Search found 1340 matches

by BrianTH
Fri May 18, 2007 7:08 am
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

Addendum: By the way, I also think it might help to clarify what predictions I think one can get from the Keynesian theory of normal backwardation. I think the prediction would be something like this: if you held a properly diversified basket of CCFs which are expected to exhibit normal backwardatio...
by BrianTH
Fri May 18, 2007 6:46 am
Forum: Investing - Theory, News & General
Topic: Investing as a complex equation
Replies: 39
Views: 14999

Re: FF five factor framework

1. Based in willingness, ability, and need to take risk, select the target coefficients ... I agree that once you do that, the rest is not so hard. But to me that is the hard part (selecting your target coefficients). And a good portion of the outcome will be based upon simple parameters - cash flo...
by BrianTH
Fri May 18, 2007 6:37 am
Forum: Investing - Theory, News & General
Topic: Investing as a complex equation
Replies: 39
Views: 14999

I think a probability distribution is a good starting point. I like the idea of monte-carlo simulations, but I think getting them to accurately simulate the real potential range of returns would be difficult. As I suggested, on a first order basis you could probably just assume a random walk. That ...
by BrianTH
Fri May 18, 2007 6:31 am
Forum: Investing - Theory, News & General
Topic: Subprime Bailout & Gov't Subsidy of Home Ownership
Replies: 44
Views: 17991

Re: You are on to something, Rich

Maybe a bigger question to ask, is why the government subsidizes homeownership in the first place. Lots has changed since this policy was set. There are many ways to save if that is what policy setters were thinking. Was the government thinking conditioned by a time in which Americans were much les...
by BrianTH
Fri May 18, 2007 6:14 am
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

Part Three ... Sorry for the delay, and I just cannot find the paper so I have to use a proxy. If it helps, I provided a link from the Library above. OK, these are the eyeball estimates of 1982 to 2004 right? No, in my version it was a table. Lets look at Zvi/Bodie 1949-1976 http://faculty.fuqua.duk...
by BrianTH
Fri May 18, 2007 5:09 am
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

Part Two ... This is period specific of course, as the other paper has shown. How long is significant for you? 5 years? 10? Just curious. I'm not sure I understand what you mean. Erb and Harvey later do a persistence study, and in their two different periods it was actually still the case that overa...
by BrianTH
Fri May 18, 2007 5:01 am
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

Part One ... And I note now we've made a subtle shift here from talking about excluding general precious metals CCF to now specifically gold, the metal least able to shed its association with cash, assuming following Finnegan's example. It is worth noting that this doesn't apply as much to silver (w...
by BrianTH
Fri May 18, 2007 4:41 am
Forum: Investing - Theory, News & General
Topic: Who owns the market?
Replies: 7
Views: 2602

It is indeed interesting (and comforting) to me that households (direct and through mutual funds) are the dominant players in the equity market. It is also interesting (and less comforting) to me that the bonds picture is quite different. Households are again the dominant player in the munis market,...
by BrianTH
Thu May 17, 2007 5:30 pm
Forum: Investing - Theory, News & General
Topic: Who owns the market?
Replies: 7
Views: 2602

You might find this helpful:

Financial Services Factbook

It has lists of what entities hold what amount of certain kinds of assets in the US.
by BrianTH
Thu May 17, 2007 5:22 pm
Forum: Investing - Theory, News & General
Topic: Investing as a complex equation
Replies: 39
Views: 14999

If I had two investments, one of which I reliably knew had a 4.1% return (ignore compounding) and the other 4.0%, but with the first vastly more subject to risk of loss (balanced out by corresponding chance of excess gain), I'd prefer the second. I guess I am still confused. What does it mean to "r...
by BrianTH
Thu May 17, 2007 5:04 pm
Forum: Investing - Theory, News & General
Topic: Investing as a complex equation
Replies: 39
Views: 14999

You're not necessarily going to do poorly by following Tobin's work, but there is no way you should be claiming it is an optimal portfolio. My point was more just that Tobin et al understood all this. After all the theories, equations, and calculations have been checked and double-checked, the one ...
by BrianTH
Thu May 17, 2007 4:53 pm
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Valuethinker, I don't think that was an entirely accurate picture of the legal field, which I know best. First, if you asked lawyers to name the top 10 law schools, there would be some schools on everyone's list, but you would end up with more than 10 names--so the "top 10" is more like 14. And ther...
by BrianTH
Thu May 17, 2007 4:29 pm
Forum: Personal Investments
Topic: Vehicles for investing in commodity futures
Replies: 2
Views: 1466

Obviously my thought is on the table already, but I will just note that DB also uses an "Optimum Yield" strategy, which as I understand it means they try to time their rolls to avoid contango. I have no idea if that will work in the long term (their backtesting, as always, looks great), but at a min...
by BrianTH
Thu May 17, 2007 4:25 pm
Forum: Personal Investments
Topic: 529 as non-taxable retirment account, vs taxable
Replies: 10
Views: 3462

Probably not. Even if you put the funds in an ordinary stock fund, you would be converting the capital gains tax into an income tax and then tacking on 10% more. There is little chance that avoiding the tax drag of stocks could make up for all that. Bonds have a better shot but that extra -10% at th...
by BrianTH
Thu May 17, 2007 4:18 pm
Forum: Investing - Theory, News & General
Topic: Investing as a complex equation
Replies: 39
Views: 14999

Brian, I sort of agree with you, but I don't think we can take psychology out of the picture either. I am fine with adding psychology back in later. But if we are starting with what I am calling a first-order approximation, then we have to choose consumption or psychology as the first thing we cons...
by BrianTH
Thu May 17, 2007 3:57 pm
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

One point to keep in mind If you cut out other commodities you will lose the rebalancing bonus. I have certainly thought about that, and it is one of the reasons I would not cut DBA out of my basket (the idea being that maybe a rebalancing bonus would overcome agricultural CCF's laggy returns even ...
by BrianTH
Thu May 17, 2007 3:48 pm
Forum: Investing - Theory, News & General
Topic: Investing as a complex equation
Replies: 39
Views: 14999

I think what matters to me is the risk of loss of real principal. In light of your original post, I would take the question a further step back. As you noted there: Portfolio management is the process of determining and describing the utility model of the investment process, determining one's input...
by BrianTH
Thu May 17, 2007 3:27 pm
Forum: Investing - Theory, News & General
Topic: Investing as a complex equation
Replies: 39
Views: 14999

First, I will just say I agree in substance with most of the original post. As I would put it, we live in a multifactor risk world and many of the relevant uncertainties are difficult or impossible to quantify. As a result, understanding and measuring the risks and rewards associated with various in...
by BrianTH
Thu May 17, 2007 3:06 pm
Forum: Investing - Theory, News & General
Topic: Managed Funds - How do investors still justify using them?
Replies: 51
Views: 24412

Many folks tend to over-complicate matters with comparisons, Beta, Alpha, Deviations, etc. .... Among those "folks" are active fund managers, who use various techniques to increase returns, but these techniques also tend to increase risks. But these managers nonetheless ask people to compare their ...
by BrianTH
Thu May 17, 2007 2:51 pm
Forum: Personal Investments
Topic: Why not a higher REIT asset allocation?
Replies: 54
Views: 22976

SmallHi wrote: I did not mean to take this thread off topic, and don't want to comment further on the viability of REITS in a portfolio.
Fair enough. I was just curious if you had done some sort of study supporting the claim I noted, but which I had missed.
by BrianTH
Thu May 17, 2007 2:28 pm
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

By the way, some concrete examples may help. So, this is the Erb and Harvey paper in the library: Erb and Harvey On Page 15, Table 2, we can see the historic excess returns of various sectors. Precious metals were easily the worst. Energy was the best, followed by industrial metals. What they call a...
by BrianTH
Thu May 17, 2007 12:39 pm
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

I couldn't get the e-analytics link to work from the Finnegan article and I'm not sure I really see much in the article itself. I can understand why a permanent backwardated precious metals market is theoretically impossible but not from that article. I cannot say the explanations Finnegan gives ar...
by BrianTH
Thu May 17, 2007 11:49 am
Forum: Investing - Theory, News & General
Topic: Commodities in a portfolio
Replies: 35
Views: 13142

We actually discuss this issue quite a bit. It is a complicated subject because there are a lot of different ways to invest in commodities, and a lot of different theories on what might or might not work. I'd suggest searching and reading a bit, and then maybe you could ask some more specific questi...
by BrianTH
Thu May 17, 2007 11:21 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

By the way, although I don't consider this proof I do think my personal experience colors my thinking on the college subject: I went to a top college and loved it. I value my experience quite a bit. My wife went to her State U. (not one of the top ones, incidentally), and I think she believes my exp...
by BrianTH
Thu May 17, 2007 11:10 am
Forum: Personal Investments
Topic: Why not a higher REIT asset allocation?
Replies: 54
Views: 22976

I guess, to steal a page from Fooled by Randomness...if we imagine 100 different ways the past could have unfolded or the future will end up, the vast majority of those will not find any meaningful efficiency from an investment portfolio's allocation to REITS not already found in a balanced, multif...
by BrianTH
Thu May 17, 2007 10:59 am
Forum: Personal Investments
Topic: Why not a higher REIT asset allocation?
Replies: 54
Views: 22976

By the way, I sometimes find it interesting to think about what I would expect the real yield on REITs to be if I didn't know the historic data. I am terrible at that sort of thing, so this is purely speculative. But as I noted, I roughly expect real estate to provide returns somewhere between bonds...
by BrianTH
Thu May 17, 2007 10:43 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Valuethinker, Fortunately, people have studied this issue somewhat closely, so we do not need to rely on anecdotes. The biggest issue in doing such a study is that you have to normalize for the students' other attributes in order to isolate the value added by the school. So, for example, if you find...
by BrianTH
Thu May 17, 2007 10:31 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Agreed on all points. But you failed to back up your point that it's that much cheaper here. From the link I gave: "Pittsburgh is consistently ranked in Rand McNally's Top Ten Most Livable Cities in North America, and here's why: The city's cost of living beats similar metro areas and is 30 percent...
by BrianTH
Thu May 17, 2007 10:11 am
Forum: Investing - Theory, News & General
Topic: Bogleheads' TIPS Intentions
Replies: 12
Views: 4794

I answered B, but I don't plan to add them for a long time.
by BrianTH
Thu May 17, 2007 10:08 am
Forum: Investing - Theory, News & General
Topic: Managed Funds - How do investors still justify using them?
Replies: 51
Views: 24412

Re: Very Rough Look using Fund Screener

... but what's surprising to me is just how few low cost actively managed funds there are. I think that is true in part because active funds just cost more to provide. The most obvious cost component is the active management component. If you are doing something very passive, this may not be too co...
by BrianTH
Thu May 17, 2007 9:50 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Maybe I am missing something, but other than cheap housing (which we STILL "pay" for because the stuff never appreciates), how is living in Pittsburgh much cheaper than living anywhere else? Well, housing is huge of course (even if with the high taxes, if you view them as consumption and not an inv...
by BrianTH
Thu May 17, 2007 9:43 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Daryll, I agree with all your points except #4. There is a huge range of schools between community colleges and the most expensive schools, and many of those schools are excellent, and often arguably offer a better education even if they are not ranked quite as high by USNWR. As an aside, often stud...
by BrianTH
Thu May 17, 2007 9:29 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Valuethinker, $112K AFTER taxes with no housing costs aside from taxes and maintenance and no ongoing child care costs would actually be a huge sum of money to spend in Pittsburgh. I'm frankly not sure how I would do it: that is over $2000 per week. At some point you run out of new toys to buy, and ...
by BrianTH
Thu May 17, 2007 9:16 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Just to be clear, I also believe that those virtues (hard work, creativity, etc.) are usually necessary to success. And in general I have no problem with people taking pride in their accomplishments for such reasons. I just also think that we need to be realistic about the role luck plays in our liv...
by BrianTH
Thu May 17, 2007 8:57 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

Just to make some things clear: Daryll apparently wants to retire early at 47, approximately 20 years earlier than most of his age cohort will retire, and thus his savings up to this point have to replace approximately 20 years worth of additional peak wage income. He also wants to use his savings t...
by BrianTH
Thu May 17, 2007 7:29 am
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

From a practical standpoint, its generally much cheaper and more tax friendly. Maybe, but the devil is in the details. First, as I understand it his approach did not completely work in practice (eg, I gather it missed considerably on oil), and even in theory had to actually ignore the roll return e...
by BrianTH
Thu May 17, 2007 7:21 am
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

I realize your caveat about excluding precious metals but I don't believe there is any reason to do so on a theoretical groud using your insurance argument and I don't have any data calcualting the excess returns without them anyway, so I cannot explain why I would do so or why doing so isn't just ...
by BrianTH
Thu May 17, 2007 6:45 am
Forum: Investing - Theory, News & General
Topic: Reaching the $5 Million Club Takes an Open Mind
Replies: 191
Views: 81141

This just isn't how it works in my experience- my city has 100s of apparently profitable Thai restaurants for example. This is actually a well-known problem in antitrust circles (why do people start new businesses and enter markets when competitive pricing will make it unlikely they can recoup thei...
by BrianTH
Thu May 17, 2007 6:33 am
Forum: Personal Investments
Topic: Why not a higher REIT asset allocation?
Replies: 54
Views: 22976

LH, I'm not sure what else to say. I believe that if you look at the things we discuss here related to asset allocation, and also look at various literature related to asset allocation (such as the books on the recommended reading list), you will see that Tobin's distinction remains a useful concept...
by BrianTH
Thu May 17, 2007 12:05 am
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

Re: Hold Commodity Producers instead of CCFs ?

Given the controversy sorrounding CCFs, a completely naive question. Has any one done an analysis of holding a broad, diversified basket of commodity producer stocks instead of CCFs ? With say a 10% allocation - basically tilting your equity portfolio towards commodity producers ? Does anyone know ...
by BrianTH
Wed May 16, 2007 11:06 pm
Forum: Investing - Theory, News & General
Topic: Managed Funds - How do investors still justify using them?
Replies: 51
Views: 24412

grumel wrote:Great so 20% win over 1 year. Aside costs, 50% should beat the index by pure luck.
And even if the proposed screens got you to 51%, it still wouldn't be worth it to me because of the style drfit problem. I'm not sure how high I would need, but I will be interested to see what people can show.
by BrianTH
Wed May 16, 2007 11:00 pm
Forum: Investing - Theory, News & General
Topic: Managed Funds - How do investors still justify using them?
Replies: 51
Views: 24412

John,

That sounds like a good idea for a study, which to me is the better approach than guessing at the result.
by BrianTH
Wed May 16, 2007 10:42 pm
Forum: Investing - Theory, News & General
Topic: Synthetic Commodities returns...
Replies: 48
Views: 22970

Edit: Wait ... Hotchachka excludes metals and energy? It doesn't surprise me that the remaining basket would have the characteristics in question, but I would include industrial metals and energy, so I am not sure how relevant that study will be. Edit #2: I found the paper and skimmed it quickly. I ...
by BrianTH
Wed May 16, 2007 10:19 pm
Forum: Investing - Theory, News & General
Topic: Poll: deflation
Replies: 49
Views: 21564

So what exactly does the Mises Institute get out of the deal by ... I wasn't trying to imply anything nefarious is going on. All I meant is that they have taken institutional positions on these issues, which is why they are not neutral with respect to this debate (rather, they are a participant in ...
by BrianTH
Wed May 16, 2007 10:05 pm
Forum: Investing - Theory, News & General
Topic: Poll: deflation
Replies: 49
Views: 21564

Joe, I am already somewhat familiar with the arguments in that article, although I am far from expert in macroeconomics. I am also somewhat familiar with the other side of those arguments, and I did not find this article particularly insightful or persuasive. And, of course, the Mises Institute is n...
by BrianTH
Wed May 16, 2007 9:54 pm
Forum: Investing - Theory, News & General
Topic: Japan Stock Market and Long term Market Risk
Replies: 64
Views: 24128

Re: Risk

Yes, the world is very uncertain. But we can and do make choices all the same. Sure, and we did so before expected utility theory was developed. The fact that we make decisions under conditions of uncertainty does not mean that any particular model of such decision making, such as expected utility ...
by BrianTH
Wed May 16, 2007 9:36 pm
Forum: Personal Investments
Topic: Why not a higher REIT asset allocation?
Replies: 54
Views: 22976

Ok, so the first part of the 2 part process is undoable, and has no answer, we both agree. Well, not quite. What I would say is that Tobin originally described the asset allocation process in a highly simplified form, and that it likely cannot be applied in that highly simplified form. Again, thoug...
by BrianTH
Wed May 16, 2007 9:07 pm
Forum: Investing - Theory, News & General
Topic: Managed Funds - How do investors still justify using them?
Replies: 51
Views: 24412

John,

I will just refer you to my post above about exceptionalism.
by BrianTH
Wed May 16, 2007 7:55 pm
Forum: Investing - Theory, News & General
Topic: Managed Funds - How do investors still justify using them?
Replies: 51
Views: 24412

Re: Managed Funds - How do investors still justify using the

Active management is worth something . In other words, I think it is worth some money to have someone slect some stocks, as long as they don't turnover the portfolio too often. I'm just going to note the logical jump here. It is undoubtedly true that active management fulfills some need, or people ...
by BrianTH
Wed May 16, 2007 7:40 pm
Forum: Personal Investments
Topic: emergency funds & short-term investing: TSM not MM/CDs
Replies: 8
Views: 2765

2C is a little tricky. If you have a low-interest line of credit, like a HELOC, I agree it can be a good substitute for cash. Ordinary consumer loans, however, like auto loans, are usually not such a good deal (even when the terms seem good, that is usually because they are giving you that instead o...