Search found 15326 matches

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: 51
Views: 2968

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: 657

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: 185
Views: 10458

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: 657

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: 185
Views: 10458

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: 185
Views: 10458

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: 2453

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: 51
Views: 2968

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: 51
Views: 2968

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: 185
Views: 10458

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: 185
Views: 10458

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: 185
Views: 10458

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: 51
Views: 2968

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: 2453

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: 185
Views: 10458

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: 185
Views: 10458

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: 185
Views: 10458

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: 51
Views: 2968

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: 51
Views: 2968

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: 51
Views: 2968

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: 2453

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: 2453

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: 185
Views: 10458

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: 19
Views: 2120

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 ...
by larryswedroe
Thu Feb 23, 2017 5:14 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 185
Views: 10458

Re: Extreme Valuations, and why you should reconsider

pkcrafter
although current valuations and expected returns probably should not be considered until within viewing distance of retirement.


I would very strongly disagree, IMO they always matter. and should always be considered.

Larry
by larryswedroe
Thu Feb 23, 2017 5:10 pm
Forum: Investing - Theory, News & General
Topic: Why has growth beaten value recently?
Replies: 19
Views: 2120

Re: Why has growth beaten value recently?

First, some good explanations already there. I would add that not only has economic growth been very slow, but we have had below expected inflation and in some industries deflation, and that hurts firms with lots of financial leverage (inflation lowers real cost of debt) and slow growth hurts firms ...
by larryswedroe
Thu Feb 23, 2017 5:07 pm
Forum: Investing - Theory, News & General
Topic: Peer-to-peer lending as an investment?
Replies: 35
Views: 2453

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

chw They buy loans funded by the platforms that meet their credit criteria, the originator SERVICES the loans As to the question about is it version of junk. Depends on the type of loans originated and bought. Stone Ridge for example buys only what are considered prime loans from consumers and small...
by larryswedroe
Thu Feb 23, 2017 11:25 am
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 185
Views: 10458

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: 185
Views: 10458

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: 35
Views: 2453

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: 185
Views: 10458

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: 185
Views: 10458

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: 185
Views: 10458

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: 227

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: 1418

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: 185
Views: 10458

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: 1418

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: 185
Views: 10458

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: 159

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: 1418

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: 185
Views: 10458

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: 221

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: 185
Views: 10458

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: 40
Views: 3662

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: 9879

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: 3689

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: 3689

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: 3689

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: 3689

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: 3689

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 ...

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