Nisiprius Investments Unveils New MDF Factor-Based Fund

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Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by nisiprius » Fri Sep 16, 2016 9:54 am

September 16th, 2016
FOR IMMEDIATE RELEASE

Nisiprius Investments Unveils New MDF Factor-Based Fund

Applying the same principles and methods used to extract other factors, the Nisiprius Investments crack research team has discovered a new factor, the Manifest Destiny Factor (MDF). According to research director Warwick Buffalo, "Who has ever benefited during the past 116 years by betting against America? We would never do a thing like that. But the other way, sure."

Buffalo went on to note that "Over the past 116 years, the total real return of the U.S. market has been 6.4%, while that of the rest of the world has been 4.3%. Clearly, then, a strategy of going long on the U.S. and shorting the rest of the world would have yielded a lucrative premium of over 2%. We call this previously unreported factor the 'manifest destiny factor' (MDF), and starting in 4Q 2016 we will be giving investors access to it in the form of a new mutual fund."

Asked how the MDF had done recently, Buffalo noted, "over the last fifty years the U.S. has earned 5.3% while the rest of the world earned 5.4%. But, as we all know, any factor can undergo long periods of underperformance, and the investor must be prepared to wait them out. To suggest that transient events like World War I and II could invalidate long-term statistics in any important way would be to undermine the very foundations of factor research."

The new fund's portfolio actually consists of only two investments, a 300% long position on VTI and a 300% short position on VXUS. 3X leverage is used to create optimal loading on the MDF factor. "Don't worry it, there's not much risk to this sort of thing if you know what you're doing," said Buffalo. "We're safe against anything short of a ten-sigma event." As for expense ratios, "We anticipate that our expense ratio will be pretty much comparable with other mutual funds that do this sort of thing."

Nisiprius Investments: Where Your Investments Create Profit(sm)

It's a joke. Nisiprius Investments does not exist. There is no such fund.
Last edited by nisiprius on Fri Sep 16, 2016 10:11 am, edited 7 times in total.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Munir » Fri Sep 16, 2016 9:57 am

Where do I sign up? :mrgreen:

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by slbnoob » Fri Sep 16, 2016 9:57 am

'crack' research team inviting us to invest money? What can go wrong?

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by jhfenton » Fri Sep 16, 2016 9:59 am

Do you offer a currency-hedged 1X long-short version? I don't believe the 3X positions are suitable for a long-term investment. :beer

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Da5id » Fri Sep 16, 2016 10:06 am

Just get a few Nobel laureates to sit on the board, and you are good to go!

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Teague » Fri Sep 16, 2016 10:13 am

Hmm, I suspect Mr. Buffalo is based not in Buffalo, but rather in Omaha? *

* At least for some parts of his philosophy.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by David Jay » Fri Sep 16, 2016 10:18 am

I enjoy reading the prospectus of each new fun(d) from N.I.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by packet » Fri Sep 16, 2016 10:20 am

I'd buy that for a dollar!

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by njboater74 » Fri Sep 16, 2016 10:33 am

This fund sounds great, do you have future plans to unveil a Southern Value Fund based on the SMN (south minus north) Factor?
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Doc » Fri Sep 16, 2016 10:38 am

Can we buy on margin?
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by alpenglow » Fri Sep 16, 2016 10:48 am

I thought it was going to be a tilt to timber (Medium Density Fibreboard).

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by triceratop » Fri Sep 16, 2016 10:49 am

It would appear that the fund is a misnomer, or if not then severely limited in upside potential. Manifest Destiny is complete, in the sense that the US settlers have occupied the continent from east to west. Even if you were serious, it's difficult to short a society (Native Americans) with different concepts of property ownership.

Instead, you must be referring to American Exceptionalism. Unfortunately for your fund, I've already registered a trademark on the American Exceptionalism Factor-Based Fund (AEF).
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by bstevlin » Fri Sep 16, 2016 11:19 am

You should with all deliberate speed establish a Black Rock ETF "MDF". The next step is to get yourself appointed to the board of directors at Goldman Sachs and J.P. Morgan and every well known hedge fund. Finally to validate your investment scheme you should appear frequently on CNBC and FBN where the discussion always leads to the demise of free market systems because of government interference when your scheme tanks.

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Da5id » Fri Sep 16, 2016 11:37 am

bstevlin wrote:You should with all deliberate speed establish a Black Rock ETF "MDF". The next step is to get yourself appointed to the board of directors at Goldman Sachs and J.P. Morgan and every well known hedge fund. Finally to validate your investment scheme you should appear frequently on CNBC and FBN where the discussion always leads to the demise of free market systems because of government interference when your scheme tanks.
You don't get it -- his scheme can't tank by definition. If it isn't succeeding you merely haven't waited long enough.

That said, clearly political correctness could be at work against his Manifest Destiny Fund...

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by David Jay » Fri Sep 16, 2016 11:41 am

njboater74 wrote:This fund sounds great, do you have future plans to unveil a Southern Value Fund based on the SMN (south minus north) Factor?
That would be the "Texas Sector Fund"
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by David Jay » Fri Sep 16, 2016 11:41 am

Doc wrote:Can we buy on margin?
...nice...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by NotWhoYouThink » Fri Sep 16, 2016 11:46 am

Does the MDF pay dividends? Monthly?

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by bertilak » Fri Sep 16, 2016 12:28 pm

Munir wrote:Where do I sign up? :mrgreen:
Since it is an imaginary fund you can simply pretend do invest and get all the benefits of the fund. You can even leverage your investment!
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Selu Gadu » Fri Sep 16, 2016 12:33 pm

Hmmmm, I see potential here. We shorted the pilgrims for 26 bucks in beads and trinkets. If we whine and cry around to the SEC maybe we could get Manhattan back.

Anyone want a piece of the action?
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by dougger5 » Fri Sep 16, 2016 12:35 pm

<snarky reference to another thread alert>

But...does it distribute dividends MONTHLY??!?
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Jack FFR1846 » Fri Sep 16, 2016 12:36 pm

I might move some of my MMF investments over to MDF.


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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Ever Ready » Fri Sep 16, 2016 12:37 pm

I thought this was a housing play:

Medium-density fibreboard (MDF)

https://en.wikipedia.org/wiki/Medium-density_fibreboard

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by parsi1 » Fri Sep 16, 2016 12:41 pm

Before we commit any money can you post the annual return of the other Nisiprius Investment Funds?

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by nisiprius » Fri Sep 16, 2016 1:54 pm

parsi1 wrote:Before we commit any money can you post the annual return of the other Nisiprius Investment Funds?
Certainly. If they had existed in 1926, backtesting shows that the Nisiprius Opportunity Knox Fund would have earned 37.49% in 1927, the Nisiprius Weedy Brown Growth Fund would have earned 43.61% in 1928, the Nisiprius No Constraints Bondage Fund would have earned 30.55% in 1991, the Nisiprius Dodgem & Carrs Fund would have earn 53.99% in 1933, and the Nisiprius 42nd Street Fund would have earned 37.20% in 1975.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by David Jay » Fri Sep 16, 2016 2:17 pm

Selu Gadu wrote:We shorted the pilgrims for 26 bucks in beads and trinkets.
Pedant alert! The Dutch purchased Manhattan. The pilgrims landed up in Massachusetts (Massachusetts Bay Colony).

...we now return you to your regularly scheduled programming...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by saltycaper » Fri Sep 16, 2016 2:59 pm

If you attempt to troll and nobody bites, but instead further extends the troll, is it still a troll?
Quod vitae sectabor iter?

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Teague » Fri Sep 16, 2016 3:02 pm

nisiprius wrote:
parsi1 wrote:Before we commit any money can you post the annual return of the other Nisiprius Investment Funds?
Certainly. If they had existed in 1926, backtesting shows that the Nisiprius Opportunity Knox Fund would have earned 37.49% in 1927, the Nisiprius Weedy Brown Growth Fund would have earned 43.61% in 1928, the Nisiprius No Constraints Bondage Fund would have earned 30.55% in 1991, the Nisiprius Dodgem & Carrs Fund would have earn 53.99% in 1933, and the Nisiprius 42nd Street Fund would have earned 37.20% in 1975.
Amazing record! But nothing in the agriculture sector? Perhaps one that trends cherry-picking or processing roses (extracting the rose color for eyeglasses applications)?
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by soboggled » Fri Sep 16, 2016 3:06 pm

Expect a call from CNBC and FBN any minute now, they like the cut of your jib.

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by steve roy » Fri Sep 16, 2016 3:07 pm

Ah, so we're allowing SOLICITATIONS around here now?

What's next? Ads for T. Rowe Price? Fidelity? Edward Jones? (Or perhaps Alex Jones?)

Is this thread in danger of being locked? And the key thrown away?

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Doc » Fri Sep 16, 2016 3:20 pm

steve roy wrote:Is this thread in danger of being locked? And the key thrown away?
Is this thread Nisi in danger of being locked? And the key thrown away?

But maybe he has already appealed.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by ANC » Fri Sep 16, 2016 3:26 pm

You can also tilt further and hedge your bets at the same time with the FFFF (Fifty Four Forty or Fight) fund, investing in all listed companies between the Russian River and Yukon River. It may not find many fans north of 49'00" however.

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Lou354 » Fri Sep 16, 2016 3:41 pm

I think the MD factor is temporarily overvalued by the recent good performance of the overlapping US stock market. Therefore I think I'll hold off exposing myself to this factor until those who aren't truly committed drop out after the next big jolt. I hope that isn't considered market timing. :wink:

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by JoMoney » Fri Sep 16, 2016 3:53 pm

The risk story for this factor has been well known and publicized and shows no signs of being arbitraged away despite well known counter parties with different "risk preferences". Every time I view the financial news I see the likes of Peter Schiff, Marc Faber, and other strong advocates for taking the opposite approach going long gold and international stocks.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by nisiprius » Fri Sep 16, 2016 3:58 pm

saltycaper wrote:If you attempt to troll and nobody bites, but instead further extends the troll, is it still a troll?
Ouch. You have a point.

For the record I'll say that I'm making what I think is a legitimate point, satirically. Let me make the legitimate point in a straightforward way.

1) When it comes analyzing factors "everybody" believes that all available data should count, and that the long periods of underperformance (and outperformance) just represent expected variability, not indications of fundamental changes at the start and end of the periods.

2) "Nobody" (including me) believes that the 116-year average returns of U.S. and international stocks mean that U.S. stocks "have" 2% higher return--that is, we do not believe that the average returns of the last 116 years should be expected to persist.

3) When it comes to international stocks, "nobody" believes that the years before the end of World War II should count, because it was obviously a different era and factors came into play that don't exist today. That is, we do think that there were fundamental differences--that was then, this is now.

What do we think about the relevance of older data?
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Angst » Fri Sep 16, 2016 4:13 pm

saltycaper wrote:If you attempt to troll and nobody bites, but instead further extends the troll, is it still a troll?
Stop nibbling! Leave Nisi to his sandbox.

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by nedsaid » Fri Sep 16, 2016 4:27 pm

nisiprius wrote:
saltycaper wrote:If you attempt to troll and nobody bites, but instead further extends the troll, is it still a troll?
Ouch. You have a point.

For the record I'll say that I'm making what I think is a legitimate point, satirically. Let me make the legitimate point in a straightforward way.

1) When it comes analyzing factors "everybody" believes that all available data should count, and that the long periods of underperformance (and outperformance) just represent expected variability, not indications of fundamental changes at the start and end of the periods.

2) "Nobody" (including me) believes that the 116-year average returns of U.S. and international stocks mean that U.S. stocks "have" 2% higher return--that is, we do not believe that the average returns of the last 116 years should be expected to persist.

3) When it comes to international stocks, "nobody" believes that the years before the end of World War II should count, because it was obviously a different era and factors came into play that don't exist today. That is, we do think that there were fundamental differences--that was then, this is now.

What do we think about the relevance of older data?
Humor and fun are allowed here. But not too much. The punchbowl gets taken away just as it starts getting fun!

The point about historical data is an excellent one. One could say that the US Stock Market changed once the Roosevelt Administration and Congress started the Securities Exchange Commission in 1934. Before then, it was pretty much the wild west out there. As I recall, the Cowles Commission played an invaluable role in collecting historical data. But really, how would you compare the data from one era to another?

Another point that could be raised is this: how much data do you need before you can draw reliable conclusions? Is 116 years of data enough?

As far as International Stocks, my understanding is that over time their return and the return of US Stocks are about the same particularly when you take into account currencies. But US Stocks seem to have the upper hand long term but that is distorted by the last few years. It seems that since the 2008-2009 financial crisis, US Stocks have done a lot better than International. But go back before then and International looked a lot better. The US Dollar has been very strong in recent years, and that might account for US Stock Market outperformance.

I am not a mathematician or a statistician but it seems to me that when you look at graphs, charts, statistics, and large amounts of data enough that you start seeing what you want to see. It gets to be sort of a Rorschach test, trying to interpret inkblots. Bias is hard to eliminate. Beliefs in large part determine what we perceive. I didn't know what Subaru Outback Station Wagons were until my neighbor pulled up in one. Now I see them all over the place. Funny how that works.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by soboggled » Fri Sep 16, 2016 4:31 pm

How should we consider historical data? Skeptically and with a pessimistic view. The upside is only gravy, the downside is utter catastrophe, so the risk/reward is not linear, and that is true the closer to retirement one gets. Take older data as a starting point. Then use sensitivity analysis: What if the worst happened again? What if it was even worse? How would I react? Do I have a fall-back plan? Am I insured against the worst?
A younger investor will obviously have different answers (and probably a better fallback) than one in or near retirement. (By historically worst, I mean stocks falling 80% in three years as in the Depression, bonds falling more than 10% for a year or more and inflation over 10% for several years as in the 1970s-1980s. Worse than that is maybe stocks losing 80% and not recovering for 25 years, bonds falling for a decade, or inflation over 15% a year for several years.)
Of course, no one can prepare for the worst black swans. If a tree is going to fall on you, even the most cautious rational person won't be able to avoid it. That is the domain of insurance or prayer, not investing.

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by saltycaper » Fri Sep 16, 2016 4:40 pm

nisiprius wrote:
For the record I'll say that I'm making what I think is a legitimate point, satirically. Let me make the legitimate point in a straightforward way.
I see. Thanks for explaining. I should add that I enjoy satire very much and simply failed to see the larger point. Though, in my defense, even if I had picked up on it obliquely, I still would have been wondering, "but what exactly does Nisiprius believe?"
nisiprius wrote:
What do we think about the relevance of older data?
IMO, it's not that the data is old that poses a problem. The real problem is the frequency of statistically improbable events that occur with remarkable frequency. It so happens we can lump "major wars disproportionately detrimental to countries other than the United States" into what's part of the old data, and we say, "this is unlikely to happen again." Of course, unlikely things happen all the time. So I think what we're left to do is look at why the unlikely event occurred and determine as best we can if it is likely to happen again. In some cases, this is easy. The effect of first going off the gold standard will not happen again. It can't, since first we would have to go back on the gold standard. IMO, the structural, behavioral, and risk explanations for the persistence of factor premiums are more likely to remain than the effect of a major world war*, as the war would have to happen first. It might, it absolutely might, but on top of the war happening, it also again would have to have a disproportionate effect on non-U.S. countries. I certainly would not make that prediction.

*Of course there's more to the difference of U.S./ex-U.S. returns in 20thC/H1 than WWI & WWII.
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by soboggled » Fri Sep 16, 2016 4:57 pm

saltycaper wrote:
nisiprius wrote:
For the record I'll say that I'm making what I think is a legitimate point, satirically. Let me make the legitimate point in a straightforward way.
I see. Thanks for explaining. I should add that I enjoy satire very much and simply failed to see the larger point. Though, in my defense, even if I had picked up on it obliquely, I still would have been wondering, "but what exactly does Nisiprius believe?"
nisiprius wrote:
What do we think about the relevance of older data?
IMO, it's not that the data is old that poses a problem. The real problem is the frequency of statistically improbable events that occur with remarkable frequency. It so happens we can lump "major wars disproportionately detrimental to countries other than the United States" into what's part of the old data, and we say, "this is unlikely to happen again." Of course, unlikely things happen all the time. So I think what we're left to do is look at why the unlikely event occurred and determine as best we can if it is likely to happen again. In some cases, this is easy. The effect of first going off the gold standard will not happen again. It can't, since first we would have to go back on the gold standard. IMO, the structural, behavioral, and risk explanations for the persistence of factor premiums are more likely to remain than the effect of a major world war*, as the war would have to happen first. It might, it absolutely might, but on top of the war happening, it also again would have to have a disproportionate effect on non-U.S. countries. I certainly would not make that prediction.

*Of course there's more to the difference of U.S./ex-U.S. returns in 20thC/H1 than WWI & WWII.
If we expect that the US is less likely to escape the worst effects of future catastrophe than has historically been the case, perhaps we should be using historical data from international markets rather than just US markets as a first-order boundary condition. (Unfortunately, the effects of another major world war might well be worse than WWII, as that one compared to WWI.)

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Quark » Fri Sep 16, 2016 5:18 pm

nisiprius wrote:...What do we think about the relevance of older data?
It's very useful for disproving some claims, especially claims that specified events always or never happen.

It can be supporting evidence for a claim strongly supported by investing theory.

There's not enough high quality relevant data to be the primary basis for very strong and useful statements about the future. We just don't have enough, for example, independent 30 year periods.

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Dale_G » Fri Sep 16, 2016 5:41 pm

You could improve the expected performance of the fund by shorting small growth and adding some commodities. I am surprised that your crack team did not pick up on that.

What is the load?

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by whodidntante » Fri Sep 16, 2016 6:03 pm

I've been looking for something that combines the volatility of leveraged frontier market stocks with the return of treasury bills.

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by Grt2bOutdoors » Fri Sep 16, 2016 6:30 pm

Will you offer an ETF version of the fund? If so, I'd like to short it! :)
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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by ljb1234 » Fri Sep 16, 2016 6:41 pm

What, no Gold?

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Re: Nisiprius Investments Unveils New MDF Factor-Based Fund

Post by LadyGeek » Fri Sep 16, 2016 6:46 pm

Doc wrote:
steve roy wrote:Is this thread in danger of being locked? And the key thrown away?
Is this thread Nisi in danger of being locked? And the key thrown away?

But maybe he has already appealed.
Nisiprius has appealed to the moderators to lock the discussion. Considering:

1. Investing is complicated. We have a ton of threads showing how "cherry picking" dates can skew the numbers. Everyone except investing "enthusiasts" who can analyze an 11 tab spreadsheet to 0.01% accuracy will miss the intent. (You know who you are. :wink:)

2. Every once in a while, posting something that's "fun" and easy-to-understand will be more effective, as it will reach the intended audience - lurkers and "newbie" investors who don't understand the discussions in (1).

3. The "serious" points have been made. Start with Nisiprius's last post (midway up the thread) and go from there.

4. Subsequent posts are derailing the discussion.

Upon further review, Nisiprius' request is granted. This thread is locked. The key is safely stored in the bit bucket.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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