Search found 3539 matches

by garlandwhizzer
Fri Mar 15, 2024 5:15 pm
Forum: Investing - Theory, News & General
Topic: 5M, probably enough to retire to a frugal lifestyle
Replies: 180
Views: 15186

Re: 5M, probably enough to retire to a frugal lifestyle

unwitting_gulag wrote: Having been a California renter for a while, I'd aver that this particular application of the "greater fool theory" is actually solid and stable. It's easy to dip into frustration with overcrowding and associated local ills, but we have the example of the defense industry bust 30 years ago, to gauge what happened with real estate prices long term. Answer: they dipped, and by some reckoning crashed... but a decade later, they recovered, and then some. I agree that the greater fool theory will still work in coastal California real estate but not to the egregious extent it did in the past. I bought a small 1 BR condo with access to a pool in Mountain View right on the border with Palo Alto in 1973. It cost 36K...
by garlandwhizzer
Fri Mar 15, 2024 2:04 pm
Forum: Investing - Theory, News & General
Topic: 5M, probably enough to retire to a frugal lifestyle
Replies: 180
Views: 15186

Re: 5M, probably enough to retire to a frugal lifestyle

Coastal California has outrageously priced real estate, high state taxes, high sales tax, and high cost of living in general. In short it is a very expensive place to live. Most who have resided there for long years could never afford to buy the house they live in now if they had to. There is no way their children will be able to afford to buy a home in their own coastal neighborhood unless they are trust fund babies or their parents can give them the necessary price of admission. I know, I used to live there. It was a wonderful but expensive place to live before the hordes arrived and it got less wonderful and more expensive. On the other hand, 5 mil is a lot of money and if invested with a widely diversified portfolio dominated by equity ...
by garlandwhizzer
Wed Mar 13, 2024 9:44 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27399

Re: Dot.Com Era/AI Era?

There is something like the feverish enthusiasm of 1999 in the current AI craze but it is not as far from reality IMO. Having lost millions in the dot com bust because I fell for the hype that had worked so well for years. I personally believe AI will end in a bubble popping but not yet. It still has legs to run for a while but at some point, the clock will strike midnight. How much AI is going to improve GDP growth, household wealth and corporate profits is an open question. It will certainly increase efficiency in some areas, but as it does so it will kill lots of jobs. Its financial benefits will flow away from the lower skilled to the higher educated, higher skilled. Tech advances have done that in the last couple of decades and transfo...
by garlandwhizzer
Wed Mar 13, 2024 2:06 pm
Forum: Investing - Theory, News & General
Topic: Index Investing Basics - Revisited
Replies: 125
Views: 7937

Re: Index Investing Basics - Revsited

In 2020, a backtesting review of nominal bond performance, especially LTTs, over the prior 4 decades would revealed not only robust consistent real returns but better risk adjusted returns even than US equity over that period. No one in 2020 argued against bonds especially LTT which were at that time declared the safest asset that you could hold. The Forum posts were dominated by bond lovers, especially LTT. There was in fact at the time a massive bubble in the bond market especially LTT brought about by 4 decades of declining inflation and declining rates. Like most bubbles it was invisible to investors at the time. They had been riding happily on the bond gravy train for 4 decades and it's always hard to depart from winners. Then the bubb...
by garlandwhizzer
Wed Mar 06, 2024 2:29 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27399

Re: Dot.Com Era/AI Era?

There is tremendous animal spirit hype in the financial markets about AI now, as there was in the past about the dot coms, the internet, the smart phone revolution, online merchandising replacing bricks and mortar, the cloud, electric cars, the explosion of social media, and the latest, AI. Many of the firms that benefitted from past tech hype like AMZN, APPL, MSFT, TSLA, META, G00GL, NVDA, etc., turned out to be not just hype driven dreamers but financially strong, highly profitable quality companies that still command very high (some would say ridiculously high) valuations. NVDA is the latest of these and has benefited greatly from the massive outperformance of the long line of hype driven tech leaders that preceded it. MOM investors have...
by garlandwhizzer
Fri Mar 01, 2024 3:13 pm
Forum: Investing - Theory, News & General
Topic: Are We in a Stock Market Bubble? (Ray Dalio)
Replies: 132
Views: 15397

Re: Are We in a Stock Market Bubble? (Ray Dalio)

I agree with Mr. Dalio that we are not at present in a bubble that is about to pop when you look at the market as a whole. IMO there some mega-cap tech darlings are now magnets for performance chasing short term MOM investors and their valuations already have so much anticipated future good news baked into them at current prices that their intermediate and longer term returns are going to be dramatically less than their recent past. On the other hand, these stocks do produce considerable and growing profits, have dominant market positions, expected future top and bottom line growth well into the future, relative resistance to a slowing economy, high return on equity, strong balance sheets with lots of cash, deep moats around their business ...
by garlandwhizzer
Tue Jan 30, 2024 2:25 pm
Forum: Investing - Theory, News & General
Topic: The number one reason why investors fail
Replies: 94
Views: 15817

Re: The number one reason why investors fail

An excerpt from the article: Right now, the past looks pretty good. Investors who bought into Vanguard’s popular S&P 500 fund VFINX and kept their money there with dividends reinvested achieved annualized returns of 13.8% over the past 15 years, 11.9% over the past 10 years, and 15.5% over the past five years. Those returns (through the end of December 2023) were easy to achieve. Yet many investors — perhaps most — didn’t do that well. I agree with Elysium that the dates are cherry picked, right at the end of the GFC 2009 which ended the full lost decade of hugely disappointing performance for the S&P 500 1999 - 2009. I don't think Mr. Merriman suggests that we should expect these returns going forward, only that using cherry picke...
by garlandwhizzer
Sat Jan 27, 2024 5:25 pm
Forum: Investing - Theory, News & General
Topic: The number one reason why investors fail
Replies: 94
Views: 15817

The number one reason why investors fail

The following article is written by Paul Merriman who formerly promoted the Ultimate Portfolio of 10 equity ETFs, basically equal splits between indexes both large and small cap, between cap weight and value, roughly split between US 60% and INTL 40%. Not exactly a simple portfolio which adds complexity when annual rebalancing, or liquidating assets for cash, or increasing assets with investable cash. It's only equity so you must add fixed income ETFs. Not exactly and easy portfolio to manage long term but certainly a very widely diversified one in equity. How has that the Ultimate Portfolio done? It underperformed the S&P 500 index fund for 1 yr, 3 yr, 5 yr, 10 yr, and 15 years, not slightly but by a lot. Mr. Merriman is an honest and ...
by garlandwhizzer
Fri Jan 26, 2024 11:41 am
Forum: Investing - Theory, News & General
Topic: How Taylor Larimore made a difference in my financial life - Salute to Taylor's 100th
Replies: 53
Views: 10226

Re: How Taylor Larimore made a difference in my financial life - Salute to Taylor's 100th

Happy birthday, Taylor, and thanks for your financial and intellectual support of the Forum which spreads good fortune to all who follow it and heed its advice. Taylor sets an example for altruistic service to aid the financial outcomes of other investors. Like Bogle himself, Taylor concentrates on improving our finances rather than maximizing his own gains. He is a morally good and honest man, a patriot, an astute and successful investor, and he has something that many other highly intelligent investors lack, wisdom. Those of us who follow the Forum owe him great debt and wish him the best.

Garland Whizzer
by garlandwhizzer
Tue Jan 23, 2024 12:45 pm
Forum: US Chapters
Topic: South Florida Local Chapter
Replies: 628
Views: 213461

Re: South Florida Local Chapter

I would just like to wish Taylor the very best on his 100th, truly worth celebrating such a long and productive life and so helpful to the many thousands of others whom he helped without every personally knowing them. I thank him for all he's done for me and other Bogleheads with his sage advice and example of generous help rather than self-aggrandizement. He is, like his hero, Jack Bogle, a brilliant and successful investor, a wise man, and something rare in the world of finance, an altruistic expert who tries his best to help others rather than stuffing his bulging pockets with yet more hundred dollar bills. I place both Taylor and Jack on the Mount Rushmore for investors and also as examples of how the rest of us mortals should model our...
by garlandwhizzer
Thu Jan 11, 2024 3:46 pm
Forum: Investing - Theory, News & General
Topic: Stocks as part of inflation protection?
Replies: 23
Views: 2348

Re: Stocks as part of inflation protection?

aristotelian wrote: In the short term, yes, stocks can go down when inflation spikes. In that sense they do not offer inflation protection. However, long term, inflation represents the biggest risk to long term bonds and historically equities have been needed to sustain higher portfolio withdrawal rates. If you do not have the luxury of putting your entire portfolio in TIPS, equities have offered the best protection against long term inflation, whereas bond heavy portfolios typically have lower success for a given withdrawal rate. 1+ Well put. Stocks offer good long term inflation protection. The problem is: how long do you have to wait for the protection to arrive? Long term is not precisely defined but eventually it comes. Equity made go...
by garlandwhizzer
Wed Jan 10, 2024 2:59 pm
Forum: Investing - Theory, News & General
Topic: Explain the benefit of bond fund duration matching to me
Replies: 59
Views: 6427

Re: Explain the benefit of bond fund duration matching to me

Personally, I believe that you should match your average duration to you risk tolerance instead of the date when you expect to need the money. Shorter duration carries less principal risk but is expected to earn lower yields long term. I believe it best to balance bond volatility/risk with expected return so that whatever happens--you die sooner than expected, you suffer dementia and/or accidents/disease/stroke and require expensive health care far in excess of what you anticipated, lawsuit, children with financial emergencies, sudden inflation spike or persistent inflation for years that devastate long duration bonds, etc.,--whatever happens your bond portfolio has sufficient flexibility for to respond. Don't shortchange safety and stabili...
by garlandwhizzer
Sun Jan 07, 2024 8:50 pm
Forum: Investing - Theory, News & General
Topic: Is the Magnificant 7 stocks too heavily weighted within vanguards S&P 500 funds
Replies: 47
Views: 9204

Re: Is the Magnificant 7 stocks too heavily weighted within vanguards S&P 500 funds

Nisi wrote: A few years ago, "fundamental indexing" was all the rage. These were index funds that used a modified index in which the amount of each stock was not based on market cap, but on economic fundamentals. One of the benefits was supposed to be keeping investors out of fads and bubbles. One of the oldest and largest is the Schwab Fundamental US Large Company Index Fund. Here's how its done since inception: 1+ Well stated, nisi. Fundamental indexing was created by Rob Arnott who is a very knowledgeable and very smart guy. It aims to select stocks not based on market price which we know errs from tine to time with LC growth bubbles, but instead with what stocks should sell for based on their demonstrable fundamentals such as...
by garlandwhizzer
Sun Dec 31, 2023 3:48 pm
Forum: Investing - Theory, News & General
Topic: Do you view portfolio risk differently when you retired
Replies: 32
Views: 3806

Re: Do you view portfolio risk differently when you retired

I have been in the retirement phase for 25 years and am decidedly not risk averse. Hence I have held 70% - 75% stock and 25% - 30% for bonds for decades and still do at age 76. I have done this because I do not believe that broadly diversified equity carries as much long term risk as do bonds in the truly long term. Bonds lost money in real terms 1940 - 1980 during a long persistent inflationary period. There has never been a 4 decade period when broadly diversified US equity did not produce substantial real returns. The real risk of equity is panic selling in deep bear markets and I've been through enough of these to have reasonable certainty that I won't do it. I always keep enough bonds and MMF to be a solid substantial anchor in deep be...
by garlandwhizzer
Wed Dec 20, 2023 4:51 pm
Forum: Investing - Theory, News & General
Topic: Start thinking about your 2024 S&P 500 year end predictions...
Replies: 25
Views: 5095

Re: Start thinking about your 2024 S&P 500 year end predictions...

Jack Bogle's Words of Wisdom: "Absolutely no one knows what the stock market is going to do tomorrow, let alone next year. Nor which sector, style or region will lead and which will lag. Given this absolute uncertainty, the most logical strategy is to invest as broadly as possible." Thanks, Taylor, for posting this. As usual, Bogle is succinct, insightful, and hits the bull's eye dead center. Market predictions are worse than a waste of time. They can get you in a lot of trouble if you take them seriously and make wholesale changes in your portfolio based on them. It's far more important IMO to get a solid, all-weather diversified investment strategy and to follow it consistently, regardless of expert's predictions or the markets...
by garlandwhizzer
Tue Dec 19, 2023 2:00 pm
Forum: Investing - Theory, News & General
Topic: The Illusion of the Small Cap premium
Replies: 121
Views: 17192

Re: The Illusion of the Small Cap premium

There is a significant small cap premium in factor models because those models double investment results with cost-free long/short and ignore trading costs and frictions which are massive in the thinly traded illiquid small cap market. Likewise with MOM which is robust in factor models but for the same reasons non-existent in real MOM funds which do lots of trading and must compete with other MOM players. That's why you don't see a lot of MOM funds in spite of their robust premiums. Factor models completely overlook these problems and more than double returns, one reason to view them with a measure of skepticism. The fact that excellent risk adjusted returns turn up in the mid section of cap weight reflects the fact that mid caps are more l...
by garlandwhizzer
Sat Dec 16, 2023 8:45 pm
Forum: Investing - Theory, News & General
Topic: Paul Merriman -SCV- 1930-2019 Evidence - Patience Leads to Better Returns
Replies: 161
Views: 22106

Re: Paul Merriman -SCV- 1930-2019 Evidence - Patience Leads to Better Returns

As Rick has said before you can use backtesting to prove almost anything. It is true that DFSVX has outperformed VFINX since the former's inception in 1993 by about 1% CAGR but that was due to only one thing--the massive inflation of the greatest bubble in US equity history in the late 1990s and it's subsequent total collapse. All of that SCV outperformance came in prior to 2003. Over the last 20 years VFINX has outperformed DFSVX and has done so with lower maximum drawdowns, lower volatility and hence a much better Sharpe ratio. All of the SCV outperformance since 1993 was in fact due to one thing only--the popping of that massive overinflated dot com bubble. The dot com bubble price action was unique, driven largely by stocks with lofty d...
by garlandwhizzer
Thu Dec 14, 2023 4:36 pm
Forum: Investing - Theory, News & General
Topic: AVUV surges past 2021 high
Replies: 42
Views: 7832

Re: AVUV surges past 2021 high

Two consecutive days of substantial SCV outperformance as investors seem to be losing some of their infatuation with the magnificent 7 that are currently valued for perfection going forward. Market leadership is broadening beyond the Magnificent 7 with their optimistic AI dreams. It's about time and long overdue for investors to consider fundamentals instead of just price action. Is this the start of a new multi-year period of outperformance by long neglected value and especially SCV which has had a very difficult run over the last 15+ years? IMO it's much too early to tell how long this will last, but it does show that performance chasing winners and avoiding losers carries its own risks when the market's mood shifts. Markets can shift fro...
by garlandwhizzer
Fri Dec 08, 2023 4:28 pm
Forum: Investing - Theory, News & General
Topic: What Will It Take for International Equities to Significantly Outperform?
Replies: 69
Views: 8454

Re: What Will It Take for International Equities to Significantly Outperform?

It's a difficult question. Based on valuation measures however you wish to measure value, INTL is considerably cheaper than US now. Not just now, it has been that way for 20 years, 40 years or however long you wish to choose. It's cheap relative to US and past history suggests that it is so far behind long term that it will never catch up. There is in theory some diversification benefit in holding INTL, but in practice as others have said, it hasn't worked impressively. Flushing money down a toilet also increases diversification but in the wrong direction. Having said all this, I continue to hold about 30% INTL/70% US, but have for years ceased to rebalance into it from US. I got tired of throwing good money after bad every year because its...
by garlandwhizzer
Wed Dec 06, 2023 3:50 pm
Forum: Investing - Theory, News & General
Topic: SCHD Poor Performance
Replies: 122
Views: 19534

Re: SCHD Poor Performance

A dividend investment strategy becomes less attractive when Treasuries and MMF offer higher yields than dividend stocks which has been the case for some time now. That is part of its performance problem pf SCHD. In addition SCHD is in the LCV space which has been largely neglected for many years as markets have become infatuated over and over with the cloud, then AI. Who knows what the next infatuation will be? Or will the overvalued and overhyped fall from their high perch? We don't know up front. The LCG tech space has driven most of market return over the the past year. Market preferences, however, change over time and SCHD holds what looks to me at least like high quality, financially sound, large cap dividend payers. That is a quality,...
by garlandwhizzer
Wed Dec 06, 2023 2:54 pm
Forum: Investing - Theory, News & General
Topic: Bond yields of 1% mean that 60/40-type allocations are off for almost everyone?
Replies: 132
Views: 15263

Re: Bond yields of 1% mean that 60/40-type allocations are off for almost everyone?

watchnerd wrote:

It was a triumph of dogma over common sense.
1+

Such triumphs are quite common.

Garland Whizzer
by garlandwhizzer
Mon Dec 04, 2023 8:50 pm
Forum: Investing - Theory, News & General
Topic: Value vs Growth divergence is at all time high
Replies: 66
Views: 9655

Re: Value vs Growth divergence is at all time high

No one knows with actionable reliability whether growth will outperform or underperform value over a given time frame going forward. It seems reasonable to me therefore to own both in significant measure. While that narrows the chance of a home run (picking the V/G winner beforehand) it likewise reduces the chance of the downside result if the guess is wrong which they often are. Holding both almost certainly reduces volatility. The market does shift in leadership from multi-year periods of LCG outperformance to multi-year periods of SCV outperformance and then after another multi-year period it does the exact opposite. Picking the exact turn around point between growth outperformance and value outperformance with any reliability is very un...
by garlandwhizzer
Sat Dec 02, 2023 8:42 pm
Forum: Investing - Theory, News & General
Topic: Firecalc.com - What is acceptable percentage?
Replies: 77
Views: 9855

Re: Firecalc.com - What is acceptable percentage?

First of all, acceptable percentage figures are based on past backtesting and the determinants of those numbers are based on multiple historical values including inflation rate, bond and stock returns, and importantly how long we're going to live. There is no guarantee whatsoever that the those numbers will be the same going forward as they were in the past. Not to mention you don't know how long you'll live or whether you'll require expensive long term care, disability, lawsuits, divorce, children needing financial help. In short percentages give a false sense of safety, not the real thing. Backtesting current bond returns for example is dominated by a 38 year bull market in bonds where 10 yr Treasury yields went from 15% in 1982 to about ...
by garlandwhizzer
Thu Nov 30, 2023 6:53 pm
Forum: Investing - Theory, News & General
Topic: Mutual funds that beat index funds in the long run
Replies: 75
Views: 22865

Re: Mutual funds that beat index funds in the long run

White Coat Investor wrote: It's easy to find funds that have outperformed in the past. The trick is finding the ones that will outperform in the future. This task is so hard that it probably isn't worth doing, at least for publicly traded stocks 1+ I totally agree. If you want to invest in Contrafund or any other fund that shows long term outperformance relative to low cost index funds go right ahead. It's important to realize however that there is no certainty that the same will happen going forward. In fact, personally, I think it likely that given sufficient time, the opposite will happen, underperformance. I could be wrong about that and I know it. Just as another's move to Contrafund could be wrong. It's important to realize that no m...
by garlandwhizzer
Wed Nov 22, 2023 8:03 pm
Forum: Investing - Theory, News & General
Topic: Vanguard 2024 Outlook
Replies: 22
Views: 3864

Re: Vanguard 2024 Outlook

Florida Orange wrote: I don't know what that means for future interest rates, but we could be in for a period of good returns in both the stock and bond markets. That's not a prediction, but current conditions would seem to indicate that it's a realistic possibility. I agree we should get good positive real returns from both stocks and bonds going forward, but not the outsized returns we've had over the last 20 years. From 2003 - 2023 the S&P 500 had an average annual return of 9.66%/yr. which amounted to a 7% real annual inflation adjusted return. I believe we won't do nearly that well going forward although we will have positive real returns. In retrospect you should have been heavily and consistently invested during 20 year golden p...
by garlandwhizzer
Wed Nov 22, 2023 4:11 pm
Forum: Investing - Theory, News & General
Topic: Vanguard 2024 Outlook
Replies: 22
Views: 3864

Re: Vanguard 2024 Outlook

I tend to agree with Vanguard's central theme that we're entering a long period of interest rates higher than the absurdly low ones from 2007 - 2021 and that US equity returns going forward are very likely to significantly lower than than 2009 - 2023. That massive equity bull was largely driven largely by the PE multiple expansion that goes along with ridiculously low rates and expectations of persisting ridiculously low interest rates in the future. That heated up the PE expansion that persisted throughout that long equity bull market run. I also believe that bond returns going forward from here, the depths of a nasty bond bear market, will be much more attractive relative to stocks going forward than has been the case for a long, long tim...
by garlandwhizzer
Fri Nov 17, 2023 2:22 pm
Forum: Investing - Theory, News & General
Topic: Investing 100% into TQQQ
Replies: 231
Views: 36289

Re: Investing 100% into TQQQ

Putting it all or at least most of the equity portfolio in TQQQ is an incredibly high risk/high reward strategy. It picks a massively popular hugely outperforming asset over the last 16 years and triples leverage to it after it has had a huge run up in price. The strategy is based partly on an expectation that we in a persistent disinflationary macroeconomic environment where rates, inflation, and economic growth will be low and reliable growth which is hard to come by in such an environment will continue to be greatly rewarded no matter how expensive it is. This expectation may or may not occur and the future may or many not unfold as expected. Risks? The lofty valuations of LCG tech may correct and reverse their persistent march higher. V...
by garlandwhizzer
Thu Nov 16, 2023 3:18 pm
Forum: Investing - Theory, News & General
Topic: Paul Merriman on small cap value tilt
Replies: 120
Views: 18839

Re: Paul Merriman on small cap value tilt

I believe it is far more important for investing success to save some amount of your income regularly each month, invest that amount each month in a low cost widely diversified portfolio whether the market is up or down, and to stick with this discipline for decades. Much more important than whether you invest 100% in a market or a factor portfolio, the question we argue forever over on this Forum which really in the long run makes little differenc. It is safe to say that over multiple decades either investing approach will work effectively in terms of results. I personally am skeptical of academic factor research as to how totally unrealistic models translate into a short cut to investing success. I have plenty of good company in that opin...
by garlandwhizzer
Tue Nov 14, 2023 12:22 pm
Forum: Investing - Theory, News & General
Topic: Increasing average duration of bond portolio
Replies: 11
Views: 1831

Increasing average duration of bond portolio

I know market timing is in general a bad idea. However, when inflation first appeared I both increased TIPS exposure, mostly short term TIPS, and also increased my MMF exposure. Between TIPS and MMF almost half my fixed income was fully prepared for a long period of inflation. I remembered the period of the late 1960s to the early 1980s, how hard it was to get inflation under control and how long it lasted. That was a disaster for nominals in direct proportion to their duration. Perhaps by luck--I cannot claim visionary skill--it turned out to be a good move, preserving fixed income principal value and producing positive returns during a nasty bond bear market. Today, I did the exact opposite, increasing average bond duration. I moved my ex...
by garlandwhizzer
Thu Nov 09, 2023 1:51 pm
Forum: Investing - Theory, News & General
Topic: Cash is a terrible long-term investment
Replies: 369
Views: 39711

Re: Cash is a terrible long-term investment

Claudia Whitten wrote: ↑Fri Sep 01, 2023 5:09 am Cash's "return on investment" comes in the form of being there if you need it when selling your other investments is impractical (think real estate) or would result in losses (think bear market). My cash therefore brings peace of mind, and for that I'm willing to pay. Just so happens that currently my cash is getting a nice return. Even if it weren't, I'd still have it unless we experienced hyperinflation and there was a vehicle that could offset such a calamity. I always suspect that threads such as this are created by people who want to justify having all their money tied up in risk assets in the hopes of, well, getting rich. Good luck with that. A 2008-style bear market, job los...
by garlandwhizzer
Fri Nov 03, 2023 3:56 pm
Forum: Investing - Theory, News & General
Topic: You can't eat Sharpe Ratio (or can you)?
Replies: 54
Views: 4857

Re: You can't eat Sharpe Ratio (or can you)?

Nathan Drake wrote: And levering up the highest sharpe ratio of the fairly recent past (1-2 decades) can lead to catastrophic results should that mean reversion occur. Often, the best performing future funds are those that experienced THE WORST sharpe ratios of the recent past. 1+ Nathan and I don't see eye to eye on everything. He has strong faith in factor approaches while I am bothered by a wide gulf between the robust factor premiums described in the literature and the underwhelming results that such approaches have produced in real funds after costs for investors over the last decade or two. On this point that he made above, however, I am in total agreement. Blindly following Sharpe ratios from the recent past to make portfolio decisio...
by garlandwhizzer
Tue Oct 31, 2023 3:26 pm
Forum: Investing - Theory, News & General
Topic: Are bonds a long-term investor's greatest threat?
Replies: 41
Views: 6940

Re: Are bonds a long-term investor's greatest threat?

Long Term Treasuries carry substantial risk which shows up glaringly during periods of inflation. They were touted by many as the safest of all assets and the source of the highest risk-adjusted long term returns during the final stages of the greatest bond bull market in history (1982 - 2020) during which yields on LTT dropped to the lowest levels in history, even lower than in the depths of the Great Depression. Yet, no one called it a bubble. Bubbles are invisible when you're inside them. When they pop, it suddenly becomes obvious and we wonder how it was we didn't see it. The last 3 years have been disastrous for LTTs. Their future depends primarily on the future course of inflation--how persistent it is, how high it gets. and how willi...
by garlandwhizzer
Sat Oct 28, 2023 6:47 pm
Forum: Investing - Theory, News & General
Topic: Is SCV always a long term winner
Replies: 40
Views: 4418

Is SCV always a long term winner

It has been claimed on this Forum that a well managed SCV fund has always outperformed both beta and the S&P 500 if you waited long enough for the premiums to show up. 20 years is defined as long term in everybody's book. Many of us will not be alive in 20 years. I believe I recall that historically 20 year SCV outperformance had been claimed a consistent finding going back to 1929. It seems to make sense. Small struggling companies are riskier than giant expensive behemoths and therefore and the market is expected to reward risk in the long term, hence higher long term returns. The only problem is that it is not always true. In the case of the last 20 years for example, VFINX outperformed DFSVX and did so with a much lower standard dev...
by garlandwhizzer
Thu Oct 26, 2023 6:15 pm
Forum: Investing - Theory, News & General
Topic: How lower can TLT drop from here? [iShares 20+ Year Treasury Bond ETF]
Replies: 87
Views: 11031

Re: How lower can TLT drop from here? [iShares 20+ Year Treasury Bond ETF]

TLT returns have two components the average coupon rate its bonds which is low and the change in principal value of the etf which has decreased by roughly half since inflation heated up. Since its etf price is reduced by half, what used to be a 2.5% coupon is now roughly a 5% yield relative to the the per share price of the etf. This does not mean that TLT is nor due for great returns going forward. High returns however will have to come from price appreciation of the principal value of the etf which could be huge if and when we return to historically very low interest rates on LTT. That would be just the opposite of what happened recently with its collapse. The question is will that happen? And, if so, how fast will it be? That depends on ...
by garlandwhizzer
Wed Oct 25, 2023 8:58 pm
Forum: Investing - Theory, News & General
Topic: How lower can TLT drop from here? [iShares 20+ Year Treasury Bond ETF]
Replies: 87
Views: 11031

Re: How lower can TLT drop from here? [iShares 20+ Year Treasury Bond ETF]

The important question is not how much lower it can drop, but how long will it take to climb out of the very deep hole it has dug for itself. It has already dropped much more than anyone thought possible. Its ultimate value depends on the time course of inflation, where it settles down and whether it stays there long term or takes off again. You have to have some insight into the future of inflation to make a sound judgement. When inflation first took off in 2021, I was scared. I moved 25% of my fixed income into ST TIPS and 25% into MMF. I was around in the late sixties, the 70s, and early 80s, which looked a lot like now, and I wanted inflation protection. At the time inflation was believed by many to be "temporary." They expect...
by garlandwhizzer
Tue Oct 24, 2023 3:39 pm
Forum: Investing - Theory, News & General
Topic: The Big Bond Selloff - a really good video on the effects of rising interest rate
Replies: 3
Views: 956

Re: The Big Bond Selloff - a really good video on the effects of rising interest rate

This is a pretty good common sense analysis IMO of bond market dynamics and the interaction between inflation, interest rates, and the economy as well as the stock market. investors are now coming to realize that higher for longer is the new paradigm rather than a quick return to ZIRP that ruled 2007 - 2022 when the FED took extraordinary steps trying to create inflation and was unable to reach 2% for a decade and a half. We're now no longer singing the happy Modern Monetary Policy song that tells us that levels of fiscal debt is not a problem. It is a big problem if you're refinancing 33 trillion of debt at 5%/yr interest, which further increases the deficit/debt and drives up interest rates further from Treasury supply/demand imbalance. T...
by garlandwhizzer
Sun Sep 24, 2023 5:40 pm
Forum: Investing - Theory, News & General
Topic: Long real recovery periods for stocks
Replies: 172
Views: 17331

Re: Long real recovery periods for stocks

It is true that history shows examples where stocks did not keep with inflation for well more than a decade. It depends on how one defines long term as to whether stocks are risky long term. If you wait long enough they come back but clearly there are very long periods when stocks suffer in real terms. However none of these stock down periods come anywhere close to the negative real returns posted by US Treasuries for the 40 consecutive years from 1940 - 1980. Treasuries are generally believed to be safe assets but they can be just the opposite. We're living now in an era of the greatest bond bubble collapse in history which like other bubble collapses was totally unforeseen. Investors believed it impossible that LTT could ever be in a bubb...
by garlandwhizzer
Fri Sep 22, 2023 2:29 pm
Forum: Personal Finance (Not Investing)
Topic: How are you self-insuring for long-term care?
Replies: 167
Views: 21746

Re: How are you self-insuring for long-term care?

Financing long term care is a very thorny issue--whether to self-insure which carries risk and uncertainty or to purchase an expensive LTC policy that usually stipulate some limits to payments. LTC policies are a waste of money if you die before needing it which many policy holders do. Typically their benefits are not inflation adjusted so if significant inflation persists that is a big problem if you happen to purchase it decades before you need it. On the other hand, if you're self insuring there is always the risk that you'll run out of money or become inept at handling investment decisions when you need it. In that situation you will be forced to move to Medicaid for LTC which inevitably severely reduces quality of care. If you're self-...
by garlandwhizzer
Mon Sep 18, 2023 3:57 pm
Forum: Investing - Theory, News & General
Topic: Private Equity Groups and Total Stock Market
Replies: 46
Views: 4757

Re: Private Equity Groups and Total Stock Market

There is an incredible amount of money from government and private pension funds flowing into both private equity and hedge funds now. This is because there is a large and growing mismatch between generous promised retirement benefits and their fund current assets given realistic expected forward returns on bonds and stocks. The numbers simply don't work given current assets from employee contributions, expected returns over the time horizon, and payment obligations at retirement. What to do? Private equity, hedge funds, and other alternates to the rescue! They promise the chance for substantially greater than market returns long term. It is an easy decision for pension fund managers to make. They can avoid both of two very politically diff...
by garlandwhizzer
Fri Sep 15, 2023 10:02 pm
Forum: Investing - Theory, News & General
Topic: Private Equity Groups and Total Stock Market
Replies: 46
Views: 4757

Re: Private Equity Groups and Total Stock Market

Broadly based portfolios of publicly traded stocks have a rather narrow range of return outcomes regardless of whether you use S&P 500, SC, MC, Value or Growth. SCV which is supposed by the research community to be the secret sauce has outperformed TSM by only 1% or less and that's using DFSVX, the premier SCV fund by reputation, as the representative of SCV instead of the mean or average SCV fund. This since 1993, 30 years ago. Not much difference and DFSVX had deeper drawdowns, greater volatility and a lower Sharpe ratio. All non-beta strategies go through alternating periods of outperformance and underperformance that have up-cycles and down-cycles and after multiple decades it turns out that it is critical to be invested in somethin...
by garlandwhizzer
Mon Sep 11, 2023 2:49 pm
Forum: Investing - Theory, News & General
Topic: Stocks vs bonds- do valuations matter?
Replies: 42
Views: 5288

Re: Stocks vs bonds- do valuations matter?

nedsaid wrote: Nedsaid: Yes and No. That seems to be a non-answer but I am attempting to bring some nuance to my answer. Yes, in the shorter run, my best guess is that US stock returns, particularly for US Large Growth stocks will be less than what we have seen in recent years. The market cannot sustain 15% -16% annual returns over longer periods of time, as we have seen with Large Growth, which has been a huge driver for US stock returns as a whole since 2008. Having said that, I expect US Stocks to have positive returns going forward, both before inflation and after inflation, but less than what we saw during the 2010's. Longer term, this all evens out over time. Keep in mind that there is a pretty good argument that bond yields are retu...
by garlandwhizzer
Wed Aug 30, 2023 9:31 pm
Forum: Investing - Theory, News & General
Topic: S&P 500 concentration risk: Should we be worried?
Replies: 245
Views: 24383

Re: S&P 500 concentration risk: Should we be worried?

I recall 10 or 15 years ago when some posters showed similar concerns and fears about the heavy concentration of mega-cap tech darlings in total market index funds and in the S&P 500. Some refused to buy for that reason while others sold their positions and opted for more sector or style equity diversification. How did that work out for them? It cost them a large opportunity because the fears of a repeat of 2000-3 have been up to this point baseless. Mega cap tech stocks have continued to outperform non-mega cap tech stocks by wide margins for a long time These darlings are now looked upon by many professional investors as safer havens more resistant to economic downturns than other stocks. Mega cap tech darlings have wide moats around ...
by garlandwhizzer
Wed Aug 23, 2023 3:38 pm
Forum: Investing - Theory, News & General
Topic: Vanguard changed their website
Replies: 30
Views: 5213

Re: Vanguard changed their website

I was a die hard Vanguard man until I tried to close out my legacy personal mutual fund account and switch all holdings to my personal brokerage account in order to avoid annual fees. On the way, I encountered the usual Vanguard marketing push for an paid advisor as well as the economic push to reduce fees by closing out legacy mutual fund accounts to reduce Vanguard's banking costs It was a long (1 - 2 hr) phone conversation with customer service in order to do this and of course there were problems which showed up 2 days later, necessitating another long customer service call. Their excuse it that the change will keep investing costs lower and put them into a better position relative to competitors. Helps them, as if they need help to att...
by garlandwhizzer
Sat Aug 19, 2023 3:40 pm
Forum: Investing - Theory, News & General
Topic: Dimensional v Avantis
Replies: 50
Views: 11107

Re: Dimensional v Avantis

quote]White Coat Investor wrote: ↑Thu Aug 17, 2023 7:03 pm Thanks for the thread everybody. Here are some interesting one year returns for small value ETFs: ETF 1- year Returns VBR 8.54% VIOV 6.08% VTWV 4.29% IJS 6.10% IWN 3.71% SVAL 1.82% SLYV 6.16% RZV 12.35% DFSV 13.04% AVUV 13.45% Kind of reads like an AVUV advertisement doesn't it?[/quote] Looks like small deep value was the 1 yr. winner. When small and value outperform, efts that load up heavily on them also outperform which is apparent looking at these results. What is actually happening is that the winners making up lost ground prior to 1 year ago when both small and value underperformed massively relative to LCG and TSI (beta) for more than a decade and a half. When small and value...
by garlandwhizzer
Thu Aug 17, 2023 4:49 pm
Forum: Investing - Theory, News & General
Topic: Equities over Cash?
Replies: 72
Views: 6385

Re: Equities over Cash?

The problem is timing--when to switch excess cash greater than your normal allocation that you've moved into for safety in current challenging markets back into equity and bonds which have higher long term expected returns. Do you wait until all the dust has cleared or do it before that anticipating the return to low inflation 2% or less and ever lower bond yields. Inflation and the rising bond rates that go along with it--that is when cash shines. The market, the experts, and amateur investors have all been wrong about how sticky inflation has been. At the beginning the this year, many expected FED rate cuts in the second half of 2023. Instead they've gotten rate increases and the FED may not be finished with them yet. My guess is that inf...
by garlandwhizzer
Sun Aug 13, 2023 9:50 pm
Forum: Investing - Theory, News & General
Topic: What do you guys think about DFA lately?
Replies: 79
Views: 9696

Re: What do you guys think about DFA lately?

I find it interesting that DFA has given up on MOM in their latest suggestions. Good reason to do so--the lousy performance of MOM funds as a whole which is quite clear relative to plain cheap beta. Factor models show very high returns for the MOM factor, the highest of all factors close to 5% by some measures. Yet MOM funds run by accomplished factor mavens have been losers due to increased trading costs in this frequent trading strategy, increased trading frictions, difficulty of defining exact points of when to buy, when to sell, how long to hold, and of course the intense competition in MOM investing because many professionals as well as amateurs get emotionally hooked getting on board current winners (FOMO) and abandoning past losers. ...
by garlandwhizzer
Wed Aug 09, 2023 7:36 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe on inaccuracy of market forecasts
Replies: 26
Views: 2878

Re: Larry Swedroe on inaccuracy of market forecasts

I agree completely with Larry's point on this issue. After watching the market humble one expert after another on market predictions, I pay no attention whatsoever to them now. I think it's reasonable to keep track of the underlying economy--interest rates, inflation, the stage of the economic cycle, employment, productivity, etc.--to get some vague sense of what may be in store in the future, but as for market timing or predictions, they require a level of certainty that very rarely appears. I think it a waste of time to pay attention to the numerous "expert" annual predictions of where the S&P 500 will end a given year. The most reliable thing for predicting short term future equity returns is IMO investor sentiment, but eve...
by garlandwhizzer
Sun Jul 23, 2023 8:47 pm
Forum: Investing - Theory, News & General
Topic: Interrogating the size and value factors
Replies: 647
Views: 53544

Re: Interrogating the size and value factors

Gaston wrote: I like your analysis. We all know the shortcomings of backtests, but let me throw one in too. Here is the CAGR from PortfolioVisualizer covering 30 years, from 1993 to date. FYI that DFVLX was established in 1993, and DFSVX in 1992. So this is close to a "since inception" view. Vanguard 500 Index Investor (VFINX) = 9.93% DFA US Large Cap Value I (DFLVX) = 9.65% DFA US Small Cap Value I (DFSVX) = 10.85% On the surface, DFA looks good. But recall that until DFA's recent entry into ETF's, its mutual funds were available only through an advisor. If the advisor charged, say, 1% per annum, then the above DFA funds underperformed VFINX. And for those of us who care about after-tax returns, if the DFA funds threw off higher...
by garlandwhizzer
Tue Jul 18, 2023 1:49 pm
Forum: Investing - Theory, News & General
Topic: Interrogating the size and value factors
Replies: 647
Views: 53544

Re: Interrogating the size and value factors

945 Regarding the size and value factors, an interesting article by Amy Arnott appeared recently in Morningstar. https://www.morningstar.com/portfolios/why-large-blend-is-better-than-value-plus-growth She compared 3 real funds (LCG, LCB, LCV), the longest continuously running ones in the large cap space, over 44 years (1978 - 2023), using one company and one index, the iShares Russell 1000 Blend, Russell 1000 Growth, and Russell 1000 Value. She wanted to compare the long term returns of growth versus value versus cap weight blend and also look at whether or not there was a potential rebalancing bonus over time between growth and value. She used multiple rebalancing bands between growth and value funds to determine in rebalancing improved re...
by garlandwhizzer
Fri Jul 14, 2023 3:47 pm
Forum: Investing - Theory, News & General
Topic: Long Treasury better than Intermediate Treasury
Replies: 102
Views: 6276

Re: Long Treasury better than Intermediate Treasury

simpleisbest wrote: Thus it appears that for any equity allocation 63% or greater, the optimal diversifying asset is not intermediate treasuries but long treasuries, and definitely not total bond market. The correct verb for this sentence is "was," not is, referring to a specific time frame and to nominal not real returns. From 1940 to 1980, rolling LTTs produced negative real returns and underperformed MMF with zero duration. In the absence of significant inflation and particularly increasing inflation over the time frame backtested, LTT are expected to outperform ITT and TBM. In bond bull markets they shine. They also provide better expected diversification to equity volatility in a stable or decreasing inflation/rate environme...