Search found 6042 matches

by market timer
Fri Oct 05, 2007 4:07 pm
Forum: Investing - Theory, News & General
Topic: Quiz: Let's say you believed that in 20 years ...
Replies: 21
Views: 4337

Since international investments are usually unhedged, they have higher risk (currency risk) but no higher expected return. I've never understood this argument, but I hear a lot of smart people making it, so I suppose the problem lies with me. My guess is that since nominal returns are measured in U...
by market timer
Fri Oct 05, 2007 11:07 am
Forum: Investing - Theory, News & General
Topic: How and why do you use credit cards.
Replies: 106
Views: 28747

Is it really such a bad thing if you spend more with a credit card? The nice dinner with a significant other, an unplanned vacation, new clothes -- these are all things that make you happier. If you have a good savings plan and spend 18% more with a credit card, your life is probably better than it ...
by market timer
Fri Oct 05, 2007 12:51 am
Forum: Investing - Theory, News & General
Topic: Vanguard Prime Money Market and CD rate comparison
Replies: 12
Views: 3903

I just found a paper supporting the money market arbitrage idea. "Money Market Funds and Shareholder Dilution" by Andrew Lyon, J. Finance, 1984 This paper empirically tests the idea I described yesterday, and finds inefficiency in money market funds (resulting from their constant $1.00 price) and an...
by market timer
Thu Oct 04, 2007 8:59 pm
Forum: Personal Investments
Topic: Funding Emergency fund vs Roth
Replies: 5
Views: 1851

You have the option of funding your Roth and withdrawing principal penalty-free if there is an emergency.
by market timer
Thu Oct 04, 2007 7:21 pm
Forum: Investing - Theory, News & General
Topic: What about mortgages?
Replies: 26
Views: 6589

LH, why does one need to have suffered a financial disaster to offer financial advice? Shouldn't reason be sufficient? My "experience" is as someone who's thought a great deal about economics and finance. I'm fortunate to be in a position where a classical emergency fund in the form of cash equivale...
by market timer
Thu Oct 04, 2007 5:12 pm
Forum: Investing - Theory, News & General
Topic: How and why do you use credit cards.
Replies: 106
Views: 28747

I have about 15 credit cards. It's convenient and cheaper not to carry much cash in my wallet or in a checking account. I like having all my bills due at the end of the month, which is when I'm paid. I take advantage of promotions, such as airline miles and low interest balance transfers. These have...
by market timer
Thu Oct 04, 2007 11:19 am
Forum: Personal Investments
Topic: Never own your home outright, Never pay it off
Replies: 114
Views: 40225

Some day, my children will probably think I handle my money like a fuddy duddy. That's just the way of things... Your children will have computer programs doing all of this for them. They will not be bothered by finance, aside from a periodic diagnostic test of their preferences. You will not trust...
by market timer
Thu Oct 04, 2007 12:36 am
Forum: Personal Investments
Topic: Never own your home outright, Never pay it off
Replies: 114
Views: 40225

Who's in a better situation, you with the $4000 cash-in hand with the $100,000 dollar note hanging over your head, or me who's out the $4k, but I'm debt free. I vote for the extra $4K plus the liquid $100K. Without the house payment, how fast can I catch up in this game? If investment returns grow ...
by market timer
Wed Oct 03, 2007 10:13 pm
Forum: Personal Investments
Topic: So maybe I'm being selfish....
Replies: 21
Views: 4411

Re: So maybe I'm being selfish....

I said my $2,000,000.00 would return 5% = 100,000.00 and If I also withdrew 2% of the 2,000,000.00 that would be $140,000.00.... The point remains that it's not a safe withdrawal rate for someone entering retirement. A 5% nominal return is only slightly beating inflation after tax. You're describin...
by market timer
Wed Oct 03, 2007 10:08 pm
Forum: Personal Investments
Topic: So maybe I'm being selfish....
Replies: 21
Views: 4411

Re: So maybe I'm being selfish....

$2,000,000.00 and at a ROR of 5% and a 2% withdraw from the nest egg...that’s an AGI $140,000.00 a year. Unfortunately, a 2% withdrawal rate is $40K per year. What you're describing is a 7% withdrawal rate, which is not considered safe for most. Regarding the crux of your message, you have the opti...
by market timer
Wed Oct 03, 2007 9:50 pm
Forum: Personal Investments
Topic: Never own your home outright, Never pay it off
Replies: 114
Views: 40225

spikeymikey,

I don't think you should suppose a 25% tax rate that is deducted annually. Most people here will buy and hold for long periods of time, and many will likely pass their assets on to children before selling.
by market timer
Wed Oct 03, 2007 9:11 pm
Forum: Investing - Theory, News & General
Topic: "Tilting" to what's doing well?
Replies: 38
Views: 10105

Nisipirus and Taylor, I should have been clearer. What I was asking was whether Taylor recommends being underweight those asset classes which have performed best in the recent past (anti performance chasing). It seems like a natural consequence for anyone who disagrees with performance chasing. Than...
by market timer
Wed Oct 03, 2007 5:18 pm
Forum: Investing - Theory, News & General
Topic: "Tilting" to what's doing well?
Replies: 38
Views: 10105

Re: "Tilting" to what's doing well?

Taylor Larimore wrote:More evidence that chasing performance is a losing strategy.
So do you recommend underweighting the best performing sectors, markets, and asset classes?
by market timer
Wed Oct 03, 2007 5:12 pm
Forum: Investing - Theory, News & General
Topic: Bond question
Replies: 8
Views: 1455

Are GNMA funds exempt from any taxes?
by market timer
Wed Oct 03, 2007 4:32 pm
Forum: Investing - Theory, News & General
Topic: Did you learn about money from your family?
Replies: 18
Views: 3843

I learned about finance by solving dynamic programming problems. Didn't really inherit any rules of thumb, so probably have less of an aversion to debt and realized losses than most people.
by market timer
Wed Oct 03, 2007 4:14 pm
Forum: Investing - Theory, News & General
Topic: Could someone explain bond funds to me?
Replies: 36
Views: 9131

Re: While

that was the market worrying about sub prime lending, it was completely irrational. Bond yields rose significantly in May-June. I remember Bill Gross increasing his long run estimates on 10-year yields just as the 10-yr climbed to 5.3%. Check out a chart of any bond fund with a large duration, such...
by market timer
Wed Oct 03, 2007 3:59 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Prime Money Market and CD rate comparison
Replies: 12
Views: 3903

I guess considering the possible rate cut by the fed the CD might end up being the best bet if I get it before the cut.... CD rates should reflect the probability of future Fed rate cuts. It seems that there is a small arbitrage opportunity during a period of falling short term rates to sell short ...
by market timer
Tue Oct 02, 2007 11:58 pm
Forum: Personal Investments
Topic: Delurking to post my AA and get advice
Replies: 8
Views: 1931

You could save a bit of money by paying your 8% loans immediately from your cash accounts. You'll probably get different answers from the others, but I think that since $7K isn't much compared to what you will eventually have invested, it really doesn't matter where you invest it. This assumes you w...
by market timer
Tue Oct 02, 2007 6:29 pm
Forum: Personal Investments
Topic: Never own your home outright, Never pay it off
Replies: 114
Views: 40225

Utter nonsense. The main flaws are a) Article assumes you have to borrow lots of money anyway at high rates anyway for cars and TVs. Bad idea in most cases. No, investing is an option. b) Article assumes you can make more in risky assets than your mtg costs. Might or might not be true over your tim...
by market timer
Tue Oct 02, 2007 6:16 pm
Forum: Personal Investments
Topic: Never own your home outright, Never pay it off
Replies: 114
Views: 40225

The opinions on this board show how investing is a combination of calculation and psychology, and probably more of the latter. I agree with the person who noted how personal this decision is. Personally, I agree with the author, and would feel like a spendthrift paying off a low interest mortgage ah...
by market timer
Tue Oct 02, 2007 10:52 am
Forum: Investing - Theory, News & General
Topic: What about mortgages?
Replies: 26
Views: 6589

LH, I thnk it's best to take a cost-benefit analysis to these problems, instead of focusing on worst-case scenarios and accepting common wisdom. There is an opportunity cost of keeping cash liquid. On the flip-side, there is a cost to making decisions subject to what are called "liquidity constraint...
by market timer
Mon Oct 01, 2007 10:23 pm
Forum: Investing - Theory, News & General
Topic: Who do you have brokerage account with
Replies: 4
Views: 1422

I use InteractiveBrokers for the following reasons:

$1 commissions
6.8% or lower margin loans
around 5% for cash
interest paid on short sales
ability to sell naked calls and puts
portfolio margin allows greater leverage than the standard RegT
by market timer
Mon Oct 01, 2007 8:27 pm
Forum: Investing - Theory, News & General
Topic: wow!!!!!!!!!!!!!!!!!!!!!!!!!!!!1
Replies: 43
Views: 13900

ChefJeff wrote:Time for the market-timers to buy back all the stocks they sold last month :lol:
I've been selling recently and investing in a higher FICO score.
by market timer
Mon Oct 01, 2007 8:23 pm
Forum: Investing - Theory, News & General
Topic: Politics and Dividends
Replies: 29
Views: 6541

Ken, When I see charts like that, which show the relatively high cost of owning dividend payers, I can't help but think this has been a big reason for why dividend payers have outperformed historically. I read Siegel's most recent book, and I don't recall him mentioning punitive dividend taxation as...
by market timer
Sun Sep 30, 2007 10:10 pm
Forum: Personal Investments
Topic: Deleted
Replies: 9
Views: 2068

OK, I deleted the period at the end of the sentence. Now it should work.
by market timer
Sun Sep 30, 2007 10:02 pm
Forum: Personal Investments
Topic: Deleted
Replies: 9
Views: 2068

This is interesting stuff, grok. I just found an article that is consistent with what you explained: http://www.ifa.com/archives/articles/spence_john_20021127_index_spotlight.asp Another article estimated the front running drag on SPY at 12 basis points annually. Now I have the idea of starting an "...
by market timer
Sun Sep 30, 2007 9:11 pm
Forum: Personal Investments
Topic: Deleted
Replies: 9
Views: 2068

Re: Index Funds question from newbie

Russell 2000 (small cap stocks) - not sure, I would avoid this index anyway because it is too easy for the hedge funds and other This brings up a really important point for index investors. By front running, I assume you mean stocks being bid up before they are added to the index, and being heavily...
by market timer
Sun Sep 30, 2007 8:48 pm
Forum: Personal Investments
Topic: Unexpected Living Expenses Definition Requested
Replies: 8
Views: 1974

market timers definition of an emergency fund is being only 200K in debt vs 400K in debt : P Haha, it's actually worse than that. I don't even have the collateral to take out much of a margin loan -- my shares serve as collateral for short options positions. But I'm childless, young, insured, and c...
by market timer
Sun Sep 30, 2007 8:40 pm
Forum: Personal Investments
Topic: Unexpected Living Expenses Definition Requested
Replies: 8
Views: 1974

If your investment portfolio is large enough, you're probably better off without an emergency fund. How large? I think 1.5 years of living expenses should be enough. That way you can easily borrow up to 1/3rd of its value to pay for 6 months of living expenses. How often are these emergency funds ac...
by market timer
Sun Sep 30, 2007 4:24 pm
Forum: Personal Investments
Topic: in need of help - terrible AA currently
Replies: 18
Views: 3203

I agree with the KISS mantra: 60% VTI, 30% VEU, 10% VNQ.
by market timer
Sun Sep 30, 2007 12:18 pm
Forum: Investing - Theory, News & General
Topic: What about mortgages?
Replies: 26
Views: 6589

There are a few points about liquidity, the embedded call option in mortgages, and the opportunity cost of retirement account space that are worth mentioning. I was too casual in my response earlier. It is important to have sufficient liquidity to meet unexpected expenses, layoffs, etc. I'd consider...
by market timer
Sun Sep 30, 2007 12:00 pm
Forum: Investing - Theory, News & General
Topic: Why overweight REITs?
Replies: 29
Views: 7120

Good point. I'm banking on value to make up for the shortfall, but I can also appreciate your approach. FWIW (and that isn't a lot), I just did my asset allocation checking today; the port listed in my signature is 220 basis points ahead of the S&P500 YTD. Which isn't bad for something that is only...
by market timer
Sun Sep 30, 2007 10:40 am
Forum: Investing - Theory, News & General
Topic: Why is everyone showing up with an aggressive AA?
Replies: 130
Views: 34130

If an investor takes this approach, it is not clear to me when they should start to substantially increase their fixed income position. Maybe when their annual contributions drop below 20% of their current assets? What do others think of this? There is a thread about this very issue here: http://ww...
by market timer
Sat Sep 29, 2007 9:03 pm
Forum: Investing - Theory, News & General
Topic: What about mortgages?
Replies: 26
Views: 6589

On the other hand, once upon a time I decided to pay off a mortgage when I figured out that my $5,000 interest deduction only saved me $3,000 in taxes. Spending 5K to save 3K didn't seem like such a good deal! That would indicate you are in a 60% bracket. I suspect that was quite a few years ago. J...
by market timer
Sat Sep 29, 2007 12:59 pm
Forum: Investing - Theory, News & General
Topic: Psychology of $$$$
Replies: 19
Views: 4318

The key to gambling (besides not doing it at all) is a) not to make foolish bets and b) to quit when you are ahead. I agree with part (a). The problem is, you're not likely to find a casino game that offers a positive expected return. I'd replace part (b) with an effective risk management system, s...
by market timer
Fri Sep 28, 2007 7:45 pm
Forum: Investing - Theory, News & General
Topic: Can We Turn Off Our Emotions When Investing?
Replies: 23
Views: 5332

Re: Can We Turn Off Our Emotions When Investing?

Economists in his day believed powerfully in the concept of “economic man”— the theory that people always acted in their own best self-interest. Yet Mr. Markowitz, famous economist though he was, was clearly not an example of economic man." That is still a fundamental assumption in economics. It's ...
by market timer
Thu Sep 27, 2007 11:46 pm
Forum: Investing - Theory, News & General
Topic: Treasury default risk
Replies: 9
Views: 1941

The vote of 53-42 wasn't a yes/no vote of whether or not to default, the consequences of which would be truly staggering to the global financial system. Defaulting on Treasuries is not even on my radar. We have the ability to print money (or should I say, "add liqiduidity"?) to pay our debts. Accele...
by market timer
Thu Sep 27, 2007 11:38 pm
Forum: Investing - Theory, News & General
Topic: Biased against traditional bonds
Replies: 51
Views: 12339

Your concerns are valid. I agree that bonds are not currently attractive. Demand for Treasuries has been driven by many price-insensitive foreign governments seeking to keep their currencies from appreciating against the dollar. There is a real inflation risk that was obvious in the reaction of the ...
by market timer
Thu Sep 27, 2007 10:47 pm
Forum: Investing - Theory, News & General
Topic: Profunds leveraged ETFs
Replies: 20
Views: 5013

watchnerd wrote:Ah, of course - the ProFund resets its leverage daily, right?
Yes, and the 2x leverage implies a momentum trading strategy.
by market timer
Thu Sep 27, 2007 10:37 pm
Forum: Investing - Theory, News & General
Topic: Profunds leveraged ETFs
Replies: 20
Views: 5013

Wouldn't it be cheaper just to buy the SPY options instead? Options don't exist that provide constant 2x leverage. Has anyone checked the effective borrowing costs for the leveraged long ProShares ETFs? How about the effective interest received by the inverse ETFs? As I recall, Profunds uses swaps ...
by market timer
Thu Sep 27, 2007 10:24 pm
Forum: Investing - Theory, News & General
Topic: Why is everyone showing up with an aggressive AA?
Replies: 130
Views: 34130

peter71 wrote:for a guy who has 80% of his money in private real estate
I was wondering what you meant earlier by 9% returns with a s.d. of 3%. Are these properties that you manage or a fund of some sort? I'm interested in both, but won't have the time for the former for a few years.
by market timer
Tue Sep 25, 2007 9:38 pm
Forum: Investing - Theory, News & General
Topic: Why is everyone showing up with an aggressive AA?
Replies: 130
Views: 34130

Re: Hi Pete,

I am pretty sure that Professor Shiller (a behavorial finance guy I think) would agree that the idea of a "leveraged 80/20" portfolio would fall into the category of irrational "framing" behavior- i.e failing to consider debt as a negative bond position. Yes, Shiller is a behavioral finance guy. I ...
by market timer
Tue Sep 25, 2007 9:25 pm
Forum: Investing - Theory, News & General
Topic: Why is everyone showing up with an aggressive AA?
Replies: 130
Views: 34130

Re: Hi Pete,

To me this would be an example of changing one's asset allocation in response to market conditions, which not a useful thing to do, IMHO. On the contrary, I think the higher observed Sharpe values for 80/20 vs. 100/0 are evidence that one should prefer a leveraged 80/20 over 100/0. It is consistent...
by market timer
Tue Sep 25, 2007 8:23 pm
Forum: Investing - Theory, News & General
Topic: Weather Derivatives: A New Class of Financial Instruments
Replies: 14
Views: 2407

Like commodities futures, there is no real return inherent in weather related derivatives. I'm not sure exactly what you mean. If you mean the expected return on investment from trading randomly is zero, that's plainly false: it's the risk-free rate. Even this underestimates commodity futures retur...
by market timer
Tue Sep 25, 2007 7:55 pm
Forum: Investing - Theory, News & General
Topic: Would Near Infinite Money Change Your Life?
Replies: 65
Views: 16873

It would certainly make it easier for me to start a hedge fund.
by market timer
Tue Sep 25, 2007 7:52 pm
Forum: Investing - Theory, News & General
Topic: Why is everyone showing up with an aggressive AA?
Replies: 130
Views: 34130

Re: Hi Pete,

So I would submit there is no such thing as a leveraged 80/20 portfolio. This really amounts to a 120% equity allocation - i.e. 120/(-20). Grok, In order to grok this you need to consider how your allocation would change in response to future market moves and rebalancing. Yes, at that instant in ti...
by market timer
Tue Sep 25, 2007 6:07 pm
Forum: Investing - Theory, News & General
Topic: Why is everyone showing up with an aggressive AA?
Replies: 130
Views: 34130

Re: Hi Pete,

Maintaining a constant asset allocation is just another form of market timing. How so? Clay and zhiwiller, How about we start with a clear definition of market timing? Investopedia defines market timing as: 1. The act of attempting to predict the future direction of the market, typically through th...
by market timer
Mon Sep 24, 2007 10:55 pm
Forum: Investing - Theory, News & General
Topic: iShares vs. Vanguard ETF's
Replies: 21
Views: 7775

TR2050 is 90% equities. That's considered aggressive by most. You don't give up much expected return with 10% bonds -- perhaps 0.5% per year or less. Once you have more money, you can construct your own Target Retirement fund without bonds.
by market timer
Mon Sep 24, 2007 10:24 pm
Forum: Investing - Theory, News & General
Topic: iShares vs. Vanguard ETF's
Replies: 21
Views: 7775

Can you explain why you think the first 20k should be in this. Are you saying I need to put more towards retirement. I have been focusing on that with my roth and 401k. My Roth is maxed. I need to worry about the next 10 years too.. It seems you simply want a diversified, low cost portfolio. The Ta...
by market timer
Mon Sep 24, 2007 10:00 pm
Forum: Investing - Theory, News & General
Topic: Why is everyone showing up with an aggressive AA?
Replies: 130
Views: 34130

Re: Hi Pete,

Well a hardcore Diehard (I'm not one...I'm researching April 2008 puts on financials right now) would say one shouldn't attempt to time the market and should stick with one's asset allocation in both cases. In other words, do nothing different, stay the course. So if you're getting mixed signals, i...