Search found 1543 matches

by Theoretical
Thu May 18, 2023 8:49 am
Forum: Investing - Theory, News & General
Topic: Impact of a light ESG screen on expected returns
Replies: 27
Views: 2906

Re: Impact of a light ESG screen on expected returns

0.3% is a big deal for equities, especially large caps. As long as the turnover is not high and it doesn't have a weird high tax cost the total market fund has, you'll have a small tracking error that's more than offset by the cheaper ER.
by Theoretical
Thu May 11, 2023 2:40 pm
Forum: Personal Consumer Issues
Topic: Engagement Ring Thoughts
Replies: 101
Views: 7626

Re: Engagement Ring Thoughts

My wife's ring is a family piece (my mom's) that she liked and mostly wears the band except for special occasions. The "RING" is definitely not something she can wear, but instead is a vintage Steinway she can play whenever and however much she wants, so creativity can also come in that direction.
by Theoretical
Sat May 06, 2023 4:09 pm
Forum: Investing - Theory, News & General
Topic: Corporate preferreds vs bonds
Replies: 38
Views: 2915

Re: Corporate preferreds vs bonds

The Credit Suisse A-1 bonds were weird hybrids that were tailor made to get given "special" treatment. Preferred stock in a financial institution is a hot mess I wouldn't touch with a 10 foot pole after 2008 and Dodd-Frank, because you're just not getting compensated for the wipe-out risk like you are for regular equities or being higher on the totem pole with regular, even high yield, debt.

Non-financial preferreds could work as a bond alternative you're using to get additional yields, and it will likely behave a bit differently than either the bonds or the stocks.
by Theoretical
Sat May 06, 2023 1:52 pm
Forum: Investing - Theory, News & General
Topic: Active Management in "Less Efficient" Markets
Replies: 23
Views: 1893

Re: Active Management in "Less Efficient" Markets

You also have to have a sufficient time period of outperformance to weed out the noise of luck, especially in something like equities that are regularly traded and where there's pretty good price discovery. Either the manager is very small and willing to take focused risks that will limit their AUM or they're going to basically hug an index and make a few biggish bets where some will go well and some badly. Net result is that most underperform.
by Theoretical
Sat May 06, 2023 5:40 am
Forum: Investing - Theory, News & General
Topic: Portfolio protection with Trend
Replies: 42
Views: 4355

Re: Portfolio protection with Trend

Conceptually I think where Boglehead ideas have some similarities is in approaching an investment systematically without discretion. Commodities (and currencies for that matter as well) are fundamentally different from bonds and stocks in that unlike the latter two, there's a built-in short side that's also part of the investment universe. For a stock or bond, to short the asset, I have to artificially create the short by borrowing the stock from someone and then selling it. With a futures contract, it's not about ownership, but rather someone buying and someone selling on a particular date. With a currency, I'm buying X currency and selling Y currency. Aside from precious metals, it's not really practical to own physical commodities unless...
by Theoretical
Thu May 04, 2023 9:01 am
Forum: Investing - Theory, News & General
Topic: Portfolio protection with Trend
Replies: 42
Views: 4355

Re: Portfolio protection with Trend

There can be partial overlaps, but it's definitely not a mainstream part of it. Commonalities: - Diversification. It's very hard to be more diversified than these types of portfolios, especially because the short side does add significant diversification. - Systematic approach (good funds are 100% systematic in the structure and execution) - Buy and hold the strategy (even though the strategy/fund inherently trades) Divergences: - The strategy itself is based on lots of timing bets, which is not part of a Boglehead asset allocation approach - The fees are quite high, a combination of both inherent trading expenses, manager fees, and for retail investors, additional costs of Cayman subsidiaries and swaps. - While the implementation is system...
by Theoretical
Wed Apr 19, 2023 6:09 pm
Forum: Investing - Theory, News & General
Topic: Gross versus Net Expense Ratio
Replies: 13
Views: 1721

Re: Gross versus Net Expense Ratio

Correct. The net expense ratio is typically accompanied by a fee waiver note in the prospectus or other materials. Sometimes, they're effectively permanent and other times they're "teaser rates."
by Theoretical
Wed Apr 19, 2023 10:48 am
Forum: Investing - Theory, News & General
Topic: International Exposure: 100% EM?
Replies: 203
Views: 13018

Re: International Exposure: 100% EM?

The big problem with 100% EM is that there's outsized, idiosyncratic risk attached to the countries, and they're often over-concentrated into individual sector bets. Owning a bunch of Russian oil companies was great in the EM value recovery from February 2018 to 2022...and then Russia got mass delisted. Developed markets aren't immune to it - See the UK pound last year -- but you get a lot of uncompensated and heavily concentrated risks here. Generally most recommendations, even from very aggressive allocators is to include no more than 25-33% of your in allocation in EM, unless your international allocation is very low, in which case I think Bogle's 50/50 approach is actually better simply for maximizing the diversification. If I was going...
by Theoretical
Mon Apr 17, 2023 10:08 am
Forum: Investing - Theory, News & General
Topic: Managed Futures Improve performance
Replies: 48
Views: 6448

Re: Managed Futures Improve performance

If the fund loses money, it just wouldn't pay dividends that year. If you lose more than you make, you can deduct the capital losses. That's the difference.
by Theoretical
Mon Apr 17, 2023 9:26 am
Forum: Investing - Theory, News & General
Topic: Managed Futures Improve performance
Replies: 48
Views: 6448

Re: Managed Futures Improve performance

I spent about a year researching them before even putting a minor 5% slug in, and you only want to invest in things where you understand WHY they would move as much as the fact that they do move. Otherwise, there's no point and the fees are high. Very helpful post, thanks. I'm still hoping for a passive index MF ETF with a TER below 0.5. So you don't think single manager/fund risk is a thing to be worried about in the MF space? I do think single fund risk is a thing which is why I have 2 primaries plus a couple of others. The main reason it's less of a risk is that a proper CTA is taking a LOT of small positions systematically, and uses a lot of different rules (KMLM is again an exception here with just 1) and it has to be managed pretty s...
by Theoretical
Sun Apr 16, 2023 7:40 pm
Forum: Investing - Theory, News & General
Topic: Managed Futures Improve performance
Replies: 48
Views: 6448

Re: Managed Futures Improve performance

I spent about a year researching them before even putting a minor 5% slug in, and you only want to invest in things where you understand WHY they would move as much as the fact that they do move. Otherwise, there's no point and the fees are high. Very helpful post, thanks. I'm still hoping for a passive index MF ETF with a TER below 0.5. So you don't think single manager/fund risk is a thing to be worried about in the MF space? The passive fund under .5 that's diversified is not really doable simply because futures are very cheap, but you still have to pay transaction costs and face slippage. Once you're in QEP/Accredited investor status, I believe Winton's program is .75% and Jerry Parker's Chesapeake is 1%. For a mutual fund, there's als...
by Theoretical
Sun Apr 16, 2023 7:23 pm
Forum: Investing - Theory, News & General
Topic: Managed Futures Improve performance
Replies: 48
Views: 6448

Re: Managed Futures Improve performance

I personally use KMLM, MFTNX (Arrow Managed Futures), LCSIX (LoCorr Long/Short Commodities) and AMFAX (Natixis AlphaSimplex Managed Futures) with the lion's share being in MFTNX and AMFAX. LCSIX is an oddball that's essentially a smorgasbord of commodity-only strategies including trend. It's got a lower weighting due to being pretty low vol and having stuff beyond trend in it (which means more blowup risk), but it's much less correlated to the other 3 CTAs. It's nice but replaceable. KMLM's fees are the lowest and it's quite transparent, which I do like. By not having equity indexes, it's less correlated to them, though with lower absolute returns. AMFAX is probably the best overall retail fund if you're only going to have one and not have ...
by Theoretical
Sun Apr 16, 2023 2:48 pm
Forum: Investing - Theory, News & General
Topic: Managed Futures Improve performance
Replies: 48
Views: 6448

Re: Managed Futures Improve performance

About 25% of our portfolio is in managed futures, and I started investing in 2017 after reading the AQR paper and a few other things. They did indeed provide a good counterbalance to both bonds and equities. If you want to learn how they work on a very small scale, get a copy of Robert Carver's book Leveraged Trading and then set up a paper money trading account in Thinkorswim or a similar broker. He's a retired trader at AHL who trades his own money and readily shares both the ups and the downs on his blog and various podcasts like Top Traders Unplugged. Retail buyers suffer quite a challenge with these funds because they combine high to very high fees with fairly low standard deviation in most cases. This means that most of the benefits t...
by Theoretical
Tue Jun 14, 2022 10:16 pm
Forum: Investing - Theory, News & General
Topic: What happened to Flight To Safety
Replies: 34
Views: 5831

Re: What happened to Flight To Safety

The flight to safety effect with bonds requires several things: 1. The crisis is a deflationary or panic situation. Supply shock, inflationary, or overheated economy situations aren't going to do it for bonds. 2. Your currency is one of the big dogs, especially in liquidity. For practical purposes, that means the Dollar, Yen, and maybe the Swiss Franc, with the former 2 being for extreme liquidity and the latter for having unusually large gold reserves. The Euro and Pound are maybes depending on the nature of the crisis. Liquidity matters even more than quality in these circumstances. Back in the Great Depression era, the big dog was the Pound, and the dollar was the up-and-comer. 3. Your currency is not directly affected by the crisis. The...
by Theoretical
Thu Jun 09, 2022 8:17 pm
Forum: Investing - Theory, News & General
Topic: Commodities for diversification in 2022?
Replies: 48
Views: 5354

Re: Commodities for diversification in 2022?

Commodities are tricky for several reasons. One, actual commodities require a LOT of storage (or a VERY secured one) so you're probably not doing that. So that leaves you in the futures realm. With a stock or a bond, I have to manufacture a derivative in order for you to short it. Buy a bond or a stock and the only baseline market is long and flat (i.e. not owning it). With a futures contract, EVERY contract is inherently long or short. The tax consequences for commodities futures are UGLY, since you have to recognize the revenue annually, and physical precious metals are taxed as collectibles. If you need them to hedge (like a farmer with a wheat crop), you absolutely need them but you're not doing it for investment purposes per se. Larry ...
by Theoretical
Thu May 26, 2022 4:38 pm
Forum: Investing - Theory, News & General
Topic: "experienced" investors: is this time different?
Replies: 377
Views: 54112

Re: "experienced" investors: is this time different?

This time may be different, but I don't know why CraigTester "fears it's exactly the same". The "same" was very good to long-term investors. I remember being in Miami in 2009 and a brand new high-rise right on the water was selling condos for $80k. Man I wish I had bought back then but I was dead broke and living paycheck to paycheck simply happy to have a job. I had friends moving back with their parents, leaving the career they worked hard for in college for good, even had one die in an accident working construction to keep food on the table. The deals were there, I saw them right before my eyes but I was in no position to reach out and grab them. Its a great thing that so many here are ready to scoop up some amazing ...
by Theoretical
Tue May 17, 2022 10:05 am
Forum: Investing - Theory, News & General
Topic: Jim Cramer is a Boglehead
Replies: 25
Views: 3112

Re: Jim Cramer is a Boglehead

That's seriously despicable. He has no skin in the game and yet he represents various stocks as good or bad candidates on a VERY big platform. It doesn't mean he has to own all of them, but the fact he doesn't eat his own cooking for at least a significant portion of his portfolio is quite dubious.
by Theoretical
Mon May 16, 2022 9:34 pm
Forum: Investing - Theory, News & General
Topic: Do you ever think “is this (drop) the big one”?
Replies: 66
Views: 8239

Re: Do you ever think “is this (drop) the big one”?

I first started being interested in the stock market in 2015 and discovered Bogleheads in 2018. There hasn't been any drops since 2009. There've been some mini-scares. November 2015-February 2016 was pretty ugly and a technical bear in the S&P. I think there was another in 2018 and March 2020 is an obvious one, and definitely the one with more of a 1929/2008 potential feel due to the sheer unknown territory of shutting large sections of the economy off on a worldwide scale. Something I think I'd also not underestimate is the sheer amount of economic and job malaise that existed throughout the 2010s for many people. 2008-09 was a huge plunge but the recovery took a LONG time and even still has left significant scars on people. The big b...
by Theoretical
Mon May 16, 2022 11:08 am
Forum: Investing - Theory, News & General
Topic: How Bad was 2008, really?
Replies: 407
Views: 63815

Re: How Bad was 2008, really?

I was in a genuine state of naivete being in law school in terms of the markets, but as I look back, my older classmates were legitimately afraid, and I'm still quite shaken by the sheer bearishness of the job market 4 years later.

Looking back just a little (and I got a job going through bank correspondence in terms of mortgage backed securities litigation), the blood drained out of me multiple times at just how bad it was.
by Theoretical
Mon May 16, 2022 10:58 am
Forum: Investing - Theory, News & General
Topic: Small caps are cheap
Replies: 33
Views: 6266

Re: Small caps are cheap

In an ideal world, where my emotional/behavioral actions were not a factor and where I had job-level time, I would do a concentrated Microcap value fund of about 100 stocks that's based solely on quantitative measures plus balance sheet verification (i.e. are the reported numbers actually the reported numbers). My biggest concern is the fraud/accounting risk, which is also the reason I fundamentally distrust megacap cap-weighted funds, and I think even among the super-value stocks there's too much uncompensated risk for the amount of diversification you need. Given that multiple of those ideals are not practical for me, I use IJS and AVUV. I have a soft spot in my heart for uber-microcap funds in theory (Aegis Funds Cigar Butt Special AVALX...
by Theoretical
Wed May 11, 2022 10:49 pm
Forum: Investing - Theory, News & General
Topic: Long term inflation protection & crash hedge?
Replies: 28
Views: 2708

Re: Long term inflation protection & crash hedge?

Inflation protection and crash hedges should be separated into two different categories especially since a real crash hedge is to protect against a deeply deflationary panic whereas the inflationary one is outpacing the growth of your assets. For inflation protection, Larry Swedroe's made some good points about a small slug of commodities combined with taking a bit longer duration risk being a workable solution. Obviously I Bonds are downright amazing right now even at 0% real, but that tax deferral and 30 years of compounding on initial high inflation is kind of special. Debt is the real inflation hedge, as the folks who got 30 year mortgages at the low, low rates just got a very sweet ride as long as their local real estate market stays s...
by Theoretical
Sat May 07, 2022 11:48 am
Forum: Investing - Theory, News & General
Topic: The Diversification Value of Alternatives
Replies: 90
Views: 10889

Re: The Diversification Value of Alternatives

Alts:

All Managed Futures:
- MFTNX, AMFAX, KMLM, and LCSAX in roughly equal dollar amounts at about 15-20% of the portfolio.

If inflation protected bonds are included, I Bonds and LTPZ
by Theoretical
Fri May 06, 2022 4:25 pm
Forum: Personal Investments
Topic: Should Managed Futures funds be held in a tax deferred accounts?
Replies: 13
Views: 2218

Re: Should Managed Futures funds be held in a tax deferred accounts?

https://bogleheads.org/forum/viewtopic.php?t=376948 I've posted some more about my thoughts on them as funds, but a few major points: 1. They're expensive, and in some cases soul-crushingly expensive. 2. They do NOT behave like most other investments in that you get lots of small losses and then WHOA gains in short bursts, and then its back to drawdown from a new high. But the drawdowns tend to be shallow and long. 3. The returns are uncorrelated and not negatively correlated, so sometimes they'll take a bath right alongside the equities or they'll go the other direction or just flat. A good fund is diversified across a bunch of different futures, so you can start to get a decent idea how it's going to do overall. 4. Volatility is a GOOD th...
by Theoretical
Fri May 06, 2022 2:02 pm
Forum: Investing - Theory, News & General
Topic: Hi! I'm high inflation. Nice to meet you.
Replies: 980
Views: 110486

Re: Will inflation be controlled?

Wow, I really stand corrected there, especially since Argentina's is even higher. Maybe then the only question is concerted efforts by the largest economies to starve it, Volker style. If not, then hello roller coaster.
by Theoretical
Fri May 06, 2022 1:04 pm
Forum: Investing - Theory, News & General
Topic: Hi! I'm high inflation. Nice to meet you.
Replies: 980
Views: 110486

Re: Will inflation be controlled?

I think there's little question that central banks have the tools to slam the doors on inflation at least in terms of known variables in modern finance. Alien invasions, mega volcanoes, or asteroid strikes don't really count in this. Volkerism is about to get its first real test if inflation doesn't start trending downward. How much political will is there going to be in various nations to strangle the economy to starve inflation? That's simultaneously an extremely political question and it's a politics-independent one. It really doesn't matter whether the Fed, White House, and Congress are controlled by the Republicans, Democrats, sloths, random people off the street, or any other political stripe (insert the equivalents for other large ec...
by Theoretical
Fri May 06, 2022 10:52 am
Forum: Personal Investments
Topic: Should Managed Futures funds be held in a tax deferred accounts?
Replies: 13
Views: 2218

Re: Should Managed Futures funds be held in a tax deferred accounts?

Fixed allocation, I haven't run the numbers recently as to the exact amounts, but it's between 15-20% of our portfolio, targeted for at least 20%. We're tax advantaged constrained (our 401ks don't have these available as options) so that's a limiting factor.

We're at a roughly even weighting on the allocation to diversify manager/strategy risk. My only debate I go back and forth on is whether to weight equally by fund volatility or simple dollar amount, since there's a big difference between them.One thing to note is that volatility is a GOOD thing on systematic managed futures funds because it tends to be much more weighted on the positive than the negative side in terms of skew.
by Theoretical
Thu May 05, 2022 6:54 pm
Forum: Investing - Theory, News & General
Topic: The Diversification Value of Alternatives
Replies: 90
Views: 10889

Re: The Diversification Value of Alternatives

We're about a 60/40 portfolio, but heavily tilted to Small Value, International Small Value, and Emerging Value (Larry style). Half of the bond allocation is in 4 managed futures mutual funds/ETFs and some of the bonds are I Bonds or Long Tips. The fees range from ugly (.90 for Krane Shares KMLM), to ghastly, to rip your eyeballs out ugly (2.1% fees regardless of performance and 25% underlying fund performance fee on positive returns for Arrow Funds Managed Futures - it's 0/25 if you're able to invest in the LP), but they've been doing exceptionally well, in conditions where they're supposed to work. Basically, I like them because they're long volatility funds without the negative expected returns of buying put or call options and in fact ...
by Theoretical
Thu May 05, 2022 6:14 pm
Forum: Investing - Theory, News & General
Topic: The Diversification Value of Alternatives
Replies: 90
Views: 10889

Re: The Diversification Value of Alternatives

With systematic managed futures, the volatility shows up on the positive side of the returns, not the negative, while the drawdowns still happen in the negative side, but they tend to be gradual, creeping things with a few big drops here and there. It's a positively skewed investment strategy so there's a bunch of small losses and the extreme moves are on the gain side for the most part based on the way the funds are structured. The gains tend to be quick, sharp and WHOA!, and happen sometimes when the market's taking a bath, sometimes when it's high as a kite and sometimes when it's fairly flat. With MFTNX, the strategy was adopted by the fund in October 2015, so you need to start there, but the underlying Dunn Capital Fund dates back to t...
by Theoretical
Thu May 05, 2022 1:16 pm
Forum: Investing - Theory, News & General
Topic: The Diversification Value of Alternatives
Replies: 90
Views: 10889

Re: The Diversification Value of Alternatives

Sure, the funds are MFTNX and KMLM (recent addition) along with the AlphaSimplex Managed Futures (AMFAX) (this was formerly called Natixis Managed Futures but it's the same manager), and LoCorr Long/Short Commodities (LCSAX). The last one is a bit of the exception/oddball compared ot the other three. Why 4, in short it's manager and strategy risk diversification, and a bunch of fund managers actually recommend that in their interviews. Some funds use shorter or more medium term signals while others use medium to long term signals. Dunn Capital (MFTNX) has a small non-trend exposure too VIX. In addition which kind of signal gets used will vary. I used to be invested in the Chesapeake mutual fund wrapper of Jerry Parker's, but the mutual fund...
by Theoretical
Thu May 05, 2022 11:48 am
Forum: Personal Investments
Topic: Should Managed Futures funds be held in a tax deferred accounts?
Replies: 13
Views: 2218

Re: Should Managed Futures funds be held in a tax deferred accounts?

Managed futures funds HAVE to make annual distributions of all of their net proceeds so the distributions can be 8-10%, and it's all ordinary income in most cases. They're definitely NOT tax efficient. I wish PQTIX was about 50-100% more volatile, but it does a very good job of being negatively correlated to equities and not overly correlated to bonds. Previously, I've been invested in it and liked it. I've also looked at DBMF and like its replicator approach. The funds we're in are Arrow Funds Managed Futures (MFTNX), AlphaSimplex Managed Futures (Formerly Nataxis) AMFAX, LoCorr Long/Short Commodities (LCSAX), and KraneShares MLM Managed Futures (KMLM). One thing to be aware of is that there's been a HUGE runup lately (45% in MFTNX), thoug...
by Theoretical
Thu May 05, 2022 11:26 am
Forum: Investing - Theory, News & General
Topic: The Diversification Value of Alternatives
Replies: 90
Views: 10889

Re: The Diversification Value of Alternatives

We're about a 60/40 portfolio, but heavily tilted to Small Value, International Small Value, and Emerging Value (Larry style). Half of the bond allocation is in 4 managed futures mutual funds/ETFs and some of the bonds are I Bonds or Long Tips. The fees range from ugly (.90 for Krane Shares KMLM), to ghastly, to rip your eyeballs out ugly (2.1% fees regardless of performance and 25% underlying fund performance fee on positive returns for Arrow Funds Managed Futures - it's 0/25 if you're able to invest in the LP), but they've been doing exceptionally well, in conditions where they're supposed to work. Basically, I like them because they're long volatility funds without the negative expected returns of buying put or call options and in fact h...
by Theoretical
Sat Apr 03, 2021 2:06 pm
Forum: Investing - Theory, News & General
Topic: Are Hedge funds basically scams?
Replies: 72
Views: 9571

Re: Are Hedge funds basically scams?

As a theoretical category, no.
As a practical reality, yes.
by Theoretical
Tue Oct 20, 2020 4:57 pm
Forum: Investing - Theory, News & General
Topic: Would inflation benefit small cap stocks?
Replies: 9
Views: 965

Re: Would inflation benefit small cap stocks?

Inflation would benefit the most heavily-leveraged companies in general. It's one of the reasons why junk bonds are considered partial inflation hedges, because even while the coupons get closer to (or even surpassed by) treasury interest rates, the credit quality of those bonds increases because they're more likely to get paid on time and in full.
by Theoretical
Thu Oct 15, 2020 11:28 am
Forum: Investing - Theory, News & General
Topic: Simplify US Equity PLUS Convexity ETF (SPYC)
Replies: 12
Views: 2303

Re: Simplify US Equity PLUS Convexity ETF (SPYC)

Adding the convexity on both ends rather than on the tails is an interesting strategy. There's no question puts (calls) are the best and most direct way to profit asymmetrically from a downward (upwards) move in a particular market, but the downside is that there's a huge volatility risk premium earned by the sellers.
by Theoretical
Thu Sep 24, 2020 11:01 am
Forum: Investing - Theory, News & General
Topic: Vanguard Global Credit Fund VGCIX - What's the catch?
Replies: 10
Views: 1712

Re: Vanguard Global Credit Fund VGCIX - What's the catch?

crystalbank wrote: Thu Sep 24, 2020 10:44 am
Dave55 wrote: Thu Sep 24, 2020 7:39 am According to Morningstar, the 3 managers have less than $10,000 each invested in the fund. The managers are not eating what they are cooking.
https://www.morningstar.com/funds/xnas/vgcax/people

Dave
Interesting. I'm not really worried about it though.
It doesn't bother me much with a vanilla index fund since the rules are externally imposed, formal, and more "keep the train on the tracks," but it bothers me a lot with any kind of active fund because they're making investment decisions with other people's money while not being exposed to the same consequences themselves.
by Theoretical
Thu Sep 24, 2020 8:26 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 36221
Views: 4652243

Re: U.S. stocks in free fall

When I was a first year law student in the fall of 2008, my torts professor mercilessly blamed the hapless stockbroker in the class every evening: “I lost $200,000 today thanks to you people.” Your professor sounds petty, immature, and unprofessional. Let’s see, 1st day of class he told one student his answer was “a Billy Madison answer and we are all dumber for it” and later that day that one of the women in the class shouldn’t have children for an answer she gave. He also told us his 10th grade son’s private school class was smarter than us. The days he showed up tipsy, he’d make more movie references and be mellower somehow. He also liked to talk about trading in wives every 10 years for “a new model” and he’d find them in the internati...
by Theoretical
Thu Sep 24, 2020 8:19 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 36221
Views: 4652243

Re: U.S. stocks in free fall

I was in the night program for working professionals, so he had a day job and law school.
by Theoretical
Wed Sep 23, 2020 8:11 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 36221
Views: 4652243

Re: U.S. stocks in free fall

When I was a first year law student in the fall of 2008, my torts professor mercilessly blamed the hapless stockbroker in the class every evening:

“I lost $200,000 today thanks to you people.”
by Theoretical
Thu Sep 03, 2020 6:27 pm
Forum: Investing - Theory, News & General
Topic: Tips hyperinflation?
Replies: 48
Views: 4585

Re: Tips hyperinflation?

I think Bill Bernstein mentioned in Deep Risk that German Gold-backed Bunds in the Weimar Republic returned 25% of the asset's value in real terms, which was a whole lot better than the fractions of fractions of fractions of pennies that the unbacked bonds did. I'd expect in a non-Weimar/Zimbabwe/Venezuela scenario, you'd get closer to 50-66% of the value back unless the government decided to play a cute tax game where the inflation adjustment is taxed at 100% for domestic holders but foreign ones are exempt. In scenarios like the late 60s/early 70s UK, where inflation came awfully close to the magic 25% where real instability shows up, I suspect most governments would just pay the debt. I'm not too worried about it being an issue for the U...
by Theoretical
Sat Apr 11, 2020 5:32 pm
Forum: Investing - Theory, News & General
Topic: Put options vs treasuries
Replies: 24
Views: 2085

Re: PPUT

Cambria's TAIL ETF is based on buying a ladder of out of the money puts and investing the rest in treasuries. It's done extremely well this year after the usual expected losses in other good years.

I think if long-term interest rates remain negative in real dollar terms, puts vs. treasury bonds is a less automatic decision in favor of the bonds.
by Theoretical
Sat Apr 11, 2020 12:59 pm
Forum: Personal Investments
Topic: What single individual stock would you buy?
Replies: 186
Views: 22035

Re: What single individual stock would you buy?

1 stock: None. Not even Berkshire. Why, because owning stock in a single company has far too much idiosyncratic risk, insider knowledge, and simple luck, and the usual fraud risks involved. Now if I was assembling some microcap value mini-fund based on quant measures, then I'd be willing to take that risk because I'd be buying like 50-100 stocks and no one issue would drastically affect on the downside even if it was a complete scam.
by Theoretical
Fri Apr 03, 2020 2:43 pm
Forum: Investing - Theory, News & General
Topic: Another way a crash manifests itself
Replies: 20
Views: 2202

Re: Another way a crash manifests itself

I think the challenge we're in right now is that you've got this truly massive deflationary chasm that just appears of an unknown depth, breadth and unprecedented speed, where it's also unknown what the shape of the curve is much deeper it will get and what timetable has it start getting filled back in naturally. That's extremely deflationary in nature. Then you have the fed and government with QE and stimulus that's like someone draining a sea into the pit (and let's be clear, the dollar amounts are massive . That's of course quite inflationary. So you have these two very opposite forces colliding where if it's not enough stimulus/QE you get a '30s style liquidity freeze, but if the Fed and government way overestimate the depth and breadth...
by Theoretical
Sun Mar 29, 2020 6:47 pm
Forum: Investing - Theory, News & General
Topic: Index Providers Postponing Rebalance
Replies: 15
Views: 1712

Re: Index Providers Postponing Rebalance

It will be interesting to see what the RAFI indexes do. The rebalance month is a day in March, which could be veeewwwy interesting for the Fundamental Index funds. Back in 2009, I think the day just happened to be March 8 or 9, which was spectacular good luck. One thing is going to be for sure though, tons and tons of energy stocks in those. For the regular indexes, it actually makes sense. While it'd be easy to calculate based on a given day's figures, I bet their models didn't account for how to determine weightings when the volatility has been so high that a marked difference in weightings could well happen intraday. Waiting to rebalance until gyrations have slowed probably gets you a more accurate picture of what the market is. I'd imag...
by Theoretical
Fri Mar 27, 2020 11:12 pm
Forum: Investing - Theory, News & General
Topic: Is there a risk of US currency collapse with trillion-dollar stimulus?
Replies: 28
Views: 3368

Re: Is there a risk of US currency collapse with trillion-dollar stimulus?

If it was a 20 Trillion stimulus or maybe a 100 trillion stimulus, then sure, the world would freak out. 2 trillion is a drop in the bucket.
by Theoretical
Thu Mar 26, 2020 10:20 pm
Forum: Investing - Theory, News & General
Topic: How to avoid temptation of Stock Picking during market crash
Replies: 50
Views: 4199

Re: How to avoid temptation of Stock Picking during market crash

Here's a key point: if you aren't regularly doing this as part of your AA, then you're going to be a lucky novice at best. My mother was taught how to be a ruthless bottom-feeder by her dad and she's continued to be quite successful at it over the years, including making some absolute killings with muni bond illiquidity (5% coupon Texas AA school bonds bought at a discount) in 2008 and some depressed stocks. The other thing is she enjoys it and is always quite conservative so she's engaged but doesn't place risky bets. The problem is that I don't have the time or discipline to focus in on bargain bins, even for a 5% allocation. There's nothing special about any of the depressed/crushed companies if you're merely looking at valuations and a ...
by Theoretical
Tue Mar 24, 2020 1:46 am
Forum: Investing - Theory, News & General
Topic: Fallen Angel junk bonds
Replies: 15
Views: 2103

Re: Fallen Angel junk bonds

Fallen angels are interesting concepts, because you become more diversified as the economy hits the trash bin because more decent and good companies fall on hard times, leading to downgrades and falling into junk status. Since many of them will ultimately survive, you get the upside of their re-ratings, so they're only sort of "fixed income." (with the usual problem of limited upside and unlimited downside). I think the credit spreads to treasuries aren't quite wide enough (though they're close), though they're now reasonable instead of the measly <3% they were just a few months ago. Now it's approaching 5%, and might be higher. Junk does have some advantages in inflationary environments because you have both the higher coupon and...
by Theoretical
Wed Mar 18, 2020 12:05 am
Forum: Investing - Theory, News & General
Topic: do people TLH even if there is no loss but it’s close?
Replies: 9
Views: 875

Re: do people TLH even if there is no loss but it’s close?

Minor tax gain harvesting can be useful to consolidate positions and simplify a bunch of small lots or incomplete previous TLHing.
by Theoretical
Tue Mar 17, 2020 11:55 pm
Forum: Investing - Theory, News & General
Topic: Are Int SCV etfs in danger of closing ?
Replies: 5
Views: 686

Re: Are Int SCV etfs in danger of closing ?

Two things. It literally just got started as a fund and the other is that it's explicitly targeting the DFA crowd at a lower cost. I suspect their business plan is to stick around for awhile to accumulate assets.
by Theoretical
Sat Mar 14, 2020 11:28 am
Forum: Investing - Theory, News & General
Topic: What are some good books on market crashes?
Replies: 8
Views: 585

Re: What are some good books on market crashes?

https://www.amazon.com/Anatomy-Bear-Les ... 1906659354

This one is good because it uses a lot of primary source newspaper articles and headlines superimposed over various stock market crashes. It's pretty interesting.
by Theoretical
Tue Mar 10, 2020 11:19 pm
Forum: Investing - Theory, News & General
Topic: Are Treasury Bonds no longer a safe haven w/ 0% interest rates
Replies: 57
Views: 5015

Re: Are Treasury Bonds no longer a safe haven w/ 0% interest rates

In the bond world, a safe haven is often seen as a fount of liquidity in illiquid, frozen times. This is why countries with huge amounts of sovereign debt and stable governments (Japan and USA) are the big safe havens. Less liquid but still ultrasafe are places like Switzerland and Germany that may not have as much debt but are highly fiscally disciplined. A 30 year treasury bond will pay 1%, likely lose money in real terms to inflation over that time, but those are all known factors, and regardless, whoever owns the 30 year bond in 30 years is going to receive the full entitled payout and will be receiving all of those coupon payments. That's a safe haven in a deflationary/panic situation. The downside is that the only risks being taken ar...