Search found 15352 matches

by larryswedroe
Wed Mar 01, 2017 12:51 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

P rojecting 4% returns and then experiencing 12% returns shows that either (1) your margin of error around your predictions is too large to be effective in practice or (2) your method of projecting returns is flawed. Both statements are incorrect, IMO. The key is understanding that we are talking ab...
by larryswedroe
Wed Mar 01, 2017 11:25 am
Forum: Investing - Theory, News & General
Topic: Why has growth beaten value recently?
Replies: 29
Views: 3438

Re: Why has growth beaten value recently?

in reality I certainly never stated one is not diversified if one doesn't concentrate in SV. But the whole purpose of my article on TSM and is it the most diversified was to get people to think differently about diversification. TMS is clearly not the most diversified due to market cap weightings. N...
by larryswedroe
Wed Mar 01, 2017 11:09 am
Forum: Investing - Theory, News & General
Topic: Momentum and the risk of crashes
Replies: 3
Views: 265

Re: Momentum and the risk of crashes

Well, momentum has been widely known for decades now and is still persistent, though like most premiums, including beta, they have shrunk some over time due to publication and lower costs of trading/implementation. But there are still human behavior which doesn't change, there are still not for prof...
by larryswedroe
Wed Mar 01, 2017 11:03 am
Forum: Investing - Theory, News & General
Topic: Why has growth beaten value recently?
Replies: 29
Views: 3438

Re: Why has growth beaten value recently?

Alchemist Y ou talk a lot about tracking error, but your confidence that the premium will eventually show up seems nearly absolute. If I had misunderstood you then I apologize, but that is certainly the impression yourself and other Factor advocates have given. It's hard to fathom how you can draw t...
by larryswedroe
Wed Mar 01, 2017 10:24 am
Forum: Investing - Theory, News & General
Topic: Momentum and the risk of crashes
Replies: 3
Views: 265

Momentum and the risk of crashes

http://www.etf.com/sections/index-investor-corner/swedroe-downside-momentum

Momentum has experienced some historic crashes, but all on the short side, and to some degree forecastable.

Hope you find this helpful
Larry
by larryswedroe
Tue Feb 28, 2017 6:34 pm
Forum: Investing - Theory, News & General
Topic: Why has growth beaten value recently?
Replies: 29
Views: 3438

Re: Why has growth beaten value recently?

DMW Eliminate the advantage when DFSVX outperformed VISVX by 1.16% and you could have found advisors for as little as say 25bp or even less (and assuming all you are getting is access)? Over the last 15 years DFA funds have outperformed Vanguard similar index funds in every case by well more than an...
by larryswedroe
Tue Feb 28, 2017 6:30 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

[url]The problem with lowering expectations is that Boglehead suggested planning numbers are already EXTREMELY conservative.[/url]
I wonder how any knows if this is true. If forecasting more than say 5% real return to stocks and maybe 1% at best for safe bonds that would IMO not be conservative
Larry
by larryswedroe
Tue Feb 28, 2017 3:59 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

[url]With a plus or minus 8% variance, I don't think one should be spending more based on a forecast. Now spending more after you get ACTUAL returns, sure[/url] thanks because I would guess you don't understand how an MCS works. For example, it might show you that even in the bottom 5% of the distri...
by larryswedroe
Tue Feb 28, 2017 2:51 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

willthrill Even Kitces who you cite has written on how valuations impact SWR. The lower the higher the SWR. Again it's all about putting odds in your favor. And as to forecasts of economists--you're citing those who make forecasts based on judgments not systematically doing so. And btw-the predictiv...
by larryswedroe
Tue Feb 28, 2017 1:15 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

willthrill IMO it makes no difference whether in accumulation or withdrawals. As noted all companies and public plans have to do it whatever phase they are in. Also you are literally alone in your belief about future returns, at least in terms of every financial economist I've talked to. They all be...
by larryswedroe
Tue Feb 28, 2017 11:35 am
Forum: Investing - Theory, News & General
Topic: have size and value been rewarded, an out of sample test
Replies: 2
Views: 344

Re: have size and value been rewarded, an out of sample test

Betablocker Just a quick look at that piece showed me it has some issues. Lots of problems that I don't have time to go into, but for one is using R2k to show returns of small caps instead of a much better index like CRSP 6-10. No academic or serious practitioner would use R2k. R2k underperformed CR...
by larryswedroe
Tue Feb 28, 2017 9:53 am
Forum: Investing - Theory, News & General
Topic: have size and value been rewarded, an out of sample test
Replies: 2
Views: 344

have size and value been rewarded, an out of sample test

https://www.advisorperspectives.com/articles/2017/02/27/were-fama-and-french-right-about-value-and-size-an-ex-post-test There were many claims of data mining when their paper was first published. But the factors have held up not only out of sample but using live funds, not just on paper. Investors ...
by larryswedroe
Mon Feb 27, 2017 9:55 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

So people know
MCS can be run with non normal distributions so that isn't even an issue. But FWIW the skewness and tails doesn't have big impact


Larry
by larryswedroe
Mon Feb 27, 2017 7:25 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

norciom I have no idea where you get that assumption, but it's wrong. It applies to everyone. Literally everyone's case is impacted in some way by valuations as it impacts your need to take risk. Now you may not change your AA based on valuations but it may lead you to change other triggers, or it m...
by larryswedroe
Mon Feb 27, 2017 6:40 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

JOMONEY First, they are REQUIRED by the laws or in case of company plans by accounting regs to do what I said. The fact that they use bad (too high) estimates and get away with it is the problem of the legislatures (or CPAs) not enforcing that the correct actions should be done. It has nothing to do...
by larryswedroe
Mon Feb 27, 2017 6:39 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

Norcom I was silent as you say because I have answer that question MANY times and wrote a book on the subject. You make estimates based on valuations and then use Monte Carlo Simulations to examine the potential dispersion of outcomes so you can see what the estimated odds of success are. As to your...
by larryswedroe
Mon Feb 27, 2017 5:48 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

Here's what's really interesting to me from a behavioral viewpoint. Every corporation and public pension plan makes estimates of future returns and then makes adjustments based on how the actual results and then what is needed to fulfill their commitments (reach their goals). Every one. Those adjust...
by larryswedroe
Mon Feb 27, 2017 9:51 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

well all I can say is that IMO it literally makes no sense to set an AA without having an expected return for the assets you are investing in. In fact it makes no sense to invest in anything without having an expected return. Just think about say corporate pension plans or say CalPERS, they have req...
by larryswedroe
Sun Feb 26, 2017 8:02 pm
Forum: Investing - Theory, News & General
Topic: Why has growth beaten value recently?
Replies: 29
Views: 3438

Re: Why has growth beaten value recently?

alchemist Part of that risk is that the premium will never show up. That is why its called risk. This seems to be ignored in discussions like this. Risky does not equal more profitable, it equals more potential for a higher profit. But too many people talk about the risk premium as if it is a fait a...
by larryswedroe
Sun Feb 26, 2017 2:49 pm
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

linenfort Think of it this way. Portfolio A owns 10 dividend paying stocks and it happens to have the same weighted average p/es and market caps as Portfolio B which happens to be mutual fund that owns 1000 stocks, some paying divs and some not. So the expected return are the same. Portfolio A has a...
by larryswedroe
Sun Feb 26, 2017 2:10 pm
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

linenfort You have the concept correct, there is nothing wrong with dividends themselves. There is clearly something wrong with limiting the universe of stocks you own to dividend payers for the reasons I gave. You are taking uncompensated idiosyncratic risks which can be diversified away without an...
by larryswedroe
Sun Feb 26, 2017 1:50 pm
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

linenfort We know the answer to this question I asked Larry, even if dividend seekers are self-deluding, is it possible that they're buying the right companies for the wrong reason? As I have explained over and over again, once you account for exposure to common factors there is no difference in ret...
by larryswedroe
Sun Feb 26, 2017 12:16 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

willthrill Sorry you have this completely wrong. What Arts said has everything to do with valuations because it was the higher valuations that produced the returns that led to reduced need to take risk. I cannot see why you cannot get this very simple point. If you are selling because you think valu...
by larryswedroe
Sun Feb 26, 2017 10:18 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

Artsdoctor I completely agree and unfortunately it's the point that willthrill cannot see to understand as shown in this comment Think of all the people we've seen on this forum lately who are concerned about high valuations and thinking of changing their AA as a result. Nearly everyone is (correctl...
by larryswedroe
Sun Feb 26, 2017 10:14 am
Forum: Investing - Theory, News & General
Topic: Source of the Small Value Premium
Replies: 11
Views: 710

Re: Source of the Small Value Premium

The following is a list of papers I used to keep up to date showing the economic risk factors behind the two premiums There are obviously more papers since. Also Your Complete Guide to Factor Based Investing summarizes the research in the two chapters on the size and value effects Hope that is helpf...
by larryswedroe
Sat Feb 25, 2017 5:50 pm
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

arctic I'll repeat, at least pre-tax divs are neither good nor bad. AT they are not good. With that said dividend policy for the company should be to return excess capital (cannot be deployed to earn above cost of capital) to shareholders either in dividends or stock buybacks (where think price is l...
by larryswedroe
Sat Feb 25, 2017 2:06 pm
Forum: Investing - Theory, News & General
Topic: Talk on CAPE 10
Replies: 5
Views: 781

Re: Talk on CAPE 10

ENT First yes the CAPE 10 is definitely signalling that future returns are highly likely to be well below the real 7% return they have provided in the past. More like 4%. Doesn't mean market is overvalued though. Just more highly valued. Second, there is a monotonic relationship between higher CAPE ...
by larryswedroe
Sat Feb 25, 2017 1:59 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

Grayfox Yes I agree, but if that was incorrect then there would be no risk in investing in stocks and the ERP would disappear and we would all be very unhappy earning tbill returns!!! Now the growth in earnings part is usually not that far off in long term. But the speculative rate can be very diffe...
by larryswedroe
Sat Feb 25, 2017 9:04 am
Forum: Investing - Theory, News & General
Topic: Talk on CAPE 10
Replies: 5
Views: 781

Talk on CAPE 10

With all the discussion of the level of the CAPE 10 I thought it be worthwhile to post a link to a talk I gave on the subject a while back. It's about 30 minute talk and discusses the many issues related to CAPE and why IMO it was not signalling overvaluation at all, but was signalling lower future ...
by larryswedroe
Sat Feb 25, 2017 9:00 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

Willthrill That point about mean reverting and to what level is EXACTLY what I wrote about in my article about the CAPE 10 being overvalued. I had suggested using 1960 as the start point. And there the mean was about 20. Add in 4 for the accounting changes related to FAS 142 and 144 and you get 24 a...
by larryswedroe
Sat Feb 25, 2017 8:53 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

gundlached If the ERP is still within historical norms but largely because real yield is low, is it "reaching for yield" to ignore a nominal predictor like CAPE? For example, would an investor with a risk tolerance of 60/40 have cause to adjust the AA toward more bonds? First, the answer s...
by larryswedroe
Sat Feb 25, 2017 8:39 am
Forum: Investing - Theory, News & General
Topic: Peer-to-peer lending as an investment?
Replies: 35
Views: 2531

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

Willthrill Yes they are similar and yes banks were positive there for the higher quality loans. But in this type of fund with the expenses of servicing and expense ratio, and a bit of leverage we estimate fund might have lost a few percent. So much better than with equities, about same as an interme...
by larryswedroe
Sat Feb 25, 2017 8:35 am
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

arctic
Well I assume you don't have all your eggs in that basket so can if need cash flow take it from other investments. And of course if you needed cash flow from BRK then you shouldn't be investing in it (:-))
Larry
by larryswedroe
Sat Feb 25, 2017 8:34 am
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

Vitaflow Financially it may be true but ownership-wise it isn't. If you sell shares you own less of a company. In that sense if you want income but do not want to reduce ownership, dividends are obviously better for you. Note true when viewed correctly. yes you have fewer shares but your shares are ...
by larryswedroe
Fri Feb 24, 2017 8:42 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

I chose to respond because now you have it EXACTLY RIGHT --just need you to see it. Don't know how many times have to state it. Valuations being higher means expected returns are now lower, But that tells you NOTHING about whether market is overvalued or not, just that it's more highly valued. So it...
by larryswedroe
Fri Feb 24, 2017 7:59 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

grayfox
Hope your post was in jest. One can never tell. But for the sake of assuming it wasn't you would have to be kidding. That is exactly what market forecasters do and they fail miserably because they are unpredictable factors, unpredictable events cause things to change.
Larry
by larryswedroe
Fri Feb 24, 2017 7:33 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

willthrill Sorry you can protest all you want but it literally makes no sense without considering what I told you. If you based it on belief that valuations are too high, I completely agree that is market timing. If you base it on your assumptions changing it is clearly not market timing. Don't know...
by larryswedroe
Fri Feb 24, 2017 5:33 pm
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

asif408 Could say before they came to us, but after they all do(:-)) What I can say is that I see this preference in a very significant percentage of investors. Just had one the other day who says he understands the theory and the facts even but loves his dividends anyway. And for the other poster w...
by larryswedroe
Fri Feb 24, 2017 5:27 pm
Forum: Investing - Theory, News & General
Topic: Peer-to-peer lending as an investment?
Replies: 35
Views: 2531

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

bjames
Your experience is EXACTLY why one should not IMO be buying individual bonds but only investing in a fund that diversifies those risks. It's like buying a single corporate bond instead of a fund. You need to diversify away the idiosyncratic risks
Larry
by larryswedroe
Fri Feb 24, 2017 5:22 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

Willthrill Market timing does not necessarily take the position that the market is wrong; it's based on what someone thinks that future prices will be. Whether you realize that or not it is EXACTLY the same thing. If you are saying you would change AA solely because valuations are high you are sayin...
by larryswedroe
Fri Feb 24, 2017 1:11 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

learning head You seem to be missing the point. It has nothing to do with market timing as I said. Only that valuations have changed and that changes your assumptions about expected returns and that changes your need to take risks as well. Homer, I agree but you miss the point, it is the rising valu...
by larryswedroe
Fri Feb 24, 2017 11:25 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

Willthrill Your own definition should tell you it's not market timing, having nothing to do with it at all, but about changing assumptions. Remember estimating returns based on valuations is also based on saying the market price is the right price, or the best estimate of the right price. But here s...
by larryswedroe
Fri Feb 24, 2017 11:20 am
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

Cyclingduo
Glad to be of help
And you have the step up in basis now, so don't have K gains to deal with that many would. Now's the time to act and improve diversification of portfolio. Especially to international as I would bet those dividend payers are either all or virtually all US
Larry
by larryswedroe
Fri Feb 24, 2017 10:10 am
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

Re: new study on Investor behavior being disconnected from financial theory and reality

Cycling duo
It's truly one of the great puzzles in finance, why people prefer dividends, which is why there are so many papers on the subject, yet no matter how much we try to educate people many cannot overcome their framing problems/biases.
Larry
by larryswedroe
Fri Feb 24, 2017 8:57 am
Forum: Investing - Theory, News & General
Topic: new study on Investor behavior being disconnected from financial theory and reality
Replies: 89
Views: 4888

new study on Investor behavior being disconnected from financial theory and reality

http://www.etf.com/sections/index-investor-corner/swedroe-investors-odd-affection-dividends Investors an the odd affection for dividends. Behavioral finance helps us understand investor behaviors and hopefully educate us on the mistakes we make. When we become aware of the mistakes hopefully we can...
by larryswedroe
Fri Feb 24, 2017 8:50 am
Forum: Investing - Theory, News & General
Topic: Peer-to-peer lending as an investment?
Replies: 35
Views: 2531

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

chw Before you draw that conclusion that LENDX or equivalent is too risky consider that in 2008 VWEHX lost about 22% while we estimate based on the historical data LENDX might have lost a few percent, The risks aren't even in the same ballpark. Also High yield has much longer duration and thus much ...
by larryswedroe
Thu Feb 23, 2017 9:34 pm
Forum: Investing - Theory, News & General
Topic: Peer-to-peer lending as an investment?
Replies: 35
Views: 2531

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

chw
I have no interest in the credit worthiness of the lenders. That's irrelevant to me as not making loans to them.
And if they fail the fund I invest in OWNS the loans and can then simply pull the servicing rights and hand them to another firm to perform that service for the same fee.
Larry
by larryswedroe
Thu Feb 23, 2017 9:32 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 281
Views: 16707

Re: Extreme Valuations, and why you should reconsider

willthrill No it isn't market timing. When the assumptions you made in planning and setting your AA have changed then smart people change their plans as well. Could be simply passing of time or change of jobs. Or could be big changes in valuations which create large changes in expected returns. Same...
by larryswedroe
Thu Feb 23, 2017 9:25 pm
Forum: Investing - Theory, News & General
Topic: Why has growth beaten value recently?
Replies: 29
Views: 3438

Re: Why has growth beaten value recently?

Achemist Bizarre? So here is simple question Which group of stocks is more riskY Those with higher SD of earnings and dividends as well as have more operating leverage and more financial leverage (more debt) or companies with the opposite traits? Obviously it's rhetorical. And just as obviously the ...

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