Search found 2524 matches

by Simplegift
Thu Sep 14, 2017 11:04 am
Forum: Investing - Theory, News & General
Topic: What's likely to happen to stocks if/when interest rates rise?
Replies: 22
Views: 1426

Re: What's likely to happen to stocks if/when interest rates rise?

Sorry, one question if I may. I understand your explanations of the negative correlation (above 5%), but what would be the reasons for the positive correlation below that threshold? Rising interest rates often indicate the economy is getting stronger, leading to increased demand for loans, increasi...
by Simplegift
Thu Sep 14, 2017 9:51 am
Forum: Investing - Theory, News & General
Topic: What's likely to happen to stocks if/when interest rates rise?
Replies: 22
Views: 1426

Re: What's likely to happen to stocks if/when interest rates rise?

So I'm not sure how to think about the relationship between interest rates and stocks. Several studies of the historical relationship between interest rate changes and stock prices show a “threshold effect” (chart below). When rates are below about 5%, rising rates are correlated with rising stock ...
by Simplegift
Wed Sep 13, 2017 2:23 pm
Forum: Investing - Theory, News & General
Topic: What If U.S. Stocks Stay Expensive For Years?
Replies: 50
Views: 7383

Re: What If U.S. Stocks Stay Expensive For Years?

The issue is that many return projections these days just assume U.S. stock market valuations will eventually “revert to the mean” — see Research Affiliates, GMO and others — and their expected return forecasts are very low as a result. But what if U.S. stock valuations never mean-revert to a long ...
by Simplegift
Wed Sep 13, 2017 1:01 pm
Forum: Investing - Theory, News & General
Topic: What If U.S. Stocks Stay Expensive For Years?
Replies: 50
Views: 7383

Re: What If U.S. Stocks Stay Expensive For Years?

OP, 1) Are you saying 4% real return is no good? For me, that is plenty. 2) Are people assuming that the bull market will continue forever? This is unlikely to be true. 3) Are people assuming that we will not hit a recession from now on? This is unlikely to be true either. So, what is the problem? ...
by Simplegift
Mon Sep 11, 2017 3:19 pm
Forum: Investing - Theory, News & General
Topic: Financial Page: REITs and International/Emerging Bonds
Replies: 25
Views: 2407

Re: Financial Page: REITs and International/Emerging Bonds

Very thorough and helpful analysis, siamond. About emerging market bonds: Emerging Bonds are more intriguing. It might be perceived as a risky asset class (and it is when analyzed on its own), but when used as part of a portfolio to replace some of the bonds portion, its historical high returns comb...
by Simplegift
Mon Sep 11, 2017 2:42 pm
Forum: Investing - Theory, News & General
Topic: What If U.S. Stocks Stay Expensive For Years?
Replies: 50
Views: 7383

Re: What If U.S. Stocks Stay Expensive For Years?

As for the initial question, it has been addressed above, but I recommend checking pages 5-7 of this paper... Thanks, lack_ey, for the link to the study. A favorite passage from the paper (my bold): A common question that arises when working with CAPE is whether it has a steady state level. In summ...
by Simplegift
Mon Sep 11, 2017 1:31 pm
Forum: Investing - Theory, News & General
Topic: What If U.S. Stocks Stay Expensive For Years?
Replies: 50
Views: 7383

Re: What If U.S. Stocks Stay Expensive For Years?

One aspect not always recognized is that, though U.S. companies have become more richly-valued in recent decades, they have also become much more profitable (chart below). Whether this justifies their higher valuations is hard to say — but it’s entirely possible that, yes, U.S. stocks are expensive,...
by Simplegift
Mon Sep 11, 2017 12:10 pm
Forum: Investing - Theory, News & General
Topic: Long-run Sharpe Ratios in an ideal world
Replies: 43
Views: 4694

Re: Long-run Sharpe Ratios in an ideal world

As you can see from the bond column, the standard deviation is far higher than the average. I am wondering if this is due to changes in inflation. The table uses nominal returns - would it be better to use real returns? For what it’s worth, in some weekend reading, I ran across real, inflation-adju...
by Simplegift
Mon Sep 11, 2017 10:40 am
Forum: Investing - Theory, News & General
Topic: What If U.S. Stocks Stay Expensive For Years?
Replies: 50
Views: 7383

Re: What If U.S. Stocks Stay Expensive For Years?

Back-of-the-envelope seems like Mr. Livermore is probably in the right ballpark. Thank you, AlohaJoe, that was just the kind of math check on Mr. Livermore’s numbers that I was hoping someone could reproduce. Your math expertise is appreciated! In the article, Mr. Livermore goes on to suggest that ...
by Simplegift
Mon Sep 11, 2017 8:53 am
Forum: Investing - Theory, News & General
Topic: What If U.S. Stocks Stay Expensive For Years?
Replies: 50
Views: 7383

What If U.S. Stocks Stay Expensive For Years?

Reading a recent article at Philosophical Economics this weekend, I ran across the following passage, discussing why expected returns for U.S. stocks could be lower in the future (my bold): The mechanism for the lower returns, in my view, is not going to be some kind of sustained mean-reversion to o...
by Simplegift
Sat Sep 09, 2017 7:31 pm
Forum: Investing - Theory, News & General
Topic: Irrational fears?
Replies: 23
Views: 1880

Re: Irrational fears?

^^^ Every now and then, nisiprius, you come up with such a brilliant, original post that, as a Forum member, I feel we are not deserving. Thanks!
by Simplegift
Sat Sep 09, 2017 5:12 pm
Forum: Investing - Theory, News & General
Topic: Yes Virginia, you can lose money in bonds
Replies: 36
Views: 4821

Re: Yes Virginia, you can lose money in bonds

The greatest threat to bond returns these days is not inflation. Most central banks today are having a hard time meeting even their minimum inflation targets in the 1%-2% range. One of the primary factors that has driven down expected bond returns in recent decades is the collapse of real interest r...
by Simplegift
Sat Sep 09, 2017 2:36 pm
Forum: Investing - Theory, News & General
Topic: Yes Virginia, you can lose money in bonds
Replies: 36
Views: 4821

Re: Yes Virginia, you can lose money in bonds

steve roy wrote:
Sat Sep 09, 2017 2:22 pm
I think it's reasonable to assume that, at some point in the future Central Banks will let inflation get away from them. Lessons are seldom learned permanently.
Which is why many Bogleheads (myself included) have at least some allocation to TIPS in their bond portfolios. :wink:
by Simplegift
Sat Sep 09, 2017 1:38 pm
Forum: Investing - Theory, News & General
Topic: Long-run Sharpe Ratios in an ideal world
Replies: 43
Views: 4694

Re: Long-run Sharpe Ratios in an ideal world

As you can see from the bond column, the standard deviation is far higher than the average. I am wondering if this is due to changes in inflation. The table uses nominal returns - would it be better to use real returns? Also, currency effects could be coming into play. Do you know what currency was...
by Simplegift
Sat Sep 09, 2017 1:08 pm
Forum: Investing - Theory, News & General
Topic: Yes Virginia, you can lose money in bonds
Replies: 36
Views: 4821

Re: Yes Virginia, you can lose money in bonds

The chart in the OP is often used as a red flag about the dangers of inflation eroding the value of bonds. However, it should be noted that the period shown, 1955-1980, otherwise known as The Great Inflation , has been widely recognized as perhaps the greatest failure of Federal Reserve policy in hi...
by Simplegift
Sat Sep 09, 2017 11:01 am
Forum: Investing - Theory, News & General
Topic: Vanguard’s chief economist says artificial intelligence, automation stymieing market forecasters
Replies: 4
Views: 1103

Re: Vanguard’s chief economist says artificial intelligence, automation stymieing market forecasters

For a good in-depth analysis of this topic, The Economist had a series of articles last year: Automation and Anxiety The article points out that technology has historically ended up creating more jobs than it destroys. By automating a particular task, so that it can be done more quickly and cheaply,...
by Simplegift
Sat Sep 09, 2017 9:34 am
Forum: Investing - Theory, News & General
Topic: One Company, Six Centuries of Stock Returns, 1372-1946
Replies: 6
Views: 1824

Re: One Company, Six Centuries of Stock Returns, 1372-1946

It’s worth noting that if ever in Toulouse, France, one can visit the original site of the Bazacle Company today (photo below). The dam across the Garonne River still exists, and the watermill now hydroelectric facility is apparently still operating. What’s been added in recent years is a museum, an...
by Simplegift
Fri Sep 08, 2017 11:23 pm
Forum: Investing - Theory, News & General
Topic: One Company, Six Centuries of Stock Returns, 1372-1946
Replies: 6
Views: 1824

Re: One Company, Six Centuries of Stock Returns, 1372-1946

I think that this shows that the approximations used in theory (assuming investors are "rational" for example) are justified over the longest of terms. Other theories (like the dividend discount model) also appear justified. These indeed seem to be primary lessons of the study. Though there’s somet...
by Simplegift
Fri Sep 08, 2017 4:34 pm
Forum: Investing - Theory, News & General
Topic: One Company, Six Centuries of Stock Returns, 1372-1946
Replies: 6
Views: 1824

Re: One Company, Six Centuries of Stock Returns, 1372-1946

Just to place the founding of the Bazacle company in 1372 within its historical context: It was formed after the bubonic plague hit Western Europe in 1348 — but before Joan of Arc (1412-1431) and the invention of the printing press by Johannes Gutenberg in 1440. A view of the Bazacle Company dam and...
by Simplegift
Fri Sep 08, 2017 1:46 pm
Forum: Investing - Theory, News & General
Topic: One Company, Six Centuries of Stock Returns, 1372-1946
Replies: 6
Views: 1824

One Company, Six Centuries of Stock Returns, 1372-1946

This is the third and final post in a Forum trilogy on deep financial history. The first post in the series reported on stock, bond and housing returns for 16 countries over 145 years, from 1870-2015. The second post looked at stock and bond returns for two countries, the U.K. and the U.S., over thr...
by Simplegift
Thu Sep 07, 2017 5:23 pm
Forum: Investing - Theory, News & General
Topic: "The Market" Portfolio
Replies: 26
Views: 3140

Re: "The Market" Portfolio

And, if interested, here is a recent paper on the historical returns of the global market portfolio, 1960-2015:
Historical Returns of the Market Portfolio
by Simplegift
Thu Sep 07, 2017 4:48 pm
Forum: Investing - Theory, News & General
Topic: Long-run Sharpe Ratios in an ideal world
Replies: 43
Views: 4694

Re: Long-run Sharpe Ratios in an ideal world

Not knowing much about the theoretical basis for similar Sharpe Ratios among asset classes over long time periods, I couldn’t help but empirically check whether the Sharpe Ratios for stocks and bonds have been similar for the 14 countries over the one century of time for which we have good data. Th...
by Simplegift
Thu Sep 07, 2017 3:50 pm
Forum: Investing - Theory, News & General
Topic: Long-run Sharpe Ratios in an ideal world
Replies: 43
Views: 4694

Re: Long-run Sharpe Ratios in an ideal world

Assuming that the strong form of the efficient market hypothesis holds, would all diversified investments have identical Sharpe ratios (before expenses) if an investment has an infinite time horizon and no black swan events occur? Anyhoo, in the real world, risk is much more than volatility, and in...
by Simplegift
Thu Sep 07, 2017 9:11 am
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Re: Three Centuries of Asset Returns, 1694-2015

One added thought is that the “societal risk premium” has also declined over the centuries, as governments have become more stable and their bonds less risky, reducing their real returns. Just my perspective. So as companies become more stable (well, as their profits are seen as more stable).... Ni...
by Simplegift
Wed Sep 06, 2017 9:11 pm
Forum: Investing - Theory, News & General
Topic: The Emerging Markets "lost decade" is over
Replies: 52
Views: 5755

Re: The Emerging Markets "lost decade" is over

As for Emerging markets suffering from corruption, I suspect the market knows that already. Interesting to note the current statistics from Vanguard’s website below. Though emerging markets and the U.S. market currently have almost identical projected earnings growth rates and return-on-equity, the...
by Simplegift
Wed Sep 06, 2017 3:45 pm
Forum: Investing - Theory, News & General
Topic: Simba's backtesting spreadsheet [a Bogleheads community project]
Replies: 1032
Views: 573030

Re: Simba's backtesting spreadsheet [a Bogleheads community project]

^^^ The 1-year, 3-year, 5-year and 10-year idea sounds like a fine one. I didn’t actually realize you were proposing to give folks a choice — but if it’s as easy to implement as you suggest, then wonderful.
by Simplegift
Wed Sep 06, 2017 3:33 pm
Forum: Investing - Theory, News & General
Topic: Simba's backtesting spreadsheet [a Bogleheads community project]
Replies: 1032
Views: 573030

Re: Simba's backtesting spreadsheet [a Bogleheads community project]

And I'll re-post my reply from the other thread, siamond, since this is the thread where this discussion belongs. Now this raises an interesting point. The Simba spreadsheet computes rolling returns FORWARD (N years starting from the year on the X axis). Quite obviously, the chart you posted compute...
by Simplegift
Wed Sep 06, 2017 3:13 pm
Forum: Investing - Theory, News & General
Topic: The Emerging Markets "lost decade" is over
Replies: 52
Views: 5755

Re: The Emerging Markets "lost decade" is over

Now this raises an interesting point. The Simba spreadsheet computes rolling returns FORWARD (N years starting from the year on the X axis). Quite obviously, the chart you posted computed rolling returns BACKWARDS (N years up to the current point). And although this is arbitrary, for whatever reaso...
by Simplegift
Wed Sep 06, 2017 2:02 pm
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Re: Three Centuries of Asset Returns, 1694-2015

Are they less 'reliable' now than before?...if not, why the increase in equity premium?...if human impulse/psychology/behavior is a constant (apparently the basis behind factor investing), and "on the face of such steady and consistent rates of economic growth over decades and decades" (as seen in ...
by Simplegift
Wed Sep 06, 2017 12:35 pm
Forum: Investing - Theory, News & General
Topic: The Emerging Markets "lost decade" is over
Replies: 52
Views: 5755

Re: The Emerging Markets "lost decade" is over

The Emerging Markets Total Return Index posted an new all time closing high today, marking the official end of the "lost decade" starting with the 2008-2009 crash. Like so many aspects of the global market, it does appear that emerging markets' outperformance goes in cycles (chart below). Perhaps w...
by Simplegift
Tue Sep 05, 2017 7:08 pm
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Re: Three Centuries of Asset Returns, 1694-2015

Despite all this, the consistency of the data over four centuries is quite compelling. So what causes this? Wonderful question. One variable that has grown rather consistently along with asset returns over several centuries is GDP per capita (world wars excepted, chart below). It’s rather amazing t...
by Simplegift
Tue Sep 05, 2017 2:32 pm
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Re: Three Centuries of Asset Returns, 1694-2015

The study showed how short periods (of 30-50 years) could have abnormalities, but how longer-term periods seemed to average out. This point can't be stressed enough. No one should assume that just because a 60/40 portfolio has fairly consistently provided real returns of 4%-5% over three centuries,...
by Simplegift
Tue Sep 05, 2017 9:13 am
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Re: Three Centuries of Asset Returns, 1694-2015

Good point about "success bias." The data in the OP is from two countries who mostly escaped the devastation of world war. Now the thing I didn't fully acknowledge in my mind so far is that the equity risk premium seems to have increased (bonds went down, stocks stayed stable). In his Two Centuries ...
by Simplegift
Mon Sep 04, 2017 11:37 pm
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Re: Three Centuries of Asset Returns, 1694-2015

Via PM, a Forum member suggested a stock returns study spanning nearly 400 years: Four Centuries of Return Predictability One doesn’t see many papers using stock returns from the Dutch East India Company (1629), the British East India Company (1692), the Bank of England (1711), the South Sea Company...
by Simplegift
Mon Sep 04, 2017 8:20 pm
Forum: Investing - Theory, News & General
Topic: Safe Withdrawal Rate -> 2% or lower
Replies: 72
Views: 7969

Re: Safe Withdrawal Rate -> 2% or lower

Someone else is discussing portfolio construction for a very safe withdrawal. But, does that make any sense if your withdrawal rate is 2% or lower? Won't simple 60/40 portfolio works? At 2% or lower, one has historically been able to easily live off of the dividends and interest of a 60/40 portfoli...
by Simplegift
Mon Sep 04, 2017 7:57 pm
Forum: Investing - Theory, News & General
Topic: China drops the Hammer on Cryptocurrencies
Replies: 23
Views: 3033

Re: China drops the Hammer on Cryptocurrencies

Apologies if this has already been mentioned in the “What is Bitcoin” thread, but on July 25 this year, the SEC issued guidance to cryptocurrency market participants, indicating that Initial Coin Offerings are likely subject to Federal securities laws. A few excerpts: The Securities and Exchange Com...
by Simplegift
Mon Sep 04, 2017 3:18 pm
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Re: Only Three Centuries of Data, 1694-2000

It doesn't make sense to me to use data on stock returns from the 1700s for anything but historical purposes. I don’t entirely disagree with your point, Pajamas. There’s shortcomings to be found in the applicability of historical asset returns even before about 1970, to my mind (when we still had d...
by Simplegift
Mon Sep 04, 2017 2:27 pm
Forum: Investing - Theory, News & General
Topic: Three Centuries of Asset Returns, 1694-2015
Replies: 35
Views: 4339

Three Centuries of Asset Returns, 1694-2015

In a 2002 article, Only Two Centuries of Data , William Bernstein lamented that high-quality, long-term return data on stock and bond markets outside the U.S. was difficult to find — so he focused his article on U.S. returns for the 1800s and 1900s. This post combines Mr. Bernstein's U.S. data with ...
by Simplegift
Mon Sep 04, 2017 11:38 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in freefall
Replies: 3966
Views: 1054131

Re: U.S. stocks in freefall

Also, stocks as a whole yielded more than bonds, the thinking was that if stocks were riskier than bonds, stockholders deserved higher yields than bondholders. The line where bonds started yielding more than stocks evidently was crossed somewhere in the 1950's, this got posted somewhere on the foru...
by Simplegift
Sun Sep 03, 2017 2:25 am
Forum: Investing - Theory, News & General
Topic: Vanguard Speaks Softly but Carries a Big Stick
Replies: 29
Views: 3277

Re: Vanguard Speaks Softly but Carries a Big Stick

What if Exxon wants to invest in, say, fracking because it believes its long term value for its shareholders, but political action committee at VG blocks it in the name of climate change? Floodgates for active hands on management and political interference have now been opened. Since fracking is te...
by Simplegift
Sun Sep 03, 2017 2:05 am
Forum: Investing - Theory, News & General
Topic: Vanguard Speaks Softly but Carries a Big Stick
Replies: 29
Views: 3277

Re: Vanguard Speaks Softly but Carries a Big Stick

Isn't their leverage pretty limited, though? My understanding has been that the main lever funds have over companies is "We'll liquidate our position", but in its passive funds, Vanguard can't sell. No, the main lever that Vanguard has is voting its shares in the companies' shareholder meetings and...
by Simplegift
Sat Sep 02, 2017 11:37 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Speaks Softly but Carries a Big Stick
Replies: 29
Views: 3277

Re: Vanguard Speaks Softly but Carries a Big Stick

Best not to draw hasty conclusions about Vanguard's investment stewardship policies, from just a brief article in the New York Times. Reading the original reports from Vanguard (linked below), one gets a more balanced perspective on how their stewardship team is advocating for a wide range of respon...
by Simplegift
Sat Sep 02, 2017 5:18 pm
Forum: Personal Consumer Issues
Topic: Tell me all about snowblowers
Replies: 50
Views: 4325

Re: Tell me all about snowblowers

Winter is not that far off here in New England, and I'm thinking of getting an Ariens 28" blower. I have a long driveway, and I've had it truck-plowed in past years at great cost. Now that I'm semi-retired I figure I can use a snow blower and do it myself. I've used a neighbor's blower a few times,...
by Simplegift
Sat Sep 02, 2017 2:03 pm
Forum: Investing - Theory, News & General
Topic: Michael Kitces 4% rule podcast on Madfientist
Replies: 355
Views: 36063

Re: Michael Kitces 4% rule podcast on Madfientist

Most of the improvements in life expectancy over the last 150 years have been aimed at preventing deaths in the young rather than extending the life of the old. Right. For one, more folks are surviving childhood and living to an older age (in developed countries at least). Also, improvements in hea...
by Simplegift
Sat Sep 02, 2017 9:31 am
Forum: Investing - Theory, News & General
Topic: Glideslope rate-of-change
Replies: 6
Views: 610

Re: Glideslope rate-of-change

Is anyone aware of research on optimal glideslopes, to maximize the area-under-the-curve for stocks, while de-risking slowly enough that sequence-of-returns isn't a problem, but fast enough that inflation isn't a problem? You might find this white paper by Ibbotson Research helpful: Lifetime Asset ...
by Simplegift
Fri Sep 01, 2017 2:39 pm
Forum: Local Chapters and Bogleheads Community
Topic: [Are the Bogleheads] getting less interesting?
Replies: 255
Views: 16966

Re: [Are the Bogleheads] getting less interesting?

If you are finding the forum less interesting then do something about it. What topics are of interest to you that you feel are worth discussing? Make some interesting thought-provoking posts or ask some interesting questions. Think of it this way: I'ts not what Bogleheads can do for you - it's what...
by Simplegift
Thu Aug 31, 2017 10:32 am
Forum: Investing - Theory, News & General
Topic: Value Factor Investing is not Value Investing
Replies: 126
Views: 9475

Re: Value Factor Investing is not Value Investing

Are there low cost Mutual Funds or ETFs that focus on Value Investing ? Or is this mainly done by an investor though detailed analysis of various individual stocks? Low cost and true value investing don't really go together. It takes a lot of work to research and analyze individual companies, inclu...
by Simplegift
Thu Aug 31, 2017 8:51 am
Forum: Investing - Theory, News & General
Topic: Value Factor Investing is not Value Investing
Replies: 126
Views: 9475

Re: Value Factor Investing is not Value Investing

I think understanding the difference between value investing & value factor investing is key because they are not the same thing. Agreed. There is often confusion in Forum discussions between passive "value factor tilting" (ala Fama-French) and active "fundamental value investing" (ala Ben Graham)....
by Simplegift
Wed Aug 30, 2017 5:18 pm
Forum: Investing - Theory, News & General
Topic: Demographic Headwinds for Stocks and Bonds?
Replies: 47
Views: 5091

Re: Demographic Headwinds for Stocks and Bonds?

Why not 'tilt' to the U.S.? This seems certainly at least as important as valuations. Why is it overlooked in favor of the much riskier strategy of overweighting to EM, which includes many countries with the same demographic issue as non-U.S. DM? A couple of reasons why greatly overweighting the U....
by Simplegift
Wed Aug 30, 2017 2:41 pm
Forum: Investing - Theory, News & General
Topic: Rob Arnott: Dump US stocks buy EM
Replies: 65
Views: 5664

Re: Rob Arnott: Dump US stocks buy EM

It would be nice to see that chart currency adjusted. I think quite a bit of European and Emerging Markets earnings growth get buried under currency weakening against USD in that chart. You’re right, the stronger US dollar since about 2011 makes emerging markets’ EPS growth look much more anemic (c...