Search found 7768 matches

by richard
Wed Jan 14, 2015 12:27 pm
Forum: Investing - Theory, News & General
Topic: Tax location spreadsheet & question
Replies: 17
Views: 2092

Tax location spreadsheet & question

I'm trying to decide if it would be better to hold some less tax efficient equities in taxable or a TIRA. My general methodology is to compare the terminal after tax value of $1,000 of bonds in a TIRA and $1,000 of equities in taxable to $1,000 of equities in a TIRA and $1,000 of bonds in taxable. On the bond side, I'd hold munis (NY long-term) in taxable or TBM in TIRA. Both are now yielding 2%. After 30 years, I'd be about $450 better off holding munis in taxable. Therefore, equities in taxable would have to beat equities in TIRA by more than $450 for equities in taxable to win. Here's a spreadsheet showing calculations. https://docs.google.com/spreadsheets/d/1zDPCYUF9NNUCzhu31P2yRsRWUhHMAonGYhCYJrY0wgo/edit?usp=sharing Based on the assum...
by richard
Wed Jan 14, 2015 7:36 am
Forum: Personal Investments
Topic: How to transfer estate without including tax man
Replies: 27
Views: 3967

Re: How to transfer estate without including tax man

Wricha wrote:Good one Bob. Richard I would pay out a percent of the entire estate and if she need more it would be available.
Consider whether you'd be leaving her less than you otherwise would in order to avoid estate tax.
by richard
Wed Jan 14, 2015 7:13 am
Forum: Personal Finance (Not Investing)
Topic: Reporter doing story on Turbo Tax Fracas
Replies: 52
Views: 10875

Re: Reporter doing story on Turbo Tax Fracas

Tim_in_GA wrote:
Saving$ wrote:... they must files in a hidden part of your hard drive that stayed there even if you reformatted.
Impossible with a full (not "quick") reformat.
"Core Security Technologies researchers have demonstrated rootkits that can survive hard-disk reformatting. They used techniques to inject a rootkit in a computer with OpenBSD and one with a Windows operating system (OS)."
https://www.technibble.com/rootkits-tha ... ormatting/

If so, not a hidden file on the harddrive, but something that survives a full reformat.
by richard
Wed Jan 14, 2015 5:48 am
Forum: Personal Investments
Topic: How to transfer estate without including tax man
Replies: 27
Views: 3967

Re: How to transfer estate without including tax man

What would you do if there were no estate taxes?
by richard
Tue Jan 13, 2015 5:18 pm
Forum: Investing - Theory, News & General
Topic: Asness: Why individual bonds are no safer than bond funds
Replies: 59
Views: 5748

Re: Asness: Why individual bonds are no safer than bond fund

pascalwager wrote:Cliff Asness' comments may not apply to TIPS. Bill Bernstein warns about a liquidity risk which shows up when a TIPS fund manager needs to sell shares on the secondary market during a financial crisis, perhaps incurring a loss of 25 or 30%. Therefore, Bernstein recommends purchasing only individual TIPS for redemption at maturity.
Please link to Bernstein's warning.
by richard
Tue Jan 13, 2015 5:05 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

<>- Low bond/savings interest rates. Of course, less interest is less interest, but it also might mean higher equity returns or enhanced bond appreciation. - Low future appreciation appreciation. The PE10 crowd will sometimes chime in that equities will not yield as much moving forward. If PE10 has such predictive powers (it obviously doesn't) you could do a lot better than a 4% SWR through careful market-timing. Good luck with that.<> Low interest rates don't necessarily mean anything about equity returns. Low interest rates temporarily increase bond prices, but over the long run hurt returns. Vanguard found PE10 (and p/e) to have more predictive power than other metrics over a 10 year horizon, being able to predict about 40% of the varia...
by richard
Tue Jan 13, 2015 12:01 pm
Forum: Investing - Theory, News & General
Topic: Russia and energy in EM
Replies: 19
Views: 2612

Re: Russia and energy in EM

packer16 wrote:I would like folks to name 1 company that has been nationalized in Russia since the 1990s. There are none.
What does that say about what Russia might do now? The 1990s weren't that long ago.

When was the last time Russia nationalized territories before Crimea and Georgia?
by richard
Tue Jan 13, 2015 11:33 am
Forum: Personal Finance (Not Investing)
Topic: Ever get 'Antsy' following BH
Replies: 26
Views: 4121

Re: Ever get 'Antsy' following BH

I sometimes wonder if there's anything I can do to improve my portfolio and then I spend time thinking about it. Then I decide not to do anything.

Here are some more quotes:

“Sitting quietly, doing nothing, Spring comes, and the grass grows, by itself.”

“All of humanity's problems stem from man's inability to sit quietly in a room alone.”
by richard
Tue Jan 13, 2015 11:21 am
Forum: Investing - Theory, News & General
Topic: Duration and Bond Fund Barbells
Replies: 7
Views: 1289

Re: Duration and Bond Fund Barbells

It depends. Different parts of the yield curve can move by different amounts or even move in different directions. In other words, not all rates move the same. For example, long and short could stay the same while the yield on intermediate could increase or decrease.
by richard
Tue Jan 13, 2015 10:16 am
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

Consumers are buying less because there was a massive housing bubble that burst, taking large amounts of net worth (given propensity to spend a few percent, this greatly decreased spending) and income out of the economy and leaving many with significant debt. This took a massive amount of spending out of the economy. In other words, they're spending less due to less net worth and less income. One reason the bubble burst is because housing prices had been growing more rapidly than made sense. The reasons for this are beyond the forum rules. The only problem is that consumer spending has been increasing since the recent housing bubble. JT 2007-2008-2009 were big drops in GDP and growth since then has not made up for it. GDP is essentially ov...
by richard
Tue Jan 13, 2015 9:00 am
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

I can't help but think that deflation is a symptom, not a cause. Many people focus on how we might avoid deflation or what we could do to fight it, but it seems they should be more concerned about how to avoid whatever the causes of deflation might be. That would also enlighten us on how to prepare, or as the OP hopes, profit from it should it arise. JT Think simple supply and demand. Hold supply constant while cutting demand and prices drop. Possible cures for low demand are fiscal (if consumers are buying less, government can fill in the gap) and monetary (the Fed can issue an infinite amount of money), but if you constrain the government due to fears of deficit spending and you constrain the Fed by rants about debasing the currency and ...
by richard
Tue Jan 13, 2015 7:38 am
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

beammeupscotty wrote:
toto238 wrote:Can you point out where Nisiprius wrote about the Wizard of Oz and bimetallism? I had a college professor who actually wrote a book on this topic. I'd like to show him that he's not the only one who cares about this topic.
http://www.bogleheads.org/forum/viewtop ... 94#p317994

https://en.wikipedia.org/wiki/Political ... zard_of_Oz
I wonder how we got from "cross of gold" to the current (or at least very recent) inflation paranoia.
by richard
Tue Jan 13, 2015 7:33 am
Forum: Personal Finance (Not Investing)
Topic: Poll - How much is enough / what's your number?
Replies: 86
Views: 14936

Re: Poll - How much is enough / what's your number?

2tall4economy wrote:<>At $50M you can get the rest; the biggest house and the jet/yacht. No material possession is out of reach that I can imagine, anywhere in the world. There's a LOT of time between $10M and $50M though (my personal forecast says an additional 25 years of watching budgets and continuing to work - no thanks).<>
There are apartments not far from me that cost well over $50M. There are paintings that would set you back much more than that. A 757 costs about twice that much (Paul Allen used to own two). There are yachts that go for more than $50M.

Your imagination seems a bit limited. :P
by richard
Tue Jan 13, 2015 7:10 am
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

I can't help but think that deflation is a symptom, not a cause. Many people focus on how we might avoid deflation or what we could do to fight it, but it seems they should be more concerned about how to avoid whatever the causes of deflation might be. That would also enlighten us on how to prepare, or as the OP hopes, profit from it should it arise. JT Think simple supply and demand. Hold supply constant while cutting demand and prices drop. Possible cures for low demand are fiscal (if consumers are buying less, government can fill in the gap) and monetary (the Fed can issue an infinite amount of money), but if you constrain the government due to fears of deficit spending and you constrain the Fed by rants about debasing the currency and ...
by richard
Tue Jan 13, 2015 6:56 am
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

It strikes me that a lot of people can't get their head around a couple of things: - if prices drop, then either wages drop, or employment drops. Yes those with jobs may be better off, but fewer people will have jobs - your savings increase is someone else's income loss The only exception to the first point is if there's enough demand in the economy for goods, services and labour that employers are able to compensate without letting people go or cutting wages. My spouse is a contractor and we have experienced an across the board cut from the customer-- 20% cut on *all* contractors all across the world. This is one of the world's 50 largest companies. That's what deflation feels like. I often post that point in inflation or deflation thread...
by richard
Mon Jan 12, 2015 5:05 pm
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

kenner wrote:Perhaps the scariest thing about deflation is that no one seems to know how to reverse its harmful effects. In the U.S, the Fed has tools to combat inflation, but almost none to fight deflation.
There's a difference between having the tools and being willing to use them. Look how eager the Fed is to deploy tools to fight inflation, even though inflation has been below its % target for quite a while and there's not much indication of incipient inflation reaching its target. Look at the rhetoric demanding the Fed tighten.
by richard
Mon Jan 12, 2015 4:52 pm
Forum: Investing - Theory, News & General
Topic: Asness: Why individual bonds are no safer than bond funds
Replies: 59
Views: 5748

Re: Asness: Why individual bonds are no safer than bond fund

Two types of bond portfolios:
1) The average maturity stays approximately constant
2) The average maturity decreases over time

These are different types. One has declining interest rate risk over time, the other does not. Talking about individual bonds compared to bond funds just confuses the issue.

There are also issues such as cost, ease of reinvesting small amounts, ease of selling small amounts, but that's not the risk story that's the subject of this thread.
by richard
Mon Jan 12, 2015 1:23 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

afan wrote:The chart illustrates the challenges in using current valuation metrics to predict future returns. This works so poorly it is not worth the effort. See Goyal.
See https://personal.vanguard.com/pdf/s338.pdf for Vanguard's research.

You may not believe the lessons of history, but then don't cite Trinity or any other studies of history.

Which Goyal paper?
by richard
Mon Jan 12, 2015 1:21 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

In the Vanguard webinar this past Thursday, both the Vanguard president and chief investment officer suggested as a general rule lowering the SWR to 3.5% in view of lower expected returns for the foreseable future. PhDs have been predicting lower expected returns since 2011... I think we know how well those predictions have held up so far. No one who retired in the last 3 years has had any problems with a 4% withdrawal rate. To say that one should drop to 3.5% is to say that you believe that the next 30 years will be WORST 30 years in modern history. That long-term returns will be the lowest ever seen in the last 120 years. That's a pretty significant prediction based on the fact that interest rates are low, and PE10 is middling high. The ...
by richard
Mon Jan 12, 2015 1:09 pm
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

bobcat2 wrote:For there to be sustained deflation in an economy the price of the biggest item in that economy will almost certainly be falling. That item is wages. Either nominal wages on average will be falling, or unemployment will be growing rapidly, or some of both.

BobK
Good luck convincing anyone of that. Almost no one sees the connections between general prices, the health of the economy and wages. Perhaps it's a problem understanding aggregates.
by richard
Mon Jan 12, 2015 1:08 pm
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

Twins Fan wrote:<>The majority out there would probably welcome deflation.... or, welcome some wage increases while prices were stagnant for a while.<>
The problem with this is the relation between wages and price levels. It's rather unlikely we're going to see a general increase in wages while seeing a general decrease in prices. There will of course be many individual exceptions, but at the aggregate level it's not likely to be sustainable.
by richard
Mon Jan 12, 2015 12:41 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

In the Vanguard webinar this past Thursday, both the Vanguard president and chief investment officer suggested as a general rule lowering the SWR to 3.5% in view of lower expected returns for the foreseable future. PhDs have been predicting lower expected returns since 2011... I think we know how well those predictions have held up so far. No one who retired in the last 3 years has had any problems with a 4% withdrawal rate. To say that one should drop to 3.5% is to say that you believe that the next 30 years will be WORST 30 years in modern history. That long-term returns will be the lowest ever seen in the last 120 years. That's a pretty significant prediction based on the fact that interest rates are low, and PE10 is middling high. The ...
by richard
Mon Jan 12, 2015 8:50 am
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

One of my favorite economists is fond of saying "don't reason from a price change". The message is to look at the underlying causes.

Deflation is a sign that the economy is seriously messed. Deflation can cause bad things, but you're not likely to see deflation in a healthy growing economy.

Individual prices can rise and fall, not necessarily in sync. Low inflation most likely means many prices are falling. It's not a binary situation in which there's a major difference between +0.1% and -0.1%, it's a continuum.
by richard
Mon Jan 12, 2015 7:32 am
Forum: Investing - Theory, News & General
Topic: Performance of fundamental indexes
Replies: 21
Views: 5010

Re: Performance of fundamental indexes

(As to actively managed funds can outperform index funds, that would require active funds to have lower costs, which is not plausible). Why does Vanguard then suggest that over 30 years their active funds have returned $27 Billion in excess of thier indexes to shareholders? They just have a low but not lower cost don't they? Anyway, their 5 year returns for active funds are less than the benchmarks net of fees so in that case too, 5 years seems perhaps not the most accurate timeframe for concluding how a strategy worked. https://advisors.vanguard.com/iwe/pdf/ICRTPX.pdf?cbdForceDomain=true By definition, the pre-cost performance of index funds and active funds is the same. Active funds are more expensive, so indexing wins. That doesn't mean...
by richard
Mon Jan 12, 2015 7:06 am
Forum: Investing - Theory, News & General
Topic: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit?
Replies: 87
Views: 10588

Re: Why Is "Deflation" A Bad Thing??? How To Prepare/Profit

Swampy wrote:I've been reading articles and posts on "deflation" or "disinflation" being a "bad thing."

OK, why is it so bad to be paying less for items that cost more last year?<>
On an economy wide level, spending equals income. If someone is spending more, someone has more income. There are distributional issues (a small number may benefit while many are paying more), but that's true of inflation, deflation or just about anything else.

Put another way, deflation means prices go down, but it also means the wages we use to pay those prices goes down.
by richard
Mon Jan 12, 2015 7:00 am
Forum: Forum Issues and Administration
Topic: Showing Newspaper Article in a post
Replies: 5
Views: 1402

Re: Showing Newspaper Article in a post

Paste the link into your post. Click preview when the post is ready so that you can make sure everything is correct, then click submit.

http://www.nytimes.com/2015/01/13/world ... -news&_r=0
by richard
Mon Jan 12, 2015 6:58 am
Forum: Investing - Theory, News & General
Topic: Israel bonds [how to evaluate political risk?]
Replies: 37
Views: 5804

Re: Israel bonds [how to evaluate political risk?]

AlohaJoe wrote:
bsteiner wrote:Israel bonds now pay 2.76% for 5 years or 3.55% for 10 years, in each case in U.S. dollars. I think the minimum needed to get these rates is $25,000.

I don't know how to evaluate the political risk.
2.76% for 5 years sounds pretty low. I can buy an Australian eTIB with maturity in 2020 and a coupon rate of 4%. Since it is an eTIB, it is also inflation-indexed. And Australia has far fewer political risks than Israel.

So for the political risk, it seems like a low-rate.
Aren't these bonds issued in Australian dollars rather than USD? If so, there's currency risk for a US investor, so a straight comparison of interest rates doesn't tell the whole story.
by richard
Mon Jan 12, 2015 6:09 am
Forum: Personal Consumer Issues
Topic: Rental Car Driver Not Authorized
Replies: 41
Views: 18031

Re: Rental Car Driver Not Authorized

How does the rental car company know that a customer has underlying car insurance? Put differently, why would any company rent a car to someone without being sure that they have insurance to cover their vehicle?
The companies have the relevant data on accident rate, costs, ability to collect from renters, etc. They charge enough to make a profit even if they have to eat some costs because they can't collect from some renters. They're large enough to self-insure (although they may have excess insurance).
by richard
Mon Jan 12, 2015 5:58 am
Forum: Personal Investments
Topic: Treasury funds - combining for duration
Replies: 4
Views: 790

Re: Treasury funds - combining for duration

If you want a specific duration for your treasury bond portfolio and want to use funds and there's no fund with the duration you want, then combining funds seems the way to go.

Barbelling is a bet on the shape of the yield curve. In some cases owning short plus long beats diversification across maturities and durations, in some cases it doesn't. Ex ante, average duration (and credit risk) are all that matters for a bond portfolio. Fama has a paper to this effect.

Why do you want a 10 year duration portfolio?
by richard
Mon Jan 12, 2015 5:47 am
Forum: Investing - Theory, News & General
Topic: "Vanguard Group execs say deflation a real risk..."
Replies: 61
Views: 8480

Re: "Vanguard Group execs say deflation a real risk..."

<>"When you look at what drives inflation, wages are the largest component. Most people focus on commodity prices, but wages actually are far more important," McNabb said. "And we have not seen much inflation there." Buckley seems to think deflation means consumers holding off buying things rather than a decrease in the general level of prices. McNabb seems to think inflation is measured by the price of labor or the prices of commodities, rather than by the general level of prices. Ron He's not saying inflation is measured by the price of labor; he's saying the prime cause of inflation is wages. The first view would be silly (look at the components of the CPI); the second view is most likely the view of the vast majorit...
by richard
Mon Jan 12, 2015 5:37 am
Forum: Investing - Theory, News & General
Topic: Performance of fundamental indexes
Replies: 21
Views: 5010

Re: Performance of fundamental indexes

nisiprius wrote:Five years seems like a ridiculously short period of time to be drawing firm conclusions about anything. Over five-year periods, large-cap growth can outperform small-cap value; actively managed funds can outperform index funds; heck, United States savings bonds can outperform stocks.
What's the minimum amount of time needed to draw firm conclusions? What is the minimum amount of time over which large-cap growth can not outperform small-cap value; United States savings bonds can not outperform stocks? (As to actively managed funds can outperform index funds, that would require active funds to have lower costs, which is not plausible).
by richard
Mon Jan 12, 2015 5:29 am
Forum: Personal Consumer Issues
Topic: Rental Car Driver Not Authorized
Replies: 41
Views: 18031

Re: Rental Car Driver Not Authorized

There are basically two situations

1) You or your wife have an insurance policy that will cover your wife even if she is not an authorized driver (insurance includes auto policy, credit card coverage, etc.).

2) You or your wife do not have an insurance policy that will cover your wife even if she is not an authorized driver (insurance includes auto policy, credit card coverage, etc.).

What insurance covers depends on the insurance contract (and any relevant state law or regulation). Discussing what it might say or what someone regards as logical does not really matter. What matters is the legally binding terms.
by richard
Sun Jan 11, 2015 8:27 pm
Forum: Personal Consumer Issues
Topic: Rental Car Driver Not Authorized
Replies: 41
Views: 18031

Re: Rental Car Driver Not Authorized

tibbitts wrote:I don't know, but I'm guessing you cannot authorize her to drive the rental car, since it's not your car. The rental car company doesn't delegate that authority to you. So the coverage on the car, regardless of what source it came from, would be similar to what you'd have if your wife had stolen the car. Most policies and coverages (whether purchased with the car rental, or a feature of your credit card, or part of your own vehicle insurance) probably won't cover you if you're operating a car without authorization - so I'm guessing you'd need to pay the full amount of any damage or personal injury.
That's my understanding - that insurance wouldn't pay for damages or injuries. You'd have to check the terms of your insurance.
by richard
Sun Jan 11, 2015 4:05 pm
Forum: Investing - Theory, News & General
Topic: "Vanguard Group execs say deflation a real risk..."
Replies: 61
Views: 8480

Re: "Vanguard Group execs say deflation a real risk..."

I agree with Johno. There is no serious disagreement about the definitions of inflation and deflation. There is some fringe disagreement, but that doesn't mean generally accepted usage isn't clear and, well, generally accepted.
by richard
Sun Jan 11, 2015 4:01 pm
Forum: Investing - Theory, News & General
Topic: Israel bonds [how to evaluate political risk?]
Replies: 37
Views: 5804

Re: Israel bonds [how to evaluate political risk?]

If large numbers are purchasing bonds for other than economic reasons and market forces couldn't counteract this, then interest rates would understate risk. Yet another reason to avoid individual bonds (other than US treasuries for US persons or similar situations). Also, the no free lunch principle.
by richard
Sun Jan 11, 2015 2:54 pm
Forum: Investing - Theory, News & General
Topic: Israel bonds [how to evaluate political risk?]
Replies: 37
Views: 5804

Re: Israel bonds [how to evaluate political risk?]

Interest rates are usually a good proxy for risk - the higher the rate, all other things being equal, the higher the risk. There are some complications - for example US treasuries are yielding more than German bonds, but that's likely more a currency play than a risk story.

There are many issues with owning individual bonds, including diversification, liquidity and limited ability to do serious analysis. I'd stick to bond funds or CDs.
by richard
Sun Jan 11, 2015 2:07 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

My point is simply that many Bogleheads, in disregarding the SWR advice of Vanguard , are working with such conservative SWRs that they will enjoy the material pleasures of retirement less than they could have. I fear they will become the richest guys in the cemetery. After years of habit-forming, careful saving during the accumulation phase, some Bogleheads might be unwilling to push the gas pedal in retirement. I believe that might be the origin of threads advocating 2.5% SWRs. Exactly what SWR advice of Vanguard are you talking about? Which specific document? All I'm seeing is various percentages based on various time frames and various allocations, with the caveat that the numbers are based on history which may not be applicable to the...
by richard
Sun Jan 11, 2015 10:56 am
Forum: Personal Investments
Topic: If you were going to retire at 57 what would your number be?
Replies: 35
Views: 5683

Re: If you were going to retire at 57 what would your number

If you're trying to decide how much you'd need to retire at 57, perhaps ask what multiple of annual spending would be enough (or what withdrawal rate would be safe). Add that no SS or pension until 67, at which time they would cover x% of anticipated spending.

There would be issues of life expectancy and how risky or safe people want to be, but this would likely be more useful.
by richard
Sun Jan 11, 2015 10:39 am
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

<>Meanwhile, Vanguard's own Retirement Nest Egg Calculator is showing me this. Only you can answer these questions: do you think a 7% chance of failure--a plan for a 7% chance of failure--matches your idea of "safe?" And, don't you think you need to allow some margin of safety to take account of the possibility that the calculator might be off? <> What I find odd is the Vanguard research paper I linked above shows a 15% chance of failure while the online calculator shows a 7% chance of failure. See Figure 2 at the top of page 4 of the paper. I imagine what that shows is something I've noticed over and over again: these studies are extremely sensitive to assumptions and to the specific choices of data and endpoint dates of the dat...
by richard
Sun Jan 11, 2015 10:10 am
Forum: Personal Investments
Topic: If you were going to retire at 57 what would your number be?
Replies: 35
Views: 5683

Re: If you were going to retire at 57 what would your number

TheTimeLord wrote:If you were going to retire at 57 and not take either SS or a pension until 67 what would you number be?
It really depends on spending needs and desires. Someone who wants $40,000/year is going to have a different number than someone who wants $400,000/year.
by richard
Sun Jan 11, 2015 9:29 am
Forum: Investing - Theory, News & General
Topic: Three Questions That Bruise The Small Cap Perf. Promise
Replies: 14
Views: 2708

Re: Three Questions That Bruise The Small Cap Perf. Promise

Speaking of great quotes, Merton Miller, DFA Interview Q: One thing I find interesting is that the data show that value stocks outperform growth stocks. A: They show that they have over some period of time. As I said, I'm always worried that the last two hundred years, or whatever your sample period is, have been somewhat unusual. I take a very long view and I'm not convinced, yet, that simple passive investing isn't the best way to go for the vast bulk of all investors. Unless you can explain to me why some strategy that everybody could follow is superior. Q: Oh, they explain it all right. They explain it by risk. They say you get rewarded for the risk you take. Value stocks are riskier. Ergo, you get more reward with value stocks. Now, th...
by richard
Sat Jan 10, 2015 5:36 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

nisiprius wrote:<>Meanwhile, Vanguard's own Retirement Nest Egg Calculator is showing me this. Only you can answer these questions: do you think a 7% chance of failure--a plan for a 7% chance of failure--matches your idea of "safe?" And, don't you think you need to allow some margin of safety to take account of the possibility that the calculator might be off? <>
What I find odd is the Vanguard research paper I linked above shows a 15% chance of failure while the online calculator shows a 7% chance of failure. See Figure 2 at the top of page 4 of the paper.
by richard
Sat Jan 10, 2015 3:52 pm
Forum: Investing - Theory, News & General
Topic: How to use Vanguard Portfolio Watch, M* X-ray, Fidelity GPS for rebalancing
Replies: 116
Views: 104495

Re: How to use Vanguard Portfolio Watch for rebalancing

If you like slice & dice, you might try https://www.portfoliovisualizer.com/factor-analysis. It does Fama-French Factor Regression Analysis.
by richard
Sat Jan 10, 2015 3:44 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

555 wrote:SWR is just a calculation, not a strategy. It just gives a ballpark figure of how much to save up.

In the real world you can use annuities to eliminate some longevity risk.

Also look at the gazillion earlier threads on this topic.
Yep. A strategy would be: if you seem to be spending too much, cut back, if you seem to have more than you could need, feel free to spend more, as Taylor has repeatedly and convincingly written.

This is a topic that has been covered in great and frequent depth.
by richard
Sat Jan 10, 2015 3:21 pm
Forum: Investing - Theory, News & General
Topic: Is a Sub-4% SWR a Boglehead Quirk?
Replies: 177
Views: 18992

Re: Is a Sub-4% SWR a Boglehead Quirk?

Here's Vanguard research with a chart showing you need withdrawal rates no higher than 4% over 30 years to have a 85% success rate.
http://www.vanguard.com/pdf/s325.pdf

85% doesn't sound very safe to me. YMMV. Longer time periods implied lower withdrawal rates. More safety would also imply a lower withdrawal rate.
by richard
Sat Jan 10, 2015 6:37 am
Forum: Investing - Theory, News & General
Topic: When GDP growth and stock returns are positively correlated
Replies: 2
Views: 492

Re: When GDP growth and stock returns are positively correla

Stock returns are a function of performance relative to expectations. High GDP growth wouldn't lead to high stock returns if investors expected very high GDP growth. That's a major issue for comparing GDP growth and stock returns.

Perhaps Greece was a case in which market expectations were unduly optimistic, leading to low returns and poor economic growth.

The problem is that it's hard to measure expectations.

I only read the beginning of the paper.
by richard
Sat Jan 10, 2015 6:18 am
Forum: Investing - Theory, News & General
Topic: "Vanguard Group execs say deflation a real risk..."
Replies: 61
Views: 8480

Re: "Vanguard Group execs say deflation a real risk..."

@ EarlyStart: http://angrybearblog.com/2004/06/krugma ... mo-as.html

Compare those who have been consistently wrong, for example, predicting Clinton tax increases would tank the economy, Bush cuts would do the opposite, inflation and interest rates would soar as a result of Fed policy since 2008, etc.

All of which shows once again you shouldn't invest based on forecasts. Even if forecasters are correct, it doesn't help in investing. Stay the course.
by richard
Fri Jan 09, 2015 8:08 pm
Forum: Investing - Theory, News & General
Topic: Help clarify "expected future return"
Replies: 12
Views: 1315

Re: Help clarify "expected future return"

stlutz wrote:
the formal definition, which is essentially probability weighted returns
And, of course, nobody ever actually does this.
It's in all the textbooks :P

At least some analysts must prepare base, normal and optimistic cases, then guess how likely each case might be. The problem, as noted, is that we really don't have any idea what returns would be under various scenarios and the odds of any of these scenarios.

I'd be happier if the term were dropped, as it usually implies a higher degree of certainty about the future than is warranted.
by richard
Fri Jan 09, 2015 7:55 pm
Forum: Investing - Theory, News & General
Topic: Help clarify "expected future return"
Replies: 12
Views: 1315

Re: Help clarify "expected future return"

LadyGeek wrote:Here's a math-heavy definition: Expected return

It probably doesn't answer your question, but it's a place to start.
There are at least two uses for expected returns, (1) the returns investors expect and (2) the formal definition, which is essentially probability weighted returns. The wiki glosses over the differences, which can be substantial. For example, take an investment which has a 1% chance of being worth $100,000 and a 99% chance of being worthless. Under the formal definition, the expected return is $1,000 ($100,000 * 1% plus $0 * 99%). I wouldn't expect to earn $1,000 - the most likely value is zero.
by richard
Fri Jan 09, 2015 7:45 pm
Forum: Investing - Theory, News & General
Topic: Help clarify "expected future return"
Replies: 12
Views: 1315

Re: Help clarify "expected future return"

All else being equal, the lower price you pay the higher your return. If you pay $8 for $10 in a year, your return will be higher than if you pay $9.

The issue is whether all else is equal. You could be paying a lower price because the market anticipates a lower future value or you could be paying a lower price because the market is nervous.