Search found 1553 matches

by magician
Wed Aug 21, 2013 12:50 am
Forum: Investing - Theory, News & General
Topic: Let’s call it “expected return”
Replies: 86
Views: 8663

Re: Let’s call it “expected return”

555 wrote:geometric mean < arithmetic mean
Almost:

geometric mean arithmetic mean
by magician
Wed Aug 21, 2013 12:43 am
Forum: Investing - Theory, News & General
Topic: Let’s call it “expected return”
Replies: 86
Views: 8663

Re: Let’s call it “expected return”

Well, with indexing, "bankruptcy" would mean the us TSM goes to zero. Or SCV goes to zero, and hits the boundary to produce the skew? I'm sure it doesn't mean that at all. It probably means that if, in retirement, the portfolio owner withdraws money periodically from this portfolio, the money will ...
by magician
Tue Aug 20, 2013 1:06 am
Forum: Personal Consumer Issues
Topic: Your biggest work victory?
Replies: 53
Views: 7005

Re: Your biggest work victory?

When I was a warhead designer I was working on a project that was far more complex than anything we'd done before; indeed, it was far more complex than anything anyone had done before. We were given three design iterations to achieve the goal, which was typical. The first design was a disaster : the...
by magician
Mon Aug 05, 2013 3:52 pm
Forum: Personal Consumer Issues
Topic: Gardening, the new year
Replies: 90
Views: 12881

Re: Gardening, the new year

We generally grow tomatoes, herbs, and peppers (in Southern California). This year I'm finally – finally! - getting some ghost chilies (after two years). I also have cayennes, serranos, fresnos, poblanos, arboles, kung paos (which I think are a cayenne hybrid), and habaneros. The downside is the pes...
by magician
Sun Aug 04, 2013 5:59 pm
Forum: Investing - Theory, News & General
Topic: Euro currency question
Replies: 13
Views: 993

Re: Euro currency question

ourbrooks wrote:It's relative demand, not the state of economies, which determine exchange rates.
Interest rate parity affects changes in exchange rates; arguably, interest rates depend on the states of the economies.
by magician
Sat Aug 03, 2013 11:54 pm
Forum: Investing - Theory, News & General
Topic: Monte Carlo Simulator for today's low yields?
Replies: 6
Views: 1065

Re: Monte Carlo Simulator for today's low yields?

I have used the T. Rowe Price Monte Carlo simulator but I believe it uses past data . Are there any good simulators that account for interest rates this low or is that scenario already incorporated into the simulators that are out there? You know that Monte Carlo simulation uses random numbers gene...
by magician
Fri Aug 02, 2013 11:36 pm
Forum: Personal Consumer Issues
Topic: Best E-Reader: Kindle, Nook or?
Replies: 46
Views: 5984

Re: Best E-Reader: Kindle, Nook or?

My wife has a Kindle and loves it.

I hate 'em all. I want a real book.
by magician
Fri Aug 02, 2013 11:34 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

It's been said a few times already in this thread. Rebalancing is about maintaining a risk profile. 80% stocks/20% fixed income, 70%/30%, 50%/50%, 30%/70%, whatever helps you sleep at night. If you don't care about maintaining a risk profile, then you don't care. But that is what rebalancing is abo...
by magician
Wed Jul 31, 2013 5:40 pm
Forum: Investing - Theory, News & General
Topic: Bond Losses: Starting Interest Rates Matter
Replies: 99
Views: 9859

Re: Bond Losses: Starting Interest Rates Matter

My main point was that each rate increase lowers NAV and pushes out any eventual Point of Indifference farther in time. Oh? Let's take the simplest case - a zero coupon bond. Suppose I buy a five year zero with a yield to maturity of 1%. The duration is five years which is the same as the maturity ...
by magician
Tue Jul 30, 2013 3:15 pm
Forum: Investing - Theory, News & General
Topic: Data on stock diversification?
Replies: 15
Views: 991

Re: Data on stock diversification?

Essay by William Bernstein: The 15-Stock Diversification Myth . His conclusion: So, yes, Virginia, you can eliminate nonsytematic portfolio risk, as defined by Modern Portfolio Theory, with a relatively few stocks. It’s just that nonsystematic risk is only a small part of the puzzle. Fifteen stocks...
by magician
Tue Jul 30, 2013 2:28 pm
Forum: Investing - Theory, News & General
Topic: Data on stock diversification?
Replies: 15
Views: 991

Re: Data on stock diversification?

Essay by William Bernstein: The 15-Stock Diversification Myth . His conclusion: So, yes, Virginia, you can eliminate nonsytematic portfolio risk, as defined by Modern Portfolio Theory, with a relatively few stocks. It’s just that nonsystematic risk is only a small part of the puzzle. Fifteen stocks...
by magician
Tue Jul 30, 2013 2:24 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

We’ve just done a study for the NYTimes on rebalancing, so the subject is fresh in my mind. Fact: a 48%S&P 500, 16% small cap, 16% international, and 20% bond index, over the past 20 years, earned a 9.49% annual return without rebalancing and a 9.71% return if rebalanced annually. That’s worth desc...
by magician
Tue Jul 30, 2013 1:17 pm
Forum: Investing - Theory, News & General
Topic: Data on stock diversification?
Replies: 15
Views: 991

Re: Data on stock diversification?

The typical number given is 30, but the piece that many investors (and practitioners) omit is that not any old collection of 30 stocks will do; they have to be 30 carefully chosen stocks: chosen specifically to eliminate (i.e., reduce to near nil) nonsystematic (idiosyncratic) risk.
by magician
Tue Jul 30, 2013 12:51 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

We’ve just done a study for the NYTimes on rebalancing, so the subject is fresh in my mind. Fact: a 48%S&P 500, 16% small cap, 16% international, and 20% bond index, over the past 20 years, earned a 9.49% annual return without rebalancing and a 9.71% return if rebalanced annually. That’s worth desc...
by magician
Tue Jul 30, 2013 10:25 am
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

Rebalancing moves money from over performing assets to under performing assets that will assumably catch up while the over performers wil take a break or decline for some interval . Why do we assume that? Probably because you would either believe in reversion to the mean or you don't believe one as...
by magician
Tue Jul 30, 2013 10:12 am
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

Rebalancing moves money from over performing assets to under performing assets that will assumably catch up while the over performers wil take a break or decline for some interval . Why do we assume that? Probably because you would either believe in reversion to the mean or you don't believe one as...
by magician
Tue Jul 30, 2013 9:16 am
Forum: Investing - Theory, News & General
Topic: What happens to stock prices if everyone index invests?
Replies: 42
Views: 5472

Re: What happens to stock prices if everyone index invests?

techcrium wrote:Wow I didn't realize that my thread generated so much hate.
There is no hate here.

Since when did mild (or even major) criticism become hate?

Ridiculous!
by magician
Tue Jul 30, 2013 9:14 am
Forum: Investing - Theory, News & General
Topic: What happens to stock prices if everyone index invests?
Replies: 42
Views: 5472

Re: What happens to stock prices if everyone index invests?

If everyone indexed, then there would be no individual stocks to index with. Companies wouldn't be able to issue new stock, because if it weren't a part of the index there'd be no one to buy it. Unless someone created the just-issued stock (or, perhaps better, the just-issued security (to cover bon...
by magician
Mon Jul 29, 2013 11:40 pm
Forum: Personal Consumer Issues
Topic: What Book Are You Currently Reading? Part V
Replies: 3372
Views: 1497123

Re: What Book Are You Currently Reading? Part V

Designing Miracles, by Darwin Ortiz.
by magician
Mon Jul 29, 2013 7:35 pm
Forum: Investing - Theory, News & General
Topic: Are oil futures doomed to persistent contango?
Replies: 10
Views: 809

Re: Are oil futures doomed to persistent contango?

Edit: You can extend the logic to entire future curve. When entire future curve is sloping down it is in contango and when the curve slopes upward it is in backwardation. Other way 'round: Contango means that there is an upward-sloping futures price curve (futures prices are higher the farther into...
by magician
Mon Jul 29, 2013 5:03 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

Rebalancing moves money from over performing assets to under performing assets that will assumably catch up while the over performers wil take a break or decline for some interval . Why do we assume that? Probably because you would either believe in reversion to the mean or you don't believe one as...
by magician
Mon Jul 29, 2013 3:47 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

Rebalancing moves money from over performing assets to under performing assets that will assumably catch up while the over performers wil take a break or decline for some interval . Why do we assume that? Probably because you would either believe in reversion to the mean or you don't believe one as...
by magician
Mon Jul 29, 2013 1:52 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

And why does nearly everyone here believe that "rebalancing" means returning to a constant mix? There are other forms of rebalancing. Well, my initial questions was directed at people who choose to maintain a constant percentage stock/bond portfolio and actively re-balance to fit that fixed percent...
by magician
Mon Jul 29, 2013 1:33 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

And why does nearly everyone here believe that "rebalancing" means returning to a constant mix?

There are other forms of rebalancing.
by magician
Mon Jul 29, 2013 1:32 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance into bonds?
Replies: 58
Views: 7700

Re: Why rebalance into bonds?

StarbuxInvestor wrote:Rebalancing moves money from over performing assets to under performing assets that will assumably catch up while the over performers wil take a break or decline for some interval.
Why do we assume that?
by magician
Sun Jul 28, 2013 5:35 pm
Forum: Personal Consumer Issues
Topic: Mayo Clinic
Replies: 7
Views: 967

Re: Mayo Clinic

Wish I could help.

All I know about the Mayo Clinic is that last November I had my right ACL replaced by Joseph Mayo, in Placentia, CA. Yes: he's one of those Mayos.

Best of luck to you and your wife; you'll be in our prayers.
by magician
Sun Jul 28, 2013 12:29 pm
Forum: Personal Consumer Issues
Topic: Math degrees
Replies: 70
Views: 7145

Re: Math degrees

You might investigate the CFA program (Chartered Financial Analyst) a 2 - 4yr math heavy program. Employed by mutual funds, retirement funds, endowments, insurance companies, hedge funds etc. Course heavy in accounting and statistics. Employment opportunities appear good...Gordon Amen: I have a Bac...
by magician
Sun Jul 28, 2013 12:03 am
Forum: Personal Consumer Issues
Topic: Stumped by a Stump
Replies: 49
Views: 5587

Re: Stumped by a Stump

by magician
Sat Jul 27, 2013 11:48 pm
Forum: Personal Consumer Issues
Topic: Math degrees
Replies: 70
Views: 7145

Re: Math degrees

So... what types of jobs are typically available to a new graduate with a math degree? I have a Bachelor's in Math and a Master's in Math (and a Bachelor's in Accounting). My business degree has never gotten me a job anywhere (though it was quite useful when I was studying for the CFA exams). Here'...
by magician
Sat Jul 27, 2013 12:08 am
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 4010

Re: CFA Results

Magician's CFA bogleheads thread from over a year ago, inspired me to start the process: How many CFA charterholders have we here? This is the second time in a week that someone has started a thread (one here, one on a magicians' forum) accusing me of having inspired them. I'm definitely going to h...
by magician
Fri Jul 26, 2013 10:32 am
Forum: Investing - Theory, News & General
Topic: The Many Myths of Warren Buffett
Replies: 29
Views: 6064

Re: The Many Myths of Warren Buffett

Warren Buffett isn't afraid of the dark; the dark is afraid of Warren Buffett.

Oh, wait . . . that's somebody else.
by magician
Thu Jul 25, 2013 11:55 am
Forum: Investing - Theory, News & General
Topic: are behavioral funds superior?
Replies: 4
Views: 581

Re: are behavioral funds superior?

Looking at our wiki - the common behavioral pitfalls are: 2.1 Overconfidence 2.2 Loss aversion 2.3 Herd behavior 2.4 Anchoring 2.5 Confirmation bias 2.6 Gambler's fallacy 2.7 Recency bias 2.8 Regret aversion 2.9 Mental accounting 2.10 Paralysis by analysis I'm guessing that they focus on 2.10: don'...
by magician
Thu Jul 25, 2013 11:52 am
Forum: Investing - Theory, News & General
Topic: Bond Losses: Starting Interest Rates Matter
Replies: 99
Views: 9859

Re: Bond Losses: Starting Interest Rates Matter

Is there anything more going on here than merely observing that a (normal, option-free) bond's duration is higher when the YTM is low, and lower when the YTM is high? If you mean the OP's initial conclusion, then it's simpler than that: if you set a fixed target (like zero returns), the high starti...
by magician
Wed Jul 24, 2013 9:47 pm
Forum: Investing - Theory, News & General
Topic: Bond Losses: Starting Interest Rates Matter
Replies: 99
Views: 9859

Re: Bond Losses: Starting Interest Rates Matter

Is there anything more going on here than merely observing that a (normal, option-free) bond's duration is higher when the YTM is low, and lower when the YTM is high?

That's pretty well-known.
by magician
Wed Jul 24, 2013 2:55 pm
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 4010

Re: CFA Results

TheOscarGuy wrote:
magician wrote:
TheOscarGuy wrote:Congratulations!
I have been thinking about giving this exam for a while now. I don't work in finance but just want to read up and see if I can pass level I for the heck of it.
It's a [heck] of an undertaking.
Makes it more worthwhile to attempt I suppose :D
Good attitude!
by magician
Wed Jul 24, 2013 2:54 pm
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 4010

Re: CFA Results

Busting Myths wrote:Just passed Level II. Will be sitting for Level III in June 2014.
Congratulations!
by magician
Wed Jul 24, 2013 1:33 pm
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 4010

Re: CFA Results

TheOscarGuy wrote:Congratulations!
I have been thinking about giving this exam for a while now. I don't work in finance but just want to read up and see if I can pass level I for the heck of it.
It's a [heck] of an undertaking.
by magician
Wed Jul 24, 2013 10:51 am
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 4010

Re: CFA Results

How long were you guys involved in the FA field before deciding to take the exams? I have been in the field a little over a year and this is something that really interests me in pursuing. Thanks! I'd worked at PIMCO for about three years, but I didn't decide to take the exams; that was . . . um . ...
by magician
Wed Jul 24, 2013 10:50 am
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 4010

Re: CFA Results

dodonnell wrote:Just passed Level II. Registered for Level III for June 2014.
... passed Level I this past December 2012.
Congratulations²!
by magician
Tue Jul 23, 2013 11:03 pm
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 4010

Re: CFA Results

rmelvey wrote:Anyone else take the CFA? Results came out today. I passed level one :D
Congratulations!

Are you on AnalystForum? Lots of people there are posting their results today: Levels I and II.
by magician
Mon Jul 22, 2013 4:19 pm
Forum: Investing - Theory, News & General
Topic: New in wiki - Bond Yield, Looking for feedback
Replies: 12
Views: 2410

Re: New in wiki - Bond Yield, Looking for feedback

Yield-to-worst is described as the smallest yield measure of all the possible yields that can be computed for the issue. Not quite: it's the smallest of yield-to-maturity, yield-to-call (or yield-to-first-call, yield-to-second-call, . . .), yield-to-redemption, and so on, but not yield-to-put. You ...
by magician
Mon Jul 22, 2013 12:44 am
Forum: Investing - Theory, News & General
Topic: Give a Detailed Explanation of Duration Please!
Replies: 20
Views: 1408

Re: Give a Detailed Explanation of Duration Please!

(Other things can happen with non-conventional bonds. For example, if interest rates fall, the duration of a callable bond will fall because it becomes more likely that the bond will be called.) This is true if interest rates are low enough that the callable bond has negative convexity. When intere...
by magician
Sun Jul 21, 2013 11:27 pm
Forum: Investing - Theory, News & General
Topic: New in wiki - Bond Yield, Looking for feedback
Replies: 12
Views: 2410

Re: New in wiki - Bond Yield, Looking for feedback

Two comments: When describing how to compute the YTM, I'm not sure that specifying the numerical methods used (binary search, Newton-Raphson) is appropriate; I'd suggest saying merely that the value is computed numerically, rather than analytically. (If you want to include the numerical methods, I s...
by magician
Sun Jul 21, 2013 4:19 pm
Forum: Investing - Theory, News & General
Topic: New in wiki - Bond Yield, Looking for feedback
Replies: 12
Views: 2410

Re: New in wiki - Bond Yield, Looking for feedback

When I find myself questioning a standard reference text, it's probably a bad sign... :) The first two YTM calculators that come up on google here and here give a YTM for the 15 year zero coupon bond as 8.99%. Interestingly, tweaking a few numbers for Fidelity's calculator here gives 8.81% for a se...
by magician
Sun Jul 21, 2013 4:15 pm
Forum: Investing - Theory, News & General
Topic: New in wiki - Bond Yield, Looking for feedback
Replies: 12
Views: 2410

Re: New in wiki - Bond Yield, Looking for feedback

The convention in discussing yields on bonds is BEY . If you look at a Treasury yield curve (par curve, spot curve, forward curve), the yields shown are BEYs. When Kai Ryssdal says that the yield on the 10-year T-Note dropped to 2.49%, he's describing the bond's BEY. When you sell a bond, or buy a ...
by magician
Sun Jul 21, 2013 3:44 pm
Forum: Investing - Theory, News & General
Topic: Bond Duration and Changes in Interest Rates
Replies: 2
Views: 457

Re: Bond Duration and Changes in Interest Rates

The Wiki has an excellent summary on Bond Duration and Convexity. http://www.bogleheads.org/wiki/Bonds:_Advanced_Topics I'm wondering why a conventional bond with no call features has positive convexity. Is that simply the result of market forces, or is it also inherent in the formula for bond dura...
by magician
Sun Jul 21, 2013 2:46 pm
Forum: Investing - Theory, News & General
Topic: Give a Detailed Explanation of Duration Please!
Replies: 20
Views: 1408

Re: Give a Detailed Explanation of Duration Please!

LadyGeek wrote:Magician - That's a nice reference, I added it to the wiki: Bonds: Advanced Topics (Under "External links").
You're too kind.

A small nit, however: "magician" isn't capitalized. ;)
by magician
Sun Jul 21, 2013 2:07 pm
Forum: Investing - Theory, News & General
Topic: Give a Detailed Explanation of Duration Please!
Replies: 20
Views: 1408

Re: Give a Detailed Explanation of Duration Please!

Thank you all for your responses. It did help a little but I can't honestly say I understand it. I wrote up an explanation of Macaualy Duration, Modified Duration, and Effective Duration for Level I CFA candidates; perhaps that will help. But I didn't really see anything that related it to a bond F...
by magician
Sun Jul 21, 2013 1:25 pm
Forum: Investing - Theory, News & General
Topic: Give a Detailed Explanation of Duration Please!
Replies: 20
Views: 1408

Re: Give a Detailed Explanation of Duration Please!

The most relevant definition for your purposes is; duration is the slope of the price-yield curve (evaluated at the current yield). Unfortunately, it isn't the slope of the price-yield curve. If duration measured the absolute price change , then it would be the slope of the price-yield curve. Durat...
by magician
Wed Jul 17, 2013 6:35 pm
Forum: Investing - Theory, News & General
Topic: [Sad news - Pat Larimore]
Replies: 225
Views: 22315

Re: [Sad news - Pat Larimore]

Dear Taylor:

My deepest condolences on the loss of your wife. You and your family are in our prayers.

BCIII