Search found 393 matches

by lee1026
Tue Aug 06, 2019 6:53 pm
Forum: Investing - Theory, News & General
Topic: New and Improved CAPE is Higher!
Replies: 33
Views: 3173

Re: New and Improved CAPE is Higher!

Earnings yield is a real figure, since the corporations in question generally own real things.

Using REITs as an example because they have simple(r) balance sheets, rents on those apartments are going to go up with time.
by lee1026
Thu Jul 26, 2018 6:07 pm
Forum: Personal Consumer Issues
Topic: Engineers come in.
Replies: 108
Views: 8712

Re: Engineers come in.

The requirement for comp-sci was 3 upper division math classes, we got to pick which ones we wanted.
by lee1026
Thu Jul 26, 2018 5:58 pm
Forum: Personal Consumer Issues
Topic: Engineers come in.
Replies: 108
Views: 8712

Re: Engineers come in.

I will go against the grain here. I did my CSEE in 2006-2009, and I absolutely cruised through the first year and half (on a double courseload, no less!). The classes will get drastically harder as things go on; intro calc is child's play compared to the upper division math classes that you will be ...
by lee1026
Sat Mar 03, 2018 7:26 pm
Forum: Personal Investments
Topic: Best way to short the equity market
Replies: 130
Views: 10027

Re: Best way to short the equity market

If you are looking for a pure short, CME's S&P 500 futures is fairly good. It allows for a lot of leverage, so you can probably get as much exposure as you want on just that cash account. It is extremely liquid and cheap to trade, with no borrowing fees that are normally attached to these things. If...
by lee1026
Wed Feb 21, 2018 4:03 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 12396
Views: 2141417

Re: U.S. stocks in freefall

VBTLX's yield changes on a nano-second basis. Anytime its price changes, so does its yield.
by lee1026
Mon Feb 22, 2016 10:48 pm
Forum: Personal Finance (Not Investing)
Topic: where to get 3% real with the least amount of risk?
Replies: 56
Views: 8755

Re: where to get 3% real with the least amount of risk?

No reasonably safe bond is going to yield 3% right now. 10 year TIPS are trading at 0.5%.
by lee1026
Wed Feb 17, 2016 8:49 pm
Forum: Non-US Investing
Topic: why large difference yield US$ vs euro corporate bonds
Replies: 8
Views: 1067

Re: why large difference yield US$ vs euro corporate bonds

I think the difference is in the duration. On the US fund, the bond fund have a duration of 12 years. The 20 year treasury is at 2.24%. On the Euro fund, duration is 5 years. The 5 year bund is at negative 0.3%. That is a difference of 2.5%, which is around the same gap that you see in the fund yiel...
by lee1026
Tue Feb 16, 2016 9:04 pm
Forum: Personal Finance (Not Investing)
Topic: Is it crazy for me to anticipate living on a budget like this when I graduate? Is it even possible?
Replies: 60
Views: 5599

Re: Is it crazy for me to anticipate living on a budget like this when I graduate? Is it even possible?

Lots of people are saying that salary estimates are I don't think software engineers are making 105k just out of college. Salary.com shows the average salary at 100k, which would mean that fresh out of college would be less and with experience they would be more. I'm in a different type of engineer...
by lee1026
Fri Feb 05, 2016 7:58 pm
Forum: Investing - Theory, News & General
Topic: Today's dumbest investment advice
Replies: 32
Views: 5145

Re: Today's dumbest investment advice

Academic research suggest that buying stocks right before the ex-dividend cutoff and then selling it right afterwards is a profitable thing. http://people.stern.nyu.edu/mgruber/working%20papers/tax_effects.pdf Key line from the paper: Almost all research on the movement of stock prices on ex-dividen...
by lee1026
Sun Jan 31, 2016 5:25 am
Forum: Investing - Theory, News & General
Topic: The last 15 years
Replies: 100
Views: 18565

Re: The last 15 years

As you say, the length of time it tends to take markets to revert to more normal valuations could be radically different in the future - considering the impact hedge funds can have on market behaviour, as well as potentially index investing .. But that doesn't matter .. Valuations are a very simple...
by lee1026
Fri Jan 29, 2016 3:13 pm
Forum: Investing - Theory, News & General
Topic: The last 15 years
Replies: 100
Views: 18565

Re: The last 15 years

Remember CAPE isn't designed to estimate 10 year returns ... Mean reversion is a long-term tendency - not a 10-year tendency ... What the chart should show you is that all valuation metrics estimate 10-year returns within a reasonable margin error I thought CAPE became popular precisely because it ...
by lee1026
Thu Jan 28, 2016 12:23 am
Forum: Personal Investments
Topic: Starting off 2016: If you had $15,000.00 to invest, what would you do with it?
Replies: 21
Views: 3254

Re: Starting off 2016: If you had $15,000.00 to invest, what would you do with it?

If somebody did know a way to reliably achieve such returns they'd borrow to the hilt and take all the money for themselves. They wouldn't tell you, or me, or even waste their time reading bogleheads.org. I know how to achieve 10% returns every month reliably - the only downside is that when the sc...
by lee1026
Wed Jan 27, 2016 5:36 pm
Forum: Investing - Theory, News & General
Topic: The last 15 years
Replies: 100
Views: 18565

Re: The last 15 years

Thing about Fama-French and value is that they picked a very odd metric for value - price to book ratio. While everything in a company's report is in some ways different from reality, book value is especially bad. Book value tells you what a company paid for its current assets minus statutory deprec...
by lee1026
Tue Jan 26, 2016 2:21 pm
Forum: Investing - Theory, News & General
Topic: The last 15 years
Replies: 100
Views: 18565

Re: The last 15 years

Shiller didn't come up with the concept - Ben Graham had been cyclically adjusting his P/E ratios at least half a century earlier But was it famous? I wasn't alive in the early 80s; I wouldn't know. But the fact that we always call it Shiller P/E suggest that it wasn't. And generally with these thi...
by lee1026
Tue Jan 26, 2016 11:36 am
Forum: Investing - Theory, News & General
Topic: The last 15 years
Replies: 100
Views: 18565

Re: The last 15 years

How is international results out of sample? Shiller had access to all of these data when he came up with the concept in the early 1990s. Out of sample would be to use the data from early 90s to now, and only use the mean P/E from 1871-1992. Under those circumstances, shiller P/E fails to predict 10 ...
by lee1026
Mon Jan 25, 2016 6:08 pm
Forum: Investing - Theory, News & General
Topic: The last 15 years
Replies: 100
Views: 18565

Re: The last 15 years

When you read stories about things like the Dell-EMC deal, you end up with an impression that either stocks are incredibly undervalued, or that (junk) bonds are incredibly overvalued. The key line from the analysis: Dell will spend less on the annual financing cost (interest expense and principal pa...
by lee1026
Fri Jan 15, 2016 4:46 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 12396
Views: 2141417

Re: U.S. stocks in freefall

NYSE is closed, but the CME will be open and trading.
by lee1026
Wed Jan 13, 2016 1:23 am
Forum: Personal Consumer Issues
Topic: Deleted
Replies: 56
Views: 8075

Re: Powerball math: annuity is better?

And more importantly, you will be paying taxes on the earnings from the lump sum. Getting this kind of money into an IRA can be tricky.
by lee1026
Tue Jan 12, 2016 9:22 pm
Forum: Investing - Theory, News & General
Topic: Lottery into SPY
Replies: 17
Views: 2340

Re: Lottery into SPY

The S&P 500 market should have enough liquidity to absorb $400 million with ease. You will probably want to break it up a bit, but it should go though in one day without much trouble. Volume on SPY is 172 million shares by day. You would be dealing with 2% of that. Drop in the bucket.... If I were d...
by lee1026
Tue Jan 12, 2016 6:06 pm
Forum: Personal Consumer Issues
Topic: Deleted
Replies: 56
Views: 8075

Re: Powerball math: annuity is better?

Why is everyone using 5% as an interest rate? The payment will increase by 5% a year; that have nothing to do with the break even rate of return needed on the lump payment to come out ahead of the annuity.
by lee1026
Tue Jan 05, 2016 5:58 pm
Forum: Investing - Theory, News & General
Topic: When will Value outpeform Growth?
Replies: 62
Views: 7722

Re: When will Value outpeform Growth?

In theory, if you know that assets with high market beta will perform no better than assets with low market beta, then you can generate a positive return by going long on the low beta stuff and short the high beta stuff. I have seen papers to this effect, but it doesn't seem to be a popular thing to...
by lee1026
Thu Dec 24, 2015 4:31 pm
Forum: Investing - Theory, News & General
Topic: Shorting stocks during a crash?
Replies: 28
Views: 3337

Re: Shorting stocks during a crash?

Because there are so many people trying to do it, you will pay a premium to get stock on loan-- at least I imagine so.
I don't think this is true, at least for things like indexes. Even in 2008, shorting the S&P remained easy.
by lee1026
Fri Dec 11, 2015 5:08 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

I think your digging in the data and others have thoroughly discussed this. But, folks saying negative correlation is desirable is a HUGE pet peeve of mine.If one likes to short markets, then okay negative correlation works in this scenario. But, if one is a buy and hold investor, anything that is ...
by lee1026
Fri Dec 11, 2015 4:52 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

If 100 people are looking to buy a house in Malibu, and supply only extends to 50, then price goes up until we reach an equilibrium Agreed. The number of sellers and buyers depends on the price, and any differences in the number of sellers and buyers in a liquid market is mediated by a change in pr...
by lee1026
Fri Dec 11, 2015 4:18 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

So perhaps it's better to forget the term "money", and just focus on "value" I don't think there is any rule that the value of all assets needs to remain constant? The number of stocks, bonds and gold don't change, but when there are more sellers than buyers, the value of (say) stocks goes down ......
by lee1026
Fri Dec 11, 2015 3:07 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

And that estimation comes from buying and selling - and when stocks crash, it means there are more sellers than buyers, and those sellers will need to move their money somewhere else I don't think that is accurate - the amount that sellers sell and the amount that buyers buy needs to be exactly the...
by lee1026
Fri Dec 11, 2015 3:28 am
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

Why can't there simply be less money in the world after the crash? The money doesn't have to go anywhere. It can just disappear.
by lee1026
Thu Dec 10, 2015 8:34 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

There are lots of other places money can flow to. Real estate, farmland, livestock*, etc. You also have to take into account that sometimes, there just isn't as much money in the economy as it used to be. E.g. great depression. *Okay, I will be REALLY surprised if livestock becomes an investment "th...
by lee1026
Thu Dec 10, 2015 6:01 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

The only thing to argue about is whether the recent negative correlation is robust, reliable, and can be expected to persist, or whether it's a fluke that can end at any time. One thing to consider is that correlations are not prices; there is nothing wrong (in theory) with buying bonds when the co...
by lee1026
Tue Dec 08, 2015 3:11 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

Stop beating this dead horse unless if you want me to start posting when they move in the same direction. It is going to happen a lot.

(And I am on your side here!)
by lee1026
Sun Dec 06, 2015 6:15 pm
Forum: Investing - Theory, News & General
Topic: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?
Replies: 70
Views: 5949

Re: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?

So there is two separate things being discussed here. There is the leverage ratio of any given bank, which is calculated based on the ratio between its assets and its equity. There is also the money multiplier, which is is based on the ratio between base money and near money. So when the Fed adds mo...
by lee1026
Sun Dec 06, 2015 5:07 pm
Forum: Investing - Theory, News & General
Topic: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?
Replies: 70
Views: 5949

Re: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?

One problem is that there is disagreement about how money is created. Budget deficits play a role in this. The Federal Reserve Bank has a big role in this. But it seems that most money is created in the banking system where in essence your deposit can be leveraged 10 to 1 into loans. Debt is money ...
by lee1026
Sat Dec 05, 2015 2:09 am
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

First if one believes the recent 'mode of oscillation' of the two markets, which does tend more to negative correlation, is here to stay. It would be impossible to prove upfront one was right about that, but it could be so. One way to figure out if the market expect for the correlation to stay is b...
by lee1026
Fri Dec 04, 2015 8:13 pm
Forum: Investing - Theory, News & General
Topic: Stocks and bonds move in opposite directions and improve results? Really?
Replies: 129
Views: 13898

Re: Stocks and bonds move in opposite directions and improve results? Really?

I agree that there isn't that much annual data. But then again, why do you need annual data? Use daily data instead. There have been an awful lot of days, and we have a large data set of those. Using daily data for S&P 500, (SPY) and the Vanguard Long-Term Treasury fund (VUSTX), we find a correlatio...
by lee1026
Fri Dec 04, 2015 3:57 pm
Forum: Investing - Theory, News & General
Topic: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?
Replies: 70
Views: 5949

Re: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?

The money in your back account is not part of M0. And if you want to use M1 or M2 or M3 or M4 or M5 or M6 all you have to do is put your paycheck in Vanguard Federal MM and it's still not part of the money supply (Tip of hat to Valuethinker). And if you use M7 some bright spark will invent yet anot...
by lee1026
Fri Dec 04, 2015 2:46 am
Forum: Investing - Theory, News & General
Topic: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?
Replies: 70
Views: 5949

Re: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?

I think the rather fundamental reason why velocity can't go too high is that people don't want to instantly spend money. I get my paycheck, I buy things, but there is generally a period of time in the middle where I am holding on to currency. If it takes me two weeks to spend my paycheck, then the f...
by lee1026
Thu Dec 03, 2015 11:27 pm
Forum: Investing - Theory, News & General
Topic: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?
Replies: 70
Views: 5949

Re: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?

I think that the velocity of money is relatively bounded. Velocity of money is the GDP/M0 (by definition), looking around the world, we see countries where the velocity of money is around 5-10* (AU), and we see countries where the money velocity is 0.5 or so. (Japan) I am not aware of any countries ...
by lee1026
Thu Dec 03, 2015 7:46 pm
Forum: Investing - Theory, News & General
Topic: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?
Replies: 70
Views: 5949

Re: Historically, was gold's "value" simply that it was a convenient, yet hard to counterfeit symbol?

Gold coins were plagued by debasement through clipping and sovereigns decreed the value of the coins at the face value, as opposed to the value of the gold in the coin. Fun fact time - once upon a time, Asian countries had so little faith in their own governments that they used silver coins minted ...
by lee1026
Tue Dec 01, 2015 6:34 pm
Forum: Investing - Theory, News & General
Topic: Wealthfront
Replies: 5
Views: 1616

Re: Wealthfront

Another issue is that they may not be great at running investments. They seem to suffer from performance chasing as much as your average consumer. For example, when I checked their suggest investments this time last year, they had a largeish allocation to natural resources in the form of commodity f...
by lee1026
Mon Nov 23, 2015 9:28 pm
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 930
Views: 252862

Re: Should I use margin to buy a balanced fund?

The argument is that shorter dated treasuries have a better sharpe ratio than longer ones. Since we are using hilariously large amounts of leverage anyway, all that matters is the sharpe ratio, not absolute return.
by lee1026
Fri Oct 30, 2015 4:26 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Market timing 2-year treasuries using Martingale-style bets

He isn't so much momentum trading so much as he is swing trading. Buying the dips and selling the highs.
by lee1026
Thu Oct 29, 2015 6:35 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Market timing 2-year treasuries using Martingale-style bets

Now that I have had more time to think it though why my knee jerk reaction is that this won't work, let me explain in proper detail. For something as short as the 2 year treasury, you can model out the "correct" interest rate on the 2 year by computing a set of probabilities on whether the Fed is go...
by lee1026
Wed Oct 28, 2015 3:22 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Market timing 2-year treasuries using Martingale-style bets

For things that are as far out as 2 weeks, how you model the roll will start becoming extremely important.

As an aside, if you think this will work, the correct answer isn't to try to lower your "cost basis" but to simply make money buying the dips and then selling a few ticks over.
by lee1026
Tue Oct 27, 2015 10:29 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Market timing 2-year treasuries using Martingale-style bets

Five-sigma case: The yield increases from 0.66% to 0.76%. The NAV of my bond position drops by 0.10% * 2 = 0.20%. I increase my position to 3x, so my effective yield is 3* 0.76% = 2.28%. It will take 365 * 0.2%/2.28% = 32 days to recover the loss from dividends. ***Note that 0.20% is still within t...
by lee1026
Tue Oct 27, 2015 1:27 am
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Should I use margin to buy a balanced fund?

We can forget about futures for a moment and focus on regular bonds/bond fund fundamentals. When yields increase and bond prices go down, we point at reinvesting dividends and say we are buying bonds with the new (higher) yield. If we hold and continue to reinvest dividends long enough , we will hi...
by lee1026
Mon Oct 26, 2015 1:58 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Should I use margin to buy a balanced fund?

Implied finance costs for stock futures and bond futures are very different, mostly because on the stock side, you are asking the lender to take on the risk that the dividends will be cut. On the bond side, the dividend is effectively T-Bills. Implied financing for bond futures is roughly LIBOR. 0.2...
by lee1026
Mon Oct 26, 2015 1:24 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Should I use margin to buy a balanced fund?

Who's even the market on the short side of short-term Treasury futures, other than speculators hoping for rate increases? Traders hedging a tiny bit of term risk out of short-term distressed credit plays? Some more complicated derivatives swaps/hedging scheme? Institutional arbitragers collecting t...
by lee1026
Sun Oct 25, 2015 10:23 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Should I use margin to buy a balanced fund?

2 ticks is $30. Margin on a 2 year bond is $650 per contract. If you go to 50% margin, you will make a 2.5% return each time you pull this off. If you can do this every week on average, that is over 100% per year.

Forget about everything else!
by lee1026
Sun Oct 25, 2015 8:44 pm
Forum: Investing - Theory, News & General
Topic: Market timing 2-year treasuries using Martingale-style bets
Replies: 87
Views: 7286

Re: Should I use margin to buy a balanced fund?

It's a term that I made up. It means that my effective purchase price of that futures position is reset to the new (lower) price. For example, say that I have 5 2-year note contracts purchased at $110.00. The price drops to $109.50. I buy 10 more contracts at $109.5 and then set a limit order to se...