Search found 282 matches

by rnitz
Mon Nov 13, 2023 6:45 pm
Forum: Investing - Theory, News & General
Topic: How volatile are long TIPS?
Replies: 65
Views: 8674

Re: How volatile are long TIPS?

Thanks McQ, a very interesting discussion (and somewhat surprising to me). If you're still following the thread, a couple of questions: 1. Eyeballing the graph, Total Bond looks fairly correlated to the Intermediate TIPS but not perfectly so. Is there much diversification/volatility benefit to owning a 50/50 split of both rather than 100% of either. 2. I was a little surprised that TIPS are more volatile than their nominal counterparts. This was because I thought Real interest rates would have a lower dynamic range than Nominal interest rates leading to lower volatilities. This is mostly from my memories of the early 80s when inflation neared 15% as did interest rates, implying that real interest rates were small (depending on the exact mon...
by rnitz
Sun Aug 21, 2022 6:59 pm
Forum: Investing - Theory, News & General
Topic: TIPS invest now?
Replies: 5
Views: 1493

Re: TIPS invest now?

To paraphrase an old Zen koan, the best time to invest in TIPS is 20 years ago. The second best time is now.
by rnitz
Sun May 22, 2022 7:46 pm
Forum: Investing - Theory, News & General
Topic: Fixed / Bonds Allocation: At What Point (if any) in Absolute $ vs Percentages(%)s?
Replies: 40
Views: 2915

Re: Fixed / Bonds Allocation: At What Point (if any) in Absolute $ vs Percentages(%)s?

I did this same line of thought with our bond % a bunch of years ago, and my answer was no: set your bond allocation to a number not a percentage. Set it to a number that if stocks do poorly for a prolonged period of time you're still ok. For us we started with 60/40 at retirement but with equities doing so well over the last decade the question was whether to rebalance. I decided not to, as our bond holdings were at a level that if stocks went to zero forever, we would still have an ok retirement (although not with some of the fun extravagances.) We could be comfortable letting it ride. For us that was the purpose of fixed income: ballast. If the storm hit, we had enough ballast.
by rnitz
Fri Feb 26, 2021 8:24 pm
Forum: Investing - Theory, News & General
Topic: Debt is a Negative Bond - The White Coat Investor
Replies: 541
Views: 37655

Re: Debt is a Negative Bond - The White Coat Investor

I'm blown away by the number of people arguing strenuously that loaning money (bonds) isn't the opposite of borrowing money (debt, mortgage, student loans, whatever).
by rnitz
Mon Nov 30, 2020 8:07 pm
Forum: Personal Finance (Not Investing)
Topic: medicare without supplement
Replies: 47
Views: 5323

Re: medicare without supplement

You pays your money, you takes your chances. We did this with my wife (Medicare only) for seven years. At 72 she got breast cancer. Hospitals/Doctors charged $400K, Medicare chopped it to $100K and we paid $20 K (the 20%). It was a wash in my opinion, but we're now on a Medicare advantage plan with a max $2300 out of pocket. I've only got one question: do you feel lucky (punk - but only for Clint Eastwood fans).
by rnitz
Sat Oct 17, 2020 7:41 pm
Forum: Investing - Theory, News & General
Topic: Has the growing trend of blindly buying index funds caused market inefficiency?
Replies: 52
Views: 7457

Re: Has the growing trend of blindly buying index funds caused market inefficiency?

Saw a great interview with Eugene Fama today who had an interesting (and different) take on this issue that I'd not seen before. He said (paraphrasing):

Who is indexing removing from the active market? If it's the intelligent, disciplined, researched investor then it adds to inefficiency. But if it's removing the casual, flighty, emotional investor then it may add to market efficiency.
by rnitz
Tue May 05, 2020 8:35 pm
Forum: Investing - Theory, News & General
Topic: Share your Re-Balancing Strategy
Replies: 25
Views: 2105

Re: Share your Re-Balancing Strategy

I always thought of myself as a typical boglehead, but in this case I guess I'm wrong. Let me offer a countercultural view. My re-balancing strategy: I don't. I'm retired and started out 60/40 equities/bonds but with the long run up in stocks I'm now closer to 70/30. Note that my bond portfolio is just about where it was when I started, it's just that stocks have zoomed. I set my bond percentage not so much on a percentage basis, but on whether I could reasonably live if stocks went to zero forever (yes, with some cut backs, but a good, reasonable life). My spending hasn't changed, just the net worth and percentages - so why would I buy more bonds (they're still enough). I don't see why you need to tinker and market time (excuse me, "...
by rnitz
Mon May 04, 2020 8:21 pm
Forum: Investing - Theory, News & General
Topic: Share your Re-Balancing Strategy
Replies: 25
Views: 2105

Re: Share your Re-Balancing Strategy

I always thought of myself as a typical boglehead, but in this case I guess I'm wrong. Let me offer a countercultural view. My re-balancing strategy: I don't. I'm retired and started out 60/40 equities/bonds but with the long run up in stocks I'm now closer to 70/30. Note that my bond portfolio is just about where it was when I started, it's just that stocks have zoomed. I set my bond percentage not so much on a percentage basis, but on whether I could reasonably live if stocks went to zero forever (yes, with some cut backs, but a good, reasonable life). My spending hasn't changed, just the net worth and percentages - so why would I buy more bonds (they're still enough). I don't see why you need to tinker and market time (excuse me, "r...
by rnitz
Sat Feb 09, 2019 8:08 pm
Forum: Investing - Theory, News & General
Topic: Why borrow money in RE but not Stocks?
Replies: 39
Views: 5218

Re: Why borrow money in RE but not Stocks?

I'm surprised no one has mentioned it, but having a mortgage while you also have stock/bond investments IS borrowing to own stocks (and/or bonds). Unless you're planning on defaulting (and live in a State/situation where they don't have claim on your other assets), debt is debt. Yes, a mortgage is a much better type of debt than margin loans, but it's a claim on all of your assets. You could sell some of your stock/bond investments and pay down your mortgage, or refinance taking out money to increase your stock investments. How does this matter (other than the aforementioned important callable/non-callable issues and interest rates). Virtually everyone uses leverage in their stock investments (at least starting out) when they have a mortgag...
by rnitz
Thu Jan 10, 2019 8:33 pm
Forum: Personal Finance (Not Investing)
Topic: How did you solve the pre-medicare healthcare riddle?
Replies: 123
Views: 14046

Re: How did you solve the pre-medicare healthcare riddle?

We've been on private insurance purchased on the open market for over 20 years now. I worked at a small company that didn't provide insurance so we priced available plans and bought (at the time) a high deductible plan with a $2,500 deductible (Anthem blue cross). Pricing was on the range of $2K to $3K per year for a family (2 kids) but didn't have a lot of "extras". Luckily when the ACA came in we were grandfathered and they didn't cancel us. It has since doubled to $6K per year but this is much cheaper than the equivalent ACA plan (California) of about $16K per year so we're keeping it. I'm 61 (wife's on Medicare, kids still on the plan) so I'm just hoping we don't get canceled in the next four years.
by rnitz
Sun Nov 25, 2018 7:30 pm
Forum: Investing - Theory, News & General
Topic: What is your allocation to U.S. and International?
Replies: 241
Views: 34462

Re: What is your allocation to U.S. and International?

abuss368,

Currently 70/30 (US equities/Int'l equities). Was closer to 60/40 as a target, but recent under-performance of Int'l (and tax drag to rebalance) has it is what it is.

If I remember correctly, the last poll of bogleheads (back when they allowed polls) was that only about 5% had no Int'l equities. Doesn't seem to jibe with the earnestness of various posters recently.
by rnitz
Wed Nov 21, 2018 7:24 pm
Forum: Investing - Theory, News & General
Topic: Taxable Account in Retirement: What Is Reason to Direct Dividends to MM for Spending/Not Reinvest?
Replies: 21
Views: 2699

Re: Taxable Account in Retirement: What Is Reason to Direct Dividends to MM for Spending/Not Reinvest?

In retirement most people need money from their investments to satisfy their expenses/lifestyle (some may have pensions that more than cover spending, but put those aside). So you need to sell some assets. 1. Dividends can be (should be?) thought of as forced sales of that investment. You don't have a choice and you pay taxes on that "sale", typically the same as long term capital gains. 2. Given you HAVE to make that sale and your going to make other asset sales to live on, why go through that forced sale, rebuy that asset, and then sell even more assets to live on? 3. If you sweep those dividends into a MM account and find out you don't actually need that much that year (due to a windfall or whatever) you can always manually inv...
by rnitz
Wed Oct 24, 2018 8:32 pm
Forum: Investing - Theory, News & General
Topic: Stocks, Inflation, and the Strategic Implications
Replies: 25
Views: 2962

Re: Stocks, Inflation, and the Strategic Implications

I think what may be missing is that the correlation of stock performance with inflation is not linear (with respect to the level of inflation). During small or moderate levels of inflation, stocks are a great inflation hedge. But at higher levels of inflation (when you really care about it) they are not. This graph from Dimson, Marsh, and Staunton over international markets captures this well. If you're counting on high equity exposure to give you safety under conditions of high, unexpected inflation you may be disappointed.

Image
by rnitz
Sun Oct 14, 2018 7:36 pm
Forum: Investing - Theory, News & General
Topic: Does international really buy you diversification?
Replies: 43
Views: 6087

Re: Does international really buy you diversification?

I think the real issue is diversification to what? What phenomenon are you trying to diversify against? If it's the short term random noise of stock movements then there isn't much diversification, as the international correlation to US equities have increased over the years (although less recently). Also not much difference between 4,000 stocks and 10,000 stocks. However, there are many other phenomena to diversify against. Against varying countries' economic growth? It should already be factored into prices, and economic growth doesn't usually positively correlate to stock performance. Against currency degradation? Yes, if the dollar should be debased (1970s anyone?) then international should diversify. Sector correction (Valuethinker's s...
by rnitz
Wed Oct 10, 2018 7:57 pm
Forum: Investing - Theory, News & General
Topic: Diversifying with a zero-correlation, zero-return volatile asset
Replies: 66
Views: 5166

Re: Diversifying with a zero-correlation, zero-return volatile asset

This is an easy one. The answer is C. I don't need to know any statistics, math, finance, or other factors. I only need to have read Nisiprius posts for the last 10 years to know this is driving one of his points about how, unless it adds value, that adding randomness can't be improving your situation (unless you're dithering a signal :) ).
by rnitz
Tue Sep 25, 2018 8:47 pm
Forum: Investing - Theory, News & General
Topic: Equities as a hedge against inflation
Replies: 36
Views: 3491

Re: Equities as a hedge against inflation

I'd be interested in the distinction between stocks performance under moderate inflation (0-4%) vs. high inflation (>5%). My understanding is that stocks are a great inflation hedge when inflation is modest (when you don't care) and is not so good when you have high inflation (aka the 70's type of inflation, when both stocks and bonds got hammered). My knowledge/google-foo is limited, so I'd love input from those who have much better knowledge than I.
by rnitz
Thu Sep 06, 2018 8:14 pm
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 6887

Re: Where's the Inflation Hedge for Short-Term TIPS?

unclescrooge wrote: Thu Sep 06, 2018 10:18 am
Rager1 wrote: Sun Aug 26, 2018 11:20 am Don't forget that TIPS are designed to protect you from "unexpected" inflation. That hasn't happened yet.

Ed
Given that the US dollar is the world's reserve currency and much more stable than say, Argentina or Venezuela, under what circumstances would an American investor experience unexpected inflation?
Perhaps an investor from 1966-1982. There's a reason that this period is worse than the great depression for retirement investors. Hint: the reason begins with "I".
by rnitz
Wed Sep 05, 2018 6:10 pm
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 6887

Re: Where's the Inflation Hedge for Short-Term TIPS?

I have a different view on TIPS from most BHs. Since my stock returns are positively correlated with inflation, I don't need to use TIPS to hedge against the inflation risk. My stocks are the protection against inflation. OTOH, If my portfolio were 100% bonds, then I'd use TIPS because my portfolio will have no protection against inflation. You probably have more knowledge than I, but my understanding was that this was particularly true for moderate inflation (2-4%), but for higher inflation (>5%) stocks have historically done poorly. Not necessarily bear market, money losing poorly but rather more poorly than long term averages. The risk being that if we have that higher level of inflation your stocks returns may be poor when your nominal...
by rnitz
Sun Aug 26, 2018 8:08 pm
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 6887

Re: Where's the Inflation Hedge for Short-Term TIPS?

The original premise that TIPS are purported to be an inflation hedge is not correct. That is too strong of a term. TIPS diversify the risk of inflation being higher than the market expects. They do not eliminate the risk. In fact, they only attempt to eliminate the risk in themselves. Nominal treasuries have inflation risk and term risk. With TIPS the inflation risk of the bonds goes away but you still have term risk. TIPS certainly do not hedge any inflation risk in other assets held. I second this comment (not that jalbert needs any "seconding"). TIPS aren't "insurance", they are a different type of bond. Nominal bonds (and funds) have nominal interest rate risk. TIPS (and TIPS funds) have real interest rate risk. I ...
by rnitz
Thu Aug 16, 2018 8:23 pm
Forum: Investing - Theory, News & General
Topic: Fidelity 401(k) millionaires hits record high
Replies: 48
Views: 6988

Re: Fidelity 401(k) millionaires hits record high

Or, take a cue from Mr. Romney - you might as well overshoot this target by 100x times over! He's 71 now, so those RMDs should be kicking in now. :D I wonder what strategy he is using to avoid paying taxes on the RMDs. Given the effort he has put into tax minimization strategies he must have a really interesting RMD and associated tax avoidance strategy. Personally, I think he is either buying life insurance with them, probably with some entity setup for this purpose, to create a non-taxable event plus QCDs, maybe put a tiny bit in a QLAC too. This will effectively allow his money to grow further and tax free. Or he might be working for an entity with a agreeable 401k plan, he transferred the IRA into the 401k before having to pay RMDs, an...
by rnitz
Thu Jul 12, 2018 8:25 pm
Forum: Investing - Theory, News & General
Topic: The value of international stocks, in pictures
Replies: 81
Views: 21203

Re: The value of international stocks, in pictures

To me, the question is diversification to what? To little random performance movements up or down? No I don't need that. To major movements of currency value? Yes, that could have some value - if the dollar goes into the sh*tter for a large number of years then yes international diversification has a lot of value. The real issue to me is do you want to bet on one country - the US. I live in the US, I've worked in the US my whole life, most of my assets are denominated in US currency, virtually all of my spending will be in the US, I personally think it's the greatest country in the world (no disrespect intended). But last century's US outperformance was largely based on the fact that major world wars devastated everyone else. If we have a m...
by rnitz
Mon Jul 09, 2018 8:39 pm
Forum: Investing - Theory, News & General
Topic: WCI blog post - "This Real Estate Bubble - Likely Isn't a Bubble"
Replies: 109
Views: 17285

Re: WCI blog post - "This Real Estate Bubble - Likely Isn't a Bubble"

My view on this is to go back to first principles. The factors that should impact the rise in residential real estate prices should be:

1. Materials cost (wood, fixtures, etc.) - go up roughly with inflation.
2. Labor cost - go up slightly more than inflation.
3. Land cost - the big unknown. Dependent on geography (San Francisco, Manhattan, etc.) but more likely on regulatory costs (unavailability of more land, fees, etc.) and the biggie: desirability of the area.

It's a bubble if the increases in real estate prices are way above these principles. Again, all real estate is local. How does your locality look according to these principles?
by rnitz
Sat Jun 30, 2018 8:12 pm
Forum: Investing - Theory, News & General
Topic: Yes, It’ll Happen - Jonathan Clements
Replies: 33
Views: 8142

Re: Yes, It’ll Happen - Jonathan Clements

CurlyDave wrote: Sat Jun 30, 2018 7:49 pm
The Wizard wrote: Fri Jun 29, 2018 4:19 pm
nova1968 wrote: Fri Jun 29, 2018 9:49 am It reemphasizes the value of a pension. For example if your pension is 40K a year it equivalent to withdrawing 4% on a 1 million dollar account.
Sort of.
But with a $1M account, I have $960,000 left in my account/estate if I die one year into retirement.
With the pension, not so much...
The $960k is not going to go with you. It makes no difference at all to you.
It does if you care about your children. Or charitable organizations of your choice.
by rnitz
Sat Jun 23, 2018 8:08 pm
Forum: Investing - Theory, News & General
Topic: Do you invest in Real Estate ? Why ?
Replies: 175
Views: 33574

Re: Do you invest in Real Estate ? Why ?

No. Because my stock and bond portfolios at Vanguard have never called me at a crucial time at work and said "water is poring down through my ceiling from your unit above me. What are you going to do about it?"*

*- Which actually happened to me when we had rental units. As well as neighbors complaining about tenants drinking in their driveway. As well as fights about damage to a unit. As well as...
by rnitz
Sat Jun 23, 2018 8:01 pm
Forum: Investing - Theory, News & General
Topic: Retiree do's and don't's in a rising rate environment by Christine Benz
Replies: 14
Views: 3365

Re: Retiree do's and don't's in a rising rate environment by Christine Benz

I think it should be noted that it's important to consider WHY interest rates rise, on bond portfolios. If it's due to real rises in the interest rate, then (nominal) bond investors will eventually be rewarded with higher returns on their bond portfolio. But if interest rates rise due to an increase in inflation then their bond losses are permanent (at least until inflation drops). Any higher bond returns are eaten up by the higher inflation and it's just a dead weight loss. TIPS of course can mitigate this somewhat.

Agree of course with those who point out the need to look at the whole portfolio.
by rnitz
Fri Jun 08, 2018 9:03 pm
Forum: Personal Finance (Not Investing)
Topic: "Open Social Security" calculator: feature requests, bug reports, etc.
Replies: 641
Views: 88280

Re: "Open Social Security" calculator: feature requests, bug reports, etc

I'm embarrassed to post this, but our circumstance seem to break the calculator. I'm 60 and trying to determine when to collect SS. My wife is much older (74) and claimed 12 years ago because we had young children and they would collect. The age limitation wouldn't allow her age. If we accepted the oldest age the calculator hung and wouldn't calculate. I kept moving the age of my spouse until it worked, but I though I'd mention it to you. Love your posts and your blog (and books).
by rnitz
Thu Mar 29, 2018 10:06 pm
Forum: Investing - Theory, News & General
Topic: What's your U.S. : International ratio?
Replies: 246
Views: 52573

Re: What's your U.S. : International ratio?

Interesting from the poll results that only 5% of respondents are 100% US only. I would have guessed many more, from my casual perusal of previous threads on the topic. Of course, the poll has some problems (no 90:10, doubles 60:40, it's 10 years old but still accepting votes, etc.) so maybe that's it.
by rnitz
Thu Mar 22, 2018 8:57 pm
Forum: Investing - Theory, News & General
Topic: I’m looking for a word...
Replies: 114
Views: 14298

Re: I’m looking for a word...

Preference cascade?
by rnitz
Mon Jan 01, 2018 7:42 pm
Forum: Investing - Theory, News & General
Topic: International stocks -- lose rebalancing benefit with total international index?
Replies: 14
Views: 2349

Re: International stocks -- lose rebalancing benefit with total international index?

edge wrote: Mon Jan 01, 2018 5:50 pm Ferris is probably right but it’s just not worth the trouble for me.
Any other comments? Anyone? Bueller? Anyone?
by rnitz
Sun Dec 24, 2017 7:06 pm
Forum: Investing - Theory, News & General
Topic: Implications of tax bill on residential real estate (house prices)
Replies: 62
Views: 8446

Re: Implications of tax bill on residential real estate (house prices)

A couple of thoughts to bound this issue: As mentioned previously, 70% of taxpayers don't itemize. This reduces the issue to the less than third of population (of which most of us bogleheads are) that are in the upper income levels. Nearly a third of homeowners have no mortgage. I don't know how much overlap there is to the itemizers vs. no mortage group but I think it reduces it further (we're in the camp of itemizers with no mortgage). Although the limit of mortgage deduction is lowered from $1M to $750K, other than that there's no impact on existing homeowners interest-deduction taxes. The fact that they give a larger standard deduction doesn't hurt homeowners taxes, it just helps non-homeowners (and those with no mortgage) with some of ...
by rnitz
Tue Dec 19, 2017 7:28 pm
Forum: Investing - Theory, News & General
Topic: Craig Rowland not blogging anymore on Permanent Portfolio.
Replies: 34
Views: 8446

Re: Craig Rowland not blogging anymore on Permanent Portfolio.

Didn't know who this Craig Rowland guy was. Read the thread with moderate interest until I realized he was the famed "craigr" who I've enjoyed so much and learned from on this forum over the years :oops: . Just a chance for me to say "thanks" to Craig - you are indeed a classy guy. Glad to hear you're chasing new and interesting things.
by rnitz
Sun Nov 26, 2017 8:06 pm
Forum: Investing - Theory, News & General
Topic: Have TIPS truly been tested yet?
Replies: 48
Views: 6032

Re: Have TIPS truly been tested yet?

simplesauce wrote: Thu Nov 02, 2017 9:39 pm Can one really put 25-50% of their bond portfolio into TIPS comfortably?
Yes, of course. I'm another one. Remember, the risk in bonds is not interest rate risk (which you regain in roughly the number of years of the duration of your bonds) but inflation risk - which is permanent.

If it gives you confidence, you might look at the types of posters that are comfortable with TIPS (Nisiprius, dbr, Phineas J. Whoopee, White Coat Investor, etc.)
by rnitz
Mon Oct 16, 2017 8:53 pm
Forum: Investing - Theory, News & General
Topic: Currency risk?
Replies: 42
Views: 4857

Re: Currency risk?

I think one of the reasons for differences in opinions on international and currency exposure is their base frame of reference. What do I mean by this - those that see exposure to other currency variation as of no value, and only negative added volatility are measuring their situation based on a view that their currency ( the dollar) is rock solid and all measurements can be absolutely measured against this. I think this is false. If the dollar goes into the sh*tter US investors will be impacted negatively, as imports will cost more, inflation will increase, even non-imported products will be impacted. Yes, some companies will benefit from better exports, but the US consumer will suffer. Dollar only investors and consumers ALREADY HAVE CURR...
by rnitz
Sun Oct 08, 2017 8:18 pm
Forum: Investing - Theory, News & General
Topic: Vanguard's long-term outlook for TIPS
Replies: 92
Views: 11600

Re: Vanguard's long-term outlook for TIPS

Prokofiev wrote: Sun Oct 08, 2017 6:35 pm ... TIPS are a terrible way to GET rich. But an excellent way to STAY rich.
Forgive me for truncating, but what a fantastic, pithy summary. I hope you don't mind me stealing it (with proper respect to your compositions).
by rnitz
Fri Sep 29, 2017 8:04 pm
Forum: Investing - Theory, News & General
Topic: Why Long-Term Corporate Bonds (e.g. VBLTX) so Unpopular?
Replies: 15
Views: 3646

Re: Why Long-Term Corporate Bonds (e.g. VBLTX) so Unpopular?

Perhaps they're unpopular due to the risk (vs. their return). What happens if interest rates (and inflation) pop a couple of points? Vanguard shows a duration of about 15 years, so a two point increase in rates would mean a 30% loss of your investment. But you'd make it back with higher interest rates right? No. Not if inflation also increased.

Many think bonds are for safety. Long term bonds have a particular risk that many of us don't want to assume in the "safe" part of our investment portfolio.
by rnitz
Fri Sep 22, 2017 8:23 pm
Forum: Investing - Theory, News & General
Topic: Retirees, what is your marginal tax rate?
Replies: 102
Views: 13984

Re: Retirees, what is your marginal tax rate?

Things may be different, depending on your circumstance. Modestly early retiree (late 50's), with basically a three-fund portfolio, almost all in taxable accounts. AGI: > $ 100K (MFJ) Fed agg. rate: -1.5% (yes, they send us a check, with no withholding) State agg. rate (CA): 2% Fed marginal rate ($1 increase): 0 State marginal rate ($1 increase, CA): 9.3% Fed marginal rate ($ 10K increase): 15% State marginal rate($ 10K increase, CA): 9.3% Circumstances: we still have two kids who are dependents, and in college. This gives us the deductions and exemptions to drop us just below the $75K level where capital gains and stock dividends are taxed at 0. Also, the college education tax credit is what drops us into negative territory for Federal tax...
by rnitz
Mon Sep 18, 2017 9:06 pm
Forum: Investing - Theory, News & General
Topic: The Difference Between Risk and Uncertainty
Replies: 44
Views: 5756

Re: The Difference Between Risk and Uncertainty

I value the economist definition of risk as standard deviation - it has value, it's calculable, you can use it. But it doesn't meet an everyday definition of risk.

I come to your house with a bag of cash. I tell you that I'm going to flip a coin and if it's heads I'll give you $ 10,000 and if it's tails I'll give you $ 1,000,000. To the economist I've drastically increased the risk to your household. To a normal person, he says "Yippee".
by rnitz
Fri Aug 25, 2017 8:53 pm
Forum: Personal Finance (Not Investing)
Topic: Is Geico a bait and switcher?
Replies: 32
Views: 15982

Re: Is Geico a bait and switcher?

We were caught in a GEICO bait and switch (not making a statement of their general policies, only our experience). My daughter had a troublesome auto accident (dui, her fault) and we'd been paying high specialty insurance rates. After several years we tried GEICO - we have high liability coverage (no comprehensive, but 500K liability) and the agent said no problem and gave us a quote several hundred dollars less than we were paying. We said great and went through the conversion with them. They then said that when they ran the numbers that the cost would be more, and they could only do 300K liability. We gritted our teeth and said ok, gave them the credit card number, committed to the change, paid the rate, got the insurance certificates and...
by rnitz
Thu Aug 10, 2017 6:49 pm
Forum: Personal Finance (Not Investing)
Topic: College and Paying for it
Replies: 61
Views: 8082

Re: College and Paying for it

I'm familiar with Stanford's policies, for parental incomes of $65K and below (and "typical" assets), it's a complete free ride - no parental contribution. For parental incomes of $125K and below (and "typical" assets) it's tuition free. You can typically get some discount for incomes up to $225K.
by rnitz
Wed Jul 26, 2017 8:51 pm
Forum: Investing - Theory, News & General
Topic: International correlations hit 20 year low
Replies: 33
Views: 4457

Re: International correlations hit 20 year low

nisiprius wrote:The global crash during 2008-2009 shows that you should not look to international stocks for disaster mitigation.
For this particular disaster. I'll have to bone up on my history of the 20th century, but I believe there are some country specific disasters that international diversification might have helped.
by rnitz
Sun Jul 16, 2017 8:57 pm
Forum: Investing - Theory, News & General
Topic: DImensions of investment risk.
Replies: 15
Views: 2067

Re: DImensions of investment risk.

I think the problem with your proposition is that risk is multi-dimensional. And by that I don't mean two or three dimensions, I mean hundreds or thousands of dimensions. Risk of what? Interest rate increase? Many companies have different exposure to interest rates (if they actually increase). Inflation risk (related to interest rate risk, but not identical) - many companies, bonds, investors have different exposure to this risk. Geopolitical risk - if Russia invades Ukraine that's a different risk exposure. If there's political instability in the US, a different set of risk exposures. If there's a reduction in US corporate tax rates, a different selection of risks. AI/robot risk of eliminating employees? You can go on forever. I'm not a sl...
by rnitz
Sat Jul 15, 2017 8:21 pm
Forum: Investing - Theory, News & General
Topic: Is now time to move into international stocks?
Replies: 57
Views: 9802

Re: Is now time to move into international stocks?

To paraphrase (badly) an old Zen koan: the best time to move into international stocks was when your asset allocation in your IPS said that this was the right long term allocation for you. The second best time is today (if indeed your IPS says that's your long term allocation).
by rnitz
Sat Jul 01, 2017 7:45 pm
Forum: Investing - Theory, News & General
Topic: would you take a new mortgage to invest in stock market?
Replies: 30
Views: 4960

Re: would you take a new mortgage to invest in stock market?

Yep I would and I am by holding a mortgage. So is everyone else that has a mortgage. emoore has it right. Taking out a mortgage and investing in stocks IS THE EXACT SAME as having stocks and still having a mortgage. If you have stocks (outside of tax/401K/IRA considerations) and still have a mortgage, your are doing exactly what is proposed by OP. Having leverage (debt) that allows you to invest in risk investments (stocks and bonds). You can always sell the stocks and pay down the mortgage (or the converse, increasing the mortgage with a HELOC et.al. to increase your investment accounts). Note that I don't argue this is a bad decision, only the people realize that debt (even a mortgage) is leverage. The only issue is your ability/desire t...
by rnitz
Fri Feb 03, 2017 7:41 pm
Forum: Investing - Theory, News & General
Topic: No Inflation-Adjusted SPIAs at Vanguard
Replies: 120
Views: 10806

Re: No Inflation-Adjusted SPIAs at Vanguard

willthrill81 wrote:
grayfox wrote: :idea: That leaves TIPS as the only bulwark against unexpected inflation.
I don't get why anyone likes TIPS. They guarantee you a 0% real return. That's only slightly better than a savings account. Granted, it's a guarantee, but it's a guarantee to never get ahead.
You do realize that TIPS pay roughly the same as nominal treasuries, right? (assuming inflation is as expected). If inflation is higher (the trouble case) then they pay more.

Do you also don't get why anyone likes nominal Treasuries?
by rnitz
Mon Jan 23, 2017 8:22 pm
Forum: Investing - Theory, News & General
Topic: Good blog article: Cracking the currency code
Replies: 3
Views: 811

Re: Good blog article: Cracking the currency code

Yes, I agree with you - I thought it was a great article (for the same reasons, it agrees with my predispositions :) ). I've often thought that much of the disagreements with the many smart, disciplined investors on this forum are due to differences in frames of reference. For the disagreements on international equities it comes down to whether the currency volatility is a pure drag (see Nisiprius, et. al.) or whether it is currency diversification. If your reference measurement metric is the rock solid fixed dollar (because your expenses are in dollars) then currency volatility gives you nothing. If your reference frame is the purchasing power of your currency (given imports, mixed int'l content of your purchases, oil, etc.) then currency ...
by rnitz
Fri Jan 06, 2017 9:12 pm
Forum: Personal Finance (Not Investing)
Topic: What monetary value has your education provided you?
Replies: 107
Views: 9851

Re: What monetary value has your education provided you?

My gut feel is $0 (this is with a lot of discussions, analysis, and reflection). This may be controversial in that I have excessive education credentials: several degrees from Stanford (AB in Mathematics, BS in EE, MS in EE) and a Harvard MBA. In my Engineering career (chip designer, satellite modem designer, engineering manager and director) I never had to use more math than I learned in High School. Everything useful I learned at work. If I could have got my job with an IQ test, both me and my employer would have been much better off financially. As to my Harvard MBA, I ended up starting my own company (self funded). Perhaps there was value I don't appreciate, but it isn't financial. To be clear, I had a fantastic time in college and it w...
by rnitz
Mon Dec 19, 2016 8:27 pm
Forum: Personal Finance (Not Investing)
Topic: What kind of person buys a franchise?
Replies: 49
Views: 8942

Re: What kind of person buys a franchise?

I've only known one guy. He was a Dad for a kid on my son's soccer team. He went to the local state school, working at Domino's as a grunt and eventually managing it. The owner saw he was dedicated and smart got him to manage several other of the other outlets. Eventually bought one of his own (after graduation, and still managing the others). When I knew him from soccer, he owned three and managed a handful of others. They recently moved to a $2M house and putting their kids through private school. A great guy, and a great story. Everyone's different.
by rnitz
Fri Dec 02, 2016 8:09 pm
Forum: Investing - Theory, News & General
Topic: Company common stock now worthless (from stock options)
Replies: 7
Views: 2209

Re: Company common stock now worthless (from stock options)

I was in a somewhat similar situation. If you wish to have a little more comfort on the tax basis you can sell the stock to someone (friend, coworker, whomever) for a dollar and you therefore have some documentation of the value of the sale price.
by rnitz
Mon Oct 24, 2016 7:52 pm
Forum: Investing - Theory, News & General
Topic: A better measure of retirement security
Replies: 13
Views: 5546

Re: A better measure of retirement security

bobcat2 wrote:An important takeaway of the best measure of retirement security

Once you realize that the chief retirement risk is standard of living risk, it naturally follows that the safest assets are not T-bills and other short-term fixed income, but rather long-term real bonds that are duration matched to your targeted stream of retirement income.

BobK
What if you have children that probably can't make it on their own, and you want to help them. Can we simply plug in the factors about how much we love them vs. our standard of living risk? (OK, that was snarky and I apologize, but how do you fold in the desire for a legacy in your retirement plans using LMP?)
by rnitz
Mon Aug 22, 2016 9:12 pm
Forum: Investing - Theory, News & General
Topic: TIPS - Did you give up?
Replies: 493
Views: 101233

Re: TIPS - Did you give up?

This http://www.etf.com/sections/index-investor-corner/swedroe-embracing-negative-real-yields?nopaging=1 That is a great article by Larry. I think he cuts through a lot of the confusion around TIPS in a very effective (and efficient) manner. When I establish my post-retirement portfolio, I expect that a TIPS ladder will provide at least half of the fixed income component. I like the idea of buying individual bonds at auction and holding them to maturity, so TIPS will fit in well with that. I may be paying a small amount for "inflation insurance," but the primary purpose of my fixed income allocation will be "preservation of purchasing power." I am not aware of anything that can provide this more securely and predictably...