Search found 923 matches

by docneil88
Tue Aug 16, 2011 7:36 pm
Forum: Investing - Theory, News & General
Topic: Valuation-based market timing with PE10 can improve returns?
Replies: 696
Views: 119864

Re: Valuation-based market timing with PE10 can improve retu

I wonder if using long-term US govt. bonds is the commonly accepted asset class as "risk free" in the ERP [Equity Risk Premium] calculation. Especially since annual volatility is relatively higher than other terms. Given it's lower volatility, I thought short-term treasury bills would be the approp...
by docneil88
Mon Aug 15, 2011 4:44 am
Forum: Investing - Theory, News & General
Topic: How Much U.S. Exposure in International Stock Indexes?
Replies: 8
Views: 4363

Re: How Much U.S. Exposure in International Stock Indexes?

I've never been able to find an estimate of the U.S. exposure in international stock indexes, so decided to do a quick-and-dirty analysis. The method was to take the percentage of market capitalization for each of the 40 countries in the Vanguard International Stock Index (VGTSX), and then multiply...
by docneil88
Sun Aug 14, 2011 10:47 pm
Forum: Investing - Theory, News & General
Topic: Valuation-based market timing with PE10 can improve returns?
Replies: 696
Views: 119864

Re: Valuation-based market timing with PE10 can improve retu

http://i.investopedia.com/inv/articles/site/S_TheLongRun_3_1r.gif The "Bonds" data above refers to long-term government bonds ( for the US from 1926 onward, it refers to the Ibbotson Associates Long Government Bond Index). Looking at the above chart, the geometric mean real return for stocks in the...
by docneil88
Sun Aug 14, 2011 9:27 pm
Forum: Investing - Theory, News & General
Topic: The myth of safety in globally diversified portfolios
Replies: 24
Views: 3777

Re: The myth of safety in globally diversified portfolios

Past correlations are no guarantee of future correlations. Country-specific events can happen that cause wide divergences between one industrialized country and the others over a long period of time, e.g. the bursting of the Japanese equity bubble in 1989. Or consider what the impact on the Japanese...
by docneil88
Sun Aug 14, 2011 7:58 pm
Forum: Investing - Theory, News & General
Topic: If ever there were a moment to market time, this is it.
Replies: 92
Views: 14041

Current vs. Historical Equity Risk Premium

This article notes the differences in historic equity risk premiums by country: http://www.investopedia.com/articles/stocks/06/equitypremium.asp Thanks for the interesting link zoot. Here's a graph from it: http://i.investopedia.com/inv/articles/site/S_TheLongRun_3_1r.gif The "Bonds" data above ref...
by docneil88
Sun Aug 14, 2011 4:58 pm
Forum: Investing - Theory, News & General
Topic: Market Cap Weighting of Gold Relative to Equities
Replies: 55
Views: 6039

Current Gold Production vs. Average Since 100 AD

FYI, the bar chart jeffyscott posted in the 2nd post above this one is measuring gold production in millions of (troy) ounces. So, 2009's world production of around 83 million ounces a year is 1.63% of all the 5,080 million ounces of gold ever mined in the history of the world (sources: http://www.c...
by docneil88
Sun Aug 14, 2011 6:23 am
Forum: Investing - Theory, News & General
Topic: 2010 PIIGS Public Debt vs. US Home Mortgage Debt in '07
Replies: 3
Views: 837

Re: 2010 PIIGS Public Debt vs. US Home Mortgage Debt in '07

PIIGS total public debt in 2010 = $4.146T. Conclusions: The size of PIIGS total public debt in 2010 is 37.3% of the size of US home mortgage debt outstanding in Q4 of 2007 ($4.146T/11.128T = 37.3%). So, if and when the PIIGS public debt melts down, it'll be a big deal, but probably not nearly as bi...
by docneil88
Sun Aug 14, 2011 3:21 am
Forum: Investing - Theory, News & General
Topic: 2010 PIIGS Public Debt vs. US Home Mortgage Debt in '07
Replies: 3
Views: 837

2010 PIIGS Public Debt vs. US Home Mortgage Debt in '07

In the 4th quarter of 2007, an early stage of the US housing meltdown, the total US mortgage debt outstanding for one to four family residences was $11.128 trillion ( source: http://www.federalreserve.gov/econresdata/releases/mortoutstand/mortoutstand20090331.htm ) Using the CIA World Factbook ( htt...
by docneil88
Sun Aug 14, 2011 2:37 am
Forum: Investing - Theory, News & General
Topic: Market Cap Weighting of Gold Relative to Equities
Replies: 55
Views: 6039

Re: Market Cap Weighting of Gold Relative to Equities

I think the correct fraction should be 9/44 because 35 + 9 = 44. Hi Bongleur, At market-cap weighting, one would have a 26% target allocation to gold relative to world equities (i.e. $9 trillion gold market-cap ÷ $35 trillion world equity market cap). So if you had a 50% portfolio allocation to equ...
by docneil88
Sat Aug 13, 2011 6:09 pm
Forum: Investing - Theory, News & General
Topic: 100 percent anything is a bad idea
Replies: 22
Views: 2198

All-world, all-asset, market-cap weighted index fund

docneil88, What you're describing sounds a lot like a target fund. I've yet to see a single target fund whose % allocation between various categories of assets was anywhere close to what I've chosen for myself. Hi djw, Target funds are somewhat similar to my idea of an all-world, all-asset, market-...
by docneil88
Sat Aug 13, 2011 5:55 pm
Forum: Investing - Theory, News & General
Topic: 100 percent anything is a bad idea
Replies: 22
Views: 2198

Re: 100 percent anything is a bad idea

Hi LH, IF Vanguard offered an all-world, all-asset, market-cap weighted index fund, I don't think 100% in that would be a bad idea for most people. I'd buy it, though I'd supplement it with some broadly diversified value index funds. Best, Neil
by docneil88
Sat Aug 13, 2011 3:38 pm
Forum: Investing - Theory, News & General
Topic: Market Cap Weighting of Gold Relative to Equities
Replies: 55
Views: 6039

Gold vs. Cowrie Shells

Cowrie shells have thousands of years of history as currency and have arguably been used as "money" longer than gold. A photographic tribute to the esteemed contenders: http://goldcoinblogger.com/wp-content/uploads/2010/03/Gold-bars-online-and-sell-gold-coins.gif http://invertebrates.si.edu/Feature...
by docneil88
Sat Aug 13, 2011 3:28 am
Forum: Investing - Theory, News & General
Topic: Market Cap Weighting of Gold Relative to Equities
Replies: 55
Views: 6039

why are you advocating owning a market cap weighting of gold to equities in isolation and ignoring other valuable assets on the planet? why are you ignoring private equity? what is so magic about the ratio of publicly traded equity to gold vs gold or any other valuable asset to the ratio of the val...
by docneil88
Fri Aug 12, 2011 4:48 pm
Forum: Investing - Theory, News & General
Topic: Market Cap Weighting of Gold Relative to Equities
Replies: 55
Views: 6039

Re: Market Cap Weighting of Gold Relative to Equities

... when the market places the historical value of something at 9 trillion dollars, it's probably worth paying attention to. Such is the nature of gold, other people have parsed the data and this is what they've conclude what it's worth. Sounds like recency bias. It's only because gold is risen so ...
by docneil88
Fri Aug 12, 2011 4:43 pm
Forum: Investing - Theory, News & General
Topic: Market Cap Weighting of Gold Relative to Equities
Replies: 55
Views: 6039

Re: Market Cap Weighting of Gold Relative to Equities

Thanks for all the interesting comments! Some responses are below: The fact that there's so much promotion and so many ETF's suggests to me that this latest fad is going to end badly for many retail investors piling in at todays prices. Gold bullion ETF's have made gold about as inexpensive and easy...
by docneil88
Fri Aug 12, 2011 12:44 am
Forum: Investing - Theory, News & General
Topic: Market Cap Weighting of Gold Relative to Equities
Replies: 55
Views: 6039

Market Cap Weighting of Gold Relative to Equities

As of today, 8/11/11, world equity market capitalization is around $35 trillion. (For reference the level of the S&P 500 is currently at 1,173.) The total troy ounces of gold mined over the whole history of the world, according to the World Gold Council, is 5,079,817,925 (at 24K purity) (source: htt...
by docneil88
Thu Aug 11, 2011 1:30 am
Forum: Investing - Theory, News & General
Topic: Gold and long bonds both soaring... sort of counterintuitive
Replies: 20
Views: 2576

Re: Gold and long bonds both soaring... sort of counterintui

Gold, which is often viewed as an inflation hedge, is soaring. And long treasuries, which are a deflation hedge, are too. Anyone else think this is sort of unexpected? Perhaps the markets are telling us that the probability of strong inflation has risen, and the probability of strong de flation has...
by docneil88
Tue Aug 09, 2011 12:06 am
Forum: Investing - Theory, News & General
Topic: Is passive investing bad for society?
Replies: 18
Views: 1969

Re: Is passive investing bad for society?

An article from May 31st on the potential for Congress to alter the 401K rules contained the following nugget: He believes that among other things, holding stocks outside of institutional accounts would encourage individual investors to pay more attention to how their money is invested. "Institutio...
by docneil88
Fri Aug 05, 2011 11:59 pm
Forum: Investing - Theory, News & General
Topic: my thoughts on today's action
Replies: 71
Views: 9576

Re: Richard

Can you cite me case when fiscal stimulus worked? It certainly hasn't worked in Japan with huge deficits for 2 decades. If it worked Japan would be growing rapidly. ...IMO the evidence of a multiplier of more than one doesn't exist, and the evidence that it is less than one is there. ...FWIW Keynes...
by docneil88
Fri Aug 05, 2011 8:32 pm
Forum: Investing - Theory, News & General
Topic: If ever there were a moment to market time, this is it.
Replies: 92
Views: 14041

Re: If ever there were a moment to market time, this is it.

Here's a blended Age & Risk-Premium (ARP) Based Asset Allocation worth considering: Equity target percentage = [(100 - Age)/2] + [5 times the Equity Risk Premium of the S&P 500] Equity Risk Premium (or ERP) = [1/PE10] - yield on 5-year TIPS Are you actually using this? Or just mulling it over? Hi F...
by docneil88
Fri Aug 05, 2011 4:45 pm
Forum: Investing - Theory, News & General
Topic: If ever there were a moment to market time, this is it.
Replies: 92
Views: 14041

Re: If ever there were a moment to market time, this is it.

My IPS requires me to invest 8 times the risk premium in equities. That's an intriguing idea Fred. Would be interesting to see some backtesting for return and standard deviation with various multiples of the risk premium in equities going way back in time (using synthetic TIPS yields for the period...
by docneil88
Fri Jul 29, 2011 6:40 pm
Forum: Investing - Theory, News & General
Topic: US can actually default on the debt payments (US Treasury)
Replies: 45
Views: 4935

"Who will Uncle Sam pay if there’s no debt deal?"

"Who will Uncle Sam pay if there’s no debt deal?" by Jane Sasseen available at: http://news.yahoo.com/blogs/exclusive/uncle-sam-pay-no-debt-deal-182942805.html . An excerpt: One thing on which all analysts agree: Holders of U.S. Treasury bonds, whether they are hedge fund managers in New York, retir...
by docneil88
Fri Jul 29, 2011 3:56 pm
Forum: Investing - Theory, News & General
Topic: US can actually default on the debt payments (US Treasury)
Replies: 45
Views: 4935

Re: US can actually default on the debt payments (US Treasur

The implication is that the government will need to pay bills in the order that they come due. I did not say, "The implication is that the government will need to pay bills in the order that they come due." That is a quote from http://www.nytimes.com/2011/07/28/business/economy/treasury-to-weigh-wh...
by docneil88
Fri Jul 29, 2011 3:23 pm
Forum: Investing - Theory, News & General
Topic: US can actually default on the debt payments (US Treasury)
Replies: 45
Views: 4935

Re: US can actually default on the debt payments (US Treasur

But the new report from Treasury says: http://www.nytimes.com/2011/07/28/business/economy/treasury-to-weigh-which-bills-to-pay.html?_r=1 The implication is that the government will need to pay bills in the order that they come due. President Obama has warned as a result that the government “cannot ...
by docneil88
Wed Jul 27, 2011 3:20 pm
Forum: Investing - Theory, News & General
Topic: Risk =/= Beta
Replies: 102
Views: 10005

Fama: Tilting as a Matter of Taste

While Fama does not advise tilting, he says folks may prefer to tilt (he is indifferent as to direction; he sees the matter as one of taste). And in doing they accept the expected returns and risks (his, as always, is a risk story) that attend their tilts. So, I see those that choose to tilt as acc...
by docneil88
Wed Jul 27, 2011 3:07 pm
Forum: Investing - Theory, News & General
Topic: Risk =/= Beta
Replies: 102
Views: 10005

Fama, French, EMH, and DFA

My argument is that EMH [the Efficient Market Hypothesis] and tilting are incompatible. I have no beef with people like Haugen who reject EMH and advocate strong tiliting strategies. I have no beef with people like Fama who continue to defend EMH (the few, the proud, the whatever!) and do not advoc...
by docneil88
Wed Jul 27, 2011 3:56 am
Forum: Investing - Theory, News & General
Topic: Is US default a CDS triggering event?
Replies: 40
Views: 3596

Re: Is US default a CDS triggering event?

Hi realreturn, Are you asking whether a US default on Treasury bills, notes, or bonds would be a triggering event or whether non-payment of other obligations (e.g. wages or entitilements) would be? Even if some entitlement program payments or some wages were no paid, I'd be very surprised if there w...
by docneil88
Wed Jul 27, 2011 1:46 am
Forum: Investing - Theory, News & General
Topic: Risk =/= Beta
Replies: 102
Views: 10005

Re: Value Stocks, Risk, and Fama & French

I think portfolio standard deviation is probably the most adequate measure of portfolio risk, and there is no conclusive evidence that value stocks, taken as a group, have a higher standard deviation than the broad market or non-value stocks taken as a group. According to the data at Ken French's w...
by docneil88
Tue Jul 26, 2011 2:50 pm
Forum: Investing - Theory, News & General
Topic: Risk =/= Beta
Replies: 102
Views: 10005

Re: Value Stocks, Risk, and Fama & French

According to the data at Ken French's web site, from 1927 through 2010, the standard deviation numbers are 20.6% for the total market, 31.8% for small value, and 27.1% for large value. The average returns are 11.7% for the total market, 19.4% for small value, and 15.1% for large value. John Norstad...
by docneil88
Mon Jul 25, 2011 5:02 pm
Forum: Investing - Theory, News & General
Topic: Risk =/= Beta
Replies: 102
Views: 10005

Downside Volatility, Upside Volatility, & Risk

...total volatility is one measure of risk but I tend to put more weight on downside risk. Mike Hi Mike, Certainly investors are more worried about downside volatility than upside volatility. But over long periods of time, stocks with a lot of upside volatility usually have a lot of downside volati...
by docneil88
Mon Jul 25, 2011 4:14 pm
Forum: Investing - Theory, News & General
Topic: Risk =/= Beta
Replies: 102
Views: 10005

Value Stocks, Risk, and Fama & French

To measure risk on a fund level, I look most closely at volatility/standard deviation. The whole point of Fama and French's research and their 3-factor model is that this is a mistake. Looking only at volatility (or more precisely, "beta" or "market risk") is the error that they claim their researc...
by docneil88
Mon Jul 25, 2011 1:56 pm
Forum: Investing - Theory, News & General
Topic: Risk =/= Beta
Replies: 102
Views: 10005

Re: I believe whole market indexes ar tilted to large growth

Others disagree, and make the claim that small/value tilting is a "free lunch". John Norstad Hi John, To measure risk on a fund level, I look most closely at volatility/standard deviation. My sense from revisiting the tilt/risk issue over the years and looking at many studies is this: First, small-...
by docneil88
Sun Jul 24, 2011 4:27 pm
Forum: Investing - Theory, News & General
Topic: Arnott's RAFI marketing finally sings a different tune
Replies: 12
Views: 1815

Turnover and Fundamental Index Funds

In an upcoming seminar on IndexUniverse.com , Research Affiliates' Jason Hsu discusses a forthcoming article in the Financial Analysts' Journal that compares fundamental, equal weight, min volume and other alternative index strategies on a like-for-like basis. The conclusion? The primary driver of ...
by docneil88
Sun Jul 24, 2011 3:53 pm
Forum: Investing - Theory, News & General
Topic: Does indexing have intrinsic worth?
Replies: 39
Views: 3533

One's Own Active Portfolio vs. Active Funds vs. Index Funds

There’s a full array of ways in which actively managed funds have greater uncertainty. Their very purpose is to try to beat the index fund enough to cover their higher fees, and to do this they concentrate their holdings more, reducing diversification, increasing uncertainty. They “drift” in “style...
by docneil88
Sun Jul 24, 2011 2:30 pm
Forum: Investing - Theory, News & General
Topic: Does indexing have intrinsic worth?
Replies: 39
Views: 3533

Re: Does indexing have intrinsic worth?

Many people here would not invest in a fund that does not have an underlying index. But does indexing have intrinsic worth? Given two funds for the same asset class which have the same expense ratio and same turnover, what makes the index fund better? Hi M B, If the holdings in the index fund are c...
by docneil88
Sun Jul 24, 2011 1:40 pm
Forum: Investing - Theory, News & General
Topic: Does indexing have intrinsic worth?
Replies: 39
Views: 3533

Cap Gains Tax Impact of Fund Liquidations

There’s a full array of ways in which actively managed funds have greater uncertainty. Their very purpose is to try to beat the index fund enough to cover their higher fees, and to do this they concentrate their holdings more, reducing diversification, increasing uncertainty. They “drift” in “style...
by docneil88
Sat Jul 23, 2011 4:19 pm
Forum: Investing - Theory, News & General
Topic: John Bogle didn't have all the data!
Replies: 29
Views: 4218

Re: "John Bogle didn't have all the data!"

http://blogs.forbes.com/investor/2011/07/21/john-bogle-didnt-have-all-the-data/?partner=yahootix by Andy Rachleff On one premise I agree with Mr Rachleff: Compared to individuals selecting mutual funds, endowment manager's are given access to more past trading info of potential sub-managers (e.g. tr...
by docneil88
Tue Jun 14, 2011 1:21 am
Forum: Investing - Theory, News & General
Topic: Treasuries, GNMAs, corporates and a U.S. debt default
Replies: 48
Views: 4772

US Treasuries Have a Higher Credit Risk Than GNMAs

On GNMA I am agnostic to the point of confusion. Would mortgages get paid in the middle of a US government debt default? I really don't know. Hi VT, In my opinion, many mortgages would continue to be paid, just as many mortgages will probably continue to be paid in Greece if and when Greece default...
by docneil88
Tue Jun 07, 2011 4:40 pm
Forum: Investing - Theory, News & General
Topic: Survey: Investors Prefer Commissions over AUM Fees
Replies: 11
Views: 1446

Costs of full service brokers

All else being equal, it comes down to what is the cheapest way to do it in present value $. To determine that, I think one needs to factor in not only the dollars in present value that the full service broker vs. investment advisor gets, but also the expense ratios of any funds to be selected, and...
by docneil88
Tue Jun 07, 2011 2:36 pm
Forum: Investing - Theory, News & General
Topic: Survey: Investors Prefer Commissions over AUM Fees
Replies: 11
Views: 1446

Survey: Investors Prefer Commissions over AUM Fees

I'm surprised. Here's the URL and some excerpts: "Investors Prefer Commissions to [%-of-Assets-Under-Management] Account Fees, Cerulli Study Says", by Elizabeth Ody of bloomberg.com, June 7, 2011: http://www.bloomberg.com/news/2011-06-07/investors-prefer-commissions-to-account-fees-study-says-1-.htm...
by docneil88
Thu Jun 02, 2011 4:38 am
Forum: Investing - Theory, News & General
Topic: John T. Reed - "TIPS Won't Protect You from Inflation a
Replies: 17
Views: 2561

TIPS, CPI-U, & hedging your own inflation

Housing, at 42% of the index, tracks rents, not home prices. If you don't rent, then 42% of the index is irrelevant to your personal inflation rate. So, in that sense, TIPS would do an insufficient job protecting most people from price inflation that directly affects them. If you own your own home ...
by docneil88
Tue May 31, 2011 10:11 pm
Forum: Investing - Theory, News & General
Topic: John T. Reed - "TIPS Won't Protect You from Inflation a
Replies: 17
Views: 2561

Re: John T. Reed - "TIPS Won't Protect You from Inflati

TIPS returns are based largely on changes in CPI-U (the Consumer Price index - Urban), and that index has the following components in the following proportions: http://dshort.com/inflation/CPI-categories.gif Housing, at 42% of the index, tracks rents, not home prices. If you don't rent, then 42% of ...
by docneil88
Sun May 29, 2011 3:20 pm
Forum: Investing - Theory, News & General
Topic: Valuation-based market timing with PE10 can improve returns?
Replies: 696
Views: 119864

Re: Valuation-based market timing with PE10 can improve retu

fredflinstone wrote:Your figures are wrong. Look at Figure II on page 8 of the study. "Fixed 50/50" refers to a 50/50 balanced fund. "MT 0-100" refers to various all-or-nothing market timing strategies.
You're right. I confused SD with return on the 50/50 balanced fund. I edited my post above. Best, Neil
by docneil88
Sun May 29, 2011 6:14 am
Forum: Investing - Theory, News & General
Topic: Valuation-based market timing with PE10 can improve returns?
Replies: 696
Views: 119864

Re: Valuation-based market timing with PE10 can improve retu

If you look at the growth of 1 dollar invested 139 years ago, the all-or-nothing valuation-based market timing strategy provides 7 times higher returns than the 50/50 balanced fund. I see how taxes could shrink the difference, but it is not plausible that they would eliminate the entire discrepancy...
by docneil88
Sat May 28, 2011 10:49 pm
Forum: Investing - Theory, News & General
Topic: Valuation-based market timing with PE10 can improve returns?
Replies: 696
Views: 119864

Re: Valuation-based market timing with PE10 can improve retu

That's what Professor Wade Pfau says: [M]arket timing [using Schiller's PE10 measure of valuation] provides comparable risks and the same average asset allocation as a 50/50 fixed allocation strategy, but with much higher returns. http://mpra.ub.uni-muenchen.de/29448/1/MPRA_paper_29448.pdf From the...
by docneil88
Mon May 23, 2011 3:43 pm
Forum: Investing - Theory, News & General
Topic: linkedin ipo
Replies: 65
Views: 5307

Re: Initial pricing for IPOs

By what criteria was it considered a failure? The IPO price for Google was for $85/share, and the stock opened at $100. It took four weeks before it increased more than 1/3 beyond its IPO price. Google's offering price of $85 came in well below expectations because the demand seemed insufficient. W...
by docneil88
Mon May 23, 2011 4:32 am
Forum: Investing - Theory, News & General
Topic: linkedin ipo
Replies: 65
Views: 5307

Re: Initial pricing for IPOs

Google tried [an auction IPO], and failed fairly miserably? By what criteria was it considered a failure? The IPO price for Google was for $85/share, and the stock opened at $100. It took four weeks before it increased more than 1/3 beyond its IPO price. So the early pop in Google was far more subd...
by docneil88
Sun May 22, 2011 11:39 pm
Forum: Investing - Theory, News & General
Topic: linkedin ipo
Replies: 65
Views: 5307

Initial pricing for IPOs

It's only at 106 now, spiked at 122.70. Here's what I don't get. Doesn't this just mean the investment bank that IPO'd the stock did a piss poor job? I mean if I was the Linkedin CEO, and the company sold 7.84 million shares at $45 each, but the market priced them at $106 each, didn't the company j...
by docneil88
Sun May 22, 2011 7:42 pm
Forum: Investing - Theory, News & General
Topic: Banks say they are not real owners,holders of MBS are..
Replies: 12
Views: 2179

Re: Banks say they are not real owners,holders of MBS are..

From http://news.yahoo.com/s/ap/20110522/ap_on_re_us/us_foreclosure_landlords : "The buck stops with the owner of record. We're saying, `You are an owner like any other owner,'" said Julia Figueira-McDonough, deputy city attorney. Not according to Deutsche or other banks. They say they aren't reall...
by docneil88
Sun May 22, 2011 7:02 pm
Forum: Forum Issues and Administration
Topic: Key Word Searches: No Results before 5/1/08
Replies: 5
Views: 1114

Thanks Livesoft. Looks like this situation is just temporary.