset classes for wh...
by larryswedroe
Fri Feb 17, 2017 7:32 pm
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

ISP First, you keep repeating, incorrectly, the assertion that I think it's the only explanation. I repeat, falling real rates can reflect several different things, including lower economic growth, which should mean lower corporate earnings and thus offsetting the impact of lower rates or it could b...
by larryswedroe
Fri Feb 17, 2017 6:39 pm
Forum: Investing - Theory, News & General
Topic: Why is American funds returns too good to be true?
Replies: 45
Views: 5000

Re: Why is American funds returns too good to be true?

daveydoo You certainly have access to portfoliovisualizer https://www.portfoliovisualizer.com/factor-analysis And it is quite easy to use. The way it works is the regressions show the loading on each factor--how much exposure the fund had. Then it takes that and accounts for that exposure times the ...
by larryswedroe
Fri Feb 17, 2017 1:54 pm
Forum: Investing - Theory, News & General
Topic: Financial Advisors and their fund picks
Replies: 10
Views: 999

Re: Financial Advisors and their fund picks

One thing missing with commissioned based advisors is that by splitting up the portfolio among DIFFERENT fund families they avoid the break points for the front-loads, so they collect more.

Another reason to NEVER use an advisor not held to fiduciary standard
Larry
by larryswedroe
Fri Feb 17, 2017 1:53 pm
Forum: Investing - Theory, News & General
Topic: Why is American funds returns too good to be true?
Replies: 45
Views: 5000

Re: Why is American funds returns too good to be true?

Davey Because you can have very different exposures to risk while being in the same broad asset class. That is why we have factor models. The adjustments are by FACTOR exposure. And this is very important to understand. Try this as example, using M* check VISVX, DFSVX and BOSVX, three small value fu...
by larryswedroe
Fri Feb 17, 2017 1:49 pm
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

EH Stock pickers ignore "risk adjusted." Total returns rule. That's an example, like buying junk bonds and outperforming treasuries, it has nothing to do with picking individual securities. It's about asset allocation---now if you beat a junk bond index that is what matters. Same with pick...
by larryswedroe
Fri Feb 17, 2017 12:19 pm
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

You measure or attempt to measure skill by whether you beat a RISK ADJUSTED appropriate benchmark. Now might beat it by random luck. That is what t-stats help us do. But you don't measure skill by comparing oranges with apples. Seriously, I cannot believe I'm having this conversation And EH what the...
by larryswedroe
Fri Feb 17, 2017 12:15 pm
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

Research Med and EH Both of you again are missing the point. Sure earning a higher return is good, them but it doesn't measure SKILL if not adjusted for risk. You'd all be complaining if a fund manager claimed alpha when beating the S&P 500 but did so by buying small value stocks. This is EXACTL...
by larryswedroe
Fri Feb 17, 2017 11:35 am
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

ResearchMed
I have NO idea how you draw that conclusion. It doesn't apply in any way to what I wrote. What we are simply talking about is measuring things properly.
Larry
by larryswedroe
Fri Feb 17, 2017 11:33 am
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

EH
Of course you cannot eat your Sharpe ratio, but we aren't discussing that. IT's just how you did perform against an APPROPRIATE benchmark. Otherwise it's like arguing you did well by purchasing junk bonds and comparing returns to Tbills.
Larry
by larryswedroe
Fri Feb 17, 2017 11:11 am
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

EHENGINEER
Sorry IMO have it exactly backwards. One should care about the risk adjusted returns, meaning they adjust returns for the exposure to factors, like stocks and value and small. So you don't get credit for higher returns simply because you took more risk.

Larry
by larryswedroe
Fri Feb 17, 2017 10:03 am
Forum: Investing - Theory, News & General
Topic: Interesting study on impact of providing investors feedback
Replies: 37
Views: 1387

Re: Interesting study on impact of providing investors feedback

re attrition, this from the paper should answer your question In the literature on learning Amit Seru, Tyler Shumway, and Noah Stoffman (2010) show that the learning of private investors in investment matters is mainly driven by attrition. Investors who learn about their inferior investment skills s...
by larryswedroe
Fri Feb 17, 2017 9:43 am
Forum: Investing - Theory, News & General
Topic: Why is American funds returns too good to be true?
Replies: 45
Views: 5000

Re: Why is American funds returns too good to be true?

davey Sorry but 15 year look backs is used because that is the data M* makes easily available to everyone. And the 15 year figures are moving targets as time goes on. And because it's risk-adjusted the period doesn't matter, because we are accounting for the loading factors and thus exposures to ris...
by larryswedroe
Fri Feb 17, 2017 9:38 am
Forum: Investing - Theory, News & General
Topic: Why is American funds returns too good to be true?
Replies: 45
Views: 5000

Re: Why is American funds returns too good to be true?

azanon yes they aren't statistically significant, and that is partly due to the relatively short period. But the alphas were certainly economically significant. And all the tstats tell you is that you cannot reject at the 95% confidence level that the alpha wasn't result of luck. Now if you look acr...
by larryswedroe
Fri Feb 17, 2017 9:35 am
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

ISP Re lower real rate, and impact on NPV. As I explained, if real rate falls due to lower GNP growth and thus lower corporate earnings you get offsetting effects, and same thing going the other way. The lower rate in the denominator the NPV but the lower earnings in the numerator lowers the NPV Sec...
by larryswedroe
Thu Feb 16, 2017 8:32 pm
Forum: Investing - Theory, News & General
Topic: Why is American funds returns too good to be true?
Replies: 45
Views: 5000

Re: Why is American funds returns too good to be true?

daveydoo Unfortunately your criticism is without merit as shown in the article, which if haven't read it might help. The funds generated fairly large alphas over the period, so that is risk adjusted returns. You can go back longer and see strong results for American funds. I use 15 year returns for ...
by larryswedroe
Thu Feb 16, 2017 7:47 pm
Forum: Investing - Theory, News & General
Topic: Why is American funds returns too good to be true?
Replies: 45
Views: 5000

Re: Why is American funds returns too good to be true?

Unfortunately too many people just jump on idea that active management is going to underperform. Active management isn't bad because of being dumb. It's typically high expenses, which American doesn't have, excluding the loads, which many investors can avoid. Also index funds other than TSM are unfo...
by larryswedroe
Thu Feb 16, 2017 12:53 pm
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

Isp the CAPE would go up when the risk-free rate of return goes down. Unfortunately, this is one of the most common mistakes people make, believing this should be true. Economists call it the money illusion. It's just not necessarily correct. From a piece I wrote on the subject The belief that nomin...
by larryswedroe
Wed Feb 15, 2017 7:33 pm
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

Will Well fairly valued is fine, but even if you make adjustments of say 5 in the CAPE 10, that brings it to 24 now. Which leaves a real expected return of about 4%. Now versus tbills that is about 3.5% premium. That's well below historical average, but IMO rational given the changes I discussed. So...
by larryswedroe
Wed Feb 15, 2017 5:11 pm
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

will Certainly I NEVER said this market is vastly overvalued, just highly valued, even with the adjustments. But rationally high, just lower ERP hilink Short answer is Bogle made presentation/speech in which he showed chart, telltale chart, showing that value stocks and growth stocks had same return...
by larryswedroe
Wed Feb 15, 2017 4:11 pm
Forum: Investing - Theory, News & General
Topic: Is a total market fund the most diversified
Replies: 157
Views: 13232

Re: Is a total market fund the most diversified

FWIW- I wrote my first book in 1998 and what we do know is that since that time frame, so not back tested, and with live portfolios, investors who tilted to size and value have in fact been well rewarded for their belief in the EXPECTATION, but not certainty, of earning a higher expected return. I j...
by larryswedroe
Wed Feb 15, 2017 4:08 pm
Forum: Investing - Theory, News & General
Topic: Does Micheal Kitces Rising Retirement Glidepath Still have legs
Replies: 47
Views: 3746

Re: Does Micheal Kitces Rising Retirement Glidepath Still have legs

Letsgobobby
But that is the point: even smart people can be irrational about risk.

That is certainly true, but mainly due to overconfidence (the opposite of what was implied).
Also it is not irrational to be highly risk averse if one has very low marginal utility of wealth.
Larry
by larryswedroe
Wed Feb 15, 2017 2:10 pm
Forum: Investing - Theory, News & General
Topic: Behavioral finance and prospect theory, it's impact on prices/returns
Replies: 3
Views: 445

Re: Behavioral finance and prospect theory, it's impact on prices/returns

nedsaid
Completely agree, so would a pretty smart guy named Buffett-
Larry
by larryswedroe
Wed Feb 15, 2017 11:01 am
Forum: Investing - Theory, News & General
Topic: Valuation does not matter (may be)
Replies: 55
Views: 3667

Re: Valuation does not matter (may be)

will yes, as there have been big accounting changes, which I noted, FA 142 and 144. There are other issues like much lower div payouts, which then can understate expected returns. I've written about this many times. And Bogle has been wrong on two issue, one is value vs growth and that tell tale cha...

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