Alts:new sources of risk/return improve portfolio efficiency

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Random Walker
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Random Walker » Fri Apr 07, 2017 7:43 pm

Larry,
Would you rank them any differently in taxable account? Would you rank them any differently depending on whether one is taking from bond or equity side to generate the positions? Thanks,

Dave

larryswedroe
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Fri Apr 07, 2017 7:50 pm

Dave
I hold the two SR products in IRA and QSPRX in taxable
And would not rate them differently if taxable or not and reason is as I said LENDX is "too good"---the returns look too high to me relative to the risks. But of course I don't need the liquidity so perhaps spreads may never come down.
Larry

Random Walker
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Random Walker » Fri Apr 07, 2017 8:10 pm

Is LENDX so good that it could be worthwhile in a taxable account? Would it be worthwhile to fill up tax advantaged space first with LENDX and then let some spill over into taxable to get to the allocation one desires? Thanks,

Dave

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Fri Apr 07, 2017 8:15 pm

DAVE
IMO it's certainly worth considering as I am doing.
Reason is say you buy even 10 year muni ladder and say 1.5%.

So you buy lendx and assume conservative 6%, and 50% total taxes, that's 3 AT and only 1.5 year duration----though do have credit risk (some) and lose some left tail protection, and lose liquidity and ability to harvest losses (possibly)--but cut inflation risk and have higher returns.

Hope that helps
Larry

Oblivious
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Oblivious » Fri Apr 07, 2017 8:54 pm

1st post on the Bogleheads board.

I'm pretty familiar with reinsurance and catastrophe risk in how it's priced and slightly familiar with how it goes from that to going into a bond. There is quite a bit more risk that's being taken on in buying these. You also have to look at reinsurance risk on a much longer time horizon than even a boglehead is used to.

It's pretty common for us to look at 1 in 100 year events that have to be priced in. From that we're essentially looking at things that have happened 10 times in the last 1000 years, along with trying to predict the impact of them. Warren Buffett is correct in that reinsurance returns are much smaller now and it's a large part due to financial products like CAT bonds. These bonds in particular are geared towards much more rare events, so saying Hurricane Katrina was the last time these things would be affected is a very normal time period.

That being said, they do have little correlation with the overall market and do offer good diversification benefits, but don't be fooled by the risk you're taking on. These are much more risky than say US treasuries or your traditional bond market. Much more risky also means only having heavy losses once every 20-50 years.

perl
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by perl » Fri Apr 07, 2017 9:49 pm

I would be concerned that reinsurance will be exposed to greater and more correlated risks due to the increase in extreme weather events that will accompany climate change. Fires, droughts, floods, hurricanes, and tornados are predicted to be more frequent and more severe. Political instability is a possible side effect. Is the industry pricing this in?

stlutz
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by stlutz » Fri Apr 07, 2017 10:02 pm

1st post on the Bogleheads board.
Welcome to the forum and thanks for the insight!

larryswedroe
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sat Apr 08, 2017 7:46 am

I would be concerned that reinsurance will be exposed to greater and more correlated risks due to the increase in extreme weather events that will accompany climate change. Fires, droughts, floods, hurricanes, and tornados are predicted to be more frequent and more severe. Political instability is a possible side effect. Is the industry pricing this in?
My usual response to such questions whether about the economy or political risks or whatever---do you think the people at the reinsurers are totally unaware of the information you just stated and therefore have not priced in the risks?

Also weather related events are only a fraction of a well diversified portfolio (another reason to avoid only investing in CAT bonds), as there are dozens of types of risks as I have mentioned that are not related to weather like hacking insurance, concert cancellations, sport injuries, and so on.

One other point---financialization of CAT bonds, which the insurers/reinsurers started in the 90s, led to that risk now being available to investors and not only on the balance sheets of insurers. This led eventually to them become more liquid over time as the supply became greater and investors became more familiar. And those factors led to lower spreads over Treasuries--exactly the same process that happens with other new instruments, with TIPS being perfect example. And the lower yields on Treasuries pulled all yields down. That's one reason, besides the concentration risk I would avoid CAT bonds (note the fund uses them to small degree to meet it's liquidity requirements of being able to meet 5% minimum redemption request).

Here with SRRIX you still have a highly illiquid investment and liquidity is a priced risk

Hope that helps

Larry

avalpert
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by avalpert » Sat Apr 08, 2017 2:13 pm

larryswedroe wrote:
I would be concerned that reinsurance will be exposed to greater and more correlated risks due to the increase in extreme weather events that will accompany climate change. Fires, droughts, floods, hurricanes, and tornados are predicted to be more frequent and more severe. Political instability is a possible side effect. Is the industry pricing this in?
My usual response to such questions whether about the economy or political risks or whatever---do you think the people at the reinsurers are totally unaware of the information you just stated and therefore have not priced in the risks?
This is the kind of response that should give one pause. We are talking about risks that are inherently unknowable - they are literally impossible to accurately model. I'm certain the reinusrers are aware of that, but that doesn't mean there is anything they can do to protect you from them if you fund their bets.

We are not a decade removed from a massive failure in modeling risks that were knowable - a failure driven by one simplifying assumption in the model made by the experts (for good reasons at the time, but they never intended for the model to be used the way it ended up being used) that wasn't questioned again by the investors because of course the experts new it and priced it in, right? And of course we are less than 3 decades removed from a similar crisis in a market for these same risks - how would we expect this security to perform in an environment similar to the LMX spiral?

These products are interesting ways for retail investors to get access to investments that they haven't been able to in the past. You should be wary of the quality of the particular investments that fall this far down the ladder and you should be very wary of mistaking access to these with some newfound way to get higher return with little risks - the risks are very real.

larryswedroe
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sat Apr 08, 2017 2:39 pm

avalpert
First, the point is that they are aware and adjust pricing and risk taking and how they diversify into account.
Second, your point on modeling is simply false. The great financial crisis had literally nothing to with modeling, and nor did the failure of LTCM (as many think).
Now of course the future is unknowable, but that applies just as much, if not more so, to equity risks of any kind.Which is EXACTLY why this fund is attractive, as it adds different types of risks than are in most portfolios, and has the same expected returns with less volatility and uncorrelated returns relative to other portfolio assets. And the fund is very well diversified including risks that have nothing to do with weather, global warming, etc., as I stated.
Larry

avalpert
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by avalpert » Sat Apr 08, 2017 3:10 pm

larryswedroe wrote: Second, your point on modeling is simply false. The great financial crisis had literally nothing to with modeling, and nor did the failure of LTCM (as many think).
I'm sorry but this assertion is simply false. Li's application of the copula function to model default correlation and the way it was used to create CDOs had plenty to do with the financial crisis. I didn't realize this was something actually contested by anyone. One could certainly say it was the misuse of the models that was the real problem, and I tend to agree with that view of it.
Now of course the future is unknowable, but that applies just as much, if not more so, to equity risks of any kind.
This also seems quite false. Equity risks, at least in the aggregate appear far more knowable (in the statistical sense) than the types of insurance risks you are looking at in reinsurance pools.
And the fund is very well diversified including risks that have nothing to do with weather, global warming, etc., as I stated.
Larry
Which is why I references the LMX spiral - unrelated risks have a history of occurring in succession and wreaking havoc on the reinsurnace market in particular. With absolutely no history of how this security would behave in situations like the series of losses in the late 80's, 9-11, or the thrashing of the credit default market in the financial crisis (situations that happen far more frequently then we like to believe) I don't know how one can be so certain it will play the role in your portfolio you assume. This seems to be exactly the kind of security that would end up holding the hot potato at the end of the game.

Oblivious
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Oblivious » Sat Apr 08, 2017 3:59 pm

larryswedroe wrote:
I would be concerned that reinsurance will be exposed to greater and more correlated risks due to the increase in extreme weather events that will accompany climate change. Fires, droughts, floods, hurricanes, and tornados are predicted to be more frequent and more severe. Political instability is a possible side effect. Is the industry pricing this in?
My usual response to such questions whether about the economy or political risks or whatever---do you think the people at the reinsurers are totally unaware of the information you just stated and therefore have not priced in the risks?

Larry

Not unaware at all. We're very much aware of the risk and correlations, along with monitoring what's going on currently that will impact these things in the future. Monitoring rising global temperatures, how they relate to rising sea levels/flooding, and the frequency of weather events is very much looked at. Now to the question is it priced in. Not necessarily. This part of the reinsurance market works in a very different way than would be expected.

All of the risks you touched upon above from weather, cyber, politics, sports injuries, concert cancellations are very different and are looked at.

larryswedroe
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sat Apr 08, 2017 6:23 pm

Avalpert
I totally disagree with your statement. That model, or if you prefer to think it's misuse (which is the same thing),had literally nothing to do with it, it was frauds and excessive leverage and regulators failing to do their jobs, etc. Even making that statement IMO is totally absurd. And I was close to people in the industry and know the players well. That's nonsense. You can believe what you like but it won't make it correct.

As to this
Equity risks, at least in the aggregate appear far more knowable (in the statistical sense) than the types of insurance risks you are looking at in reinsurance pools.
This is equally absurd IMO. Really, you cannot be serious. Things like wars and oil embargos and great financial crises and Great Depressions don't even compare to the risks we are talking about here for diversified portfolios of reinsurance and that is obvious from looking at historical worst case losses which are not even in ballpark of stocks.

And sorry to say this statement really is even more absurd than the last because they have nothing to do with reinsurance risks
With absolutely no history of how this security would behave in situations like the series of losses in the late 80's, 9-11, or the thrashing of the credit default market in the financial crisis (situations that happen far more frequently then we like to believe) I don't know how one can be so certain it will play the role in your portfolio you assume.
Simply put the losses from the financial crisis or CDOs have NOTHING to do with anything related to reinsurance risks.And don't even know what losses you are talking about from late 80s.

Sorry but IMO you are so far off base here there's nothing worse discussing
Larry
Last edited by larryswedroe on Sat Apr 08, 2017 6:34 pm, edited 1 time in total.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sat Apr 08, 2017 6:33 pm

Oblivious
IMO the best operating assumption in free capital markets is that all publicly available information is in prices---it's not always perfectly the case but markets are highly, if not perfectly, efficient.
And again, repeat, reinsurance portfolios are highly diversified by types of risks.
Larry

freyj6
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by freyj6 » Sat Apr 08, 2017 6:58 pm

Hey Larry,

This is some really interesting stuff, especially considering that interest rates are low and US stock prices are so high.

Is it possible to invest in LENDX or SRRIX directly through a Roth IRA, or does one need a broker/adviser?

Thanks!

avalpert
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by avalpert » Sat Apr 08, 2017 7:16 pm

Larry,

I have a lot of respect for you, the work you have done and your approach to portfolio construction. But your arguments here are quite off base.
larryswedroe wrote:Avalpert
I totally disagree with your statement. That model, or if you prefer to think it's misuse (which is the same thing),had literally nothing to do with it, it was frauds and excessive leverage and regulators failing to do their jobs, etc. Even making that statement IMO is totally absurd. And I was close to people in the industry and know the players well. That's nonsense. You can believe what you like but it won't make it correct.
I was close to the industry to at that moment, I was closely involved with risk management functions at the major banks and know the academic and corporate players as well. And no, it isn't at all nonsense. It is a fairly mainstream understanding of what happened. If you want to blame the whole thing on fraud and leverage you are welcome to - but pretending that it was all malfeasance and if only we let the system work as intended everything would be hunky dory is not only absurd it is dangerously oblivious to the real risks inherent in modern economies. Thinking that way almost guarantees you wouldn't learn any valuable lessons from our recent brush with disaster. In particular, you keep talking about the diversified nature of the reinsurance contracts in exactly the same way that diversification, and an assumption about correlation of those diversified entities, was used to support AAA ratings of CDOs - we now know the correlation assumptions there were dangerously wrong.

As to this
Equity risks, at least in the aggregate appear far more knowable (in the statistical sense) than the types of insurance risks you are looking at in reinsurance pools.
This is equally absurd IMO. Really, you cannot be serious. Things like wars and oil embargos and great financial crises and Great Depressions don't even compare to the risks we are talking about here for diversified portfolios of reinsurance and that is obvious from looking at historical worst case losses which are not even in ballpark of stocks.
And again it is you who can't be serious. That you don't seem to know what the LMX spiral was (i.e. those losses from the late 80's) does not bode well for the due diligence you claim to have done into historic reinsurance losses and risks. And, if you are aware of it, yet don't see the connection between that and how the entanglement between parties in the CDO market impacted the financial crises and what that implies for risks of reinsurance securities in the future does not reflect well on your appreciation for the risks you are advising others to take.
Sorry but IMO you are so far off base here there's nothing worse discussing
On this I'm afraid we agree.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sat Apr 08, 2017 7:33 pm

you keep talking about the diversified nature of the reinsurance contracts in exactly the same way that diversification, and an assumption about correlation of those diversified entities, was used to support AAA ratings of CDOs - we now know the correlation assumptions there were dangerously wrong.
That is EXACTLY the absurdity I am talking about. That assumption was nonsensical so of course any fool making decisions on it was an idiot and this is how the few made billions betting against that. And I know personally people who did.

As I said if you want to think something else so be it. Feel free to have the last word. But bad models weren't even close to the cause of the problem. Just allowed it perhaps to get even worse than would have been otherwise
Larry

avalpert
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by avalpert » Sat Apr 08, 2017 7:45 pm

larryswedroe wrote:
you keep talking about the diversified nature of the reinsurance contracts in exactly the same way that diversification, and an assumption about correlation of those diversified entities, was used to support AAA ratings of CDOs - we now know the correlation assumptions there were dangerously wrong.
That is EXACTLY the absurdity I am talking about. That assumption was nonsensical so of course any fool making decisions on it was an idiot and this is how the few made billions betting against that. And I know personally people who did.

As I said if you want to think something else so be it. Feel free to have the last word. But bad models weren't even close to the cause of the problem. Just allowed it perhaps to get even worse than would have been otherwise
Larry
Larry,

I appreciate the discussion.

My last words are - if it was only the idiots (which happens to consist of most of the world's leading banks, the credit rating agencies, regulators and investors) who were foolish enough to accept the assumptions of low correlation (that worked well in both backtesting and for a short period of actual history right until it didn't) what would that say about the people accepting the same assumption in a relatively young security based on reinsurance risks (which also has a history of seeing assumptions about correlation of risk occurrences coming back to bite them)?

matto
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by matto » Sat Apr 08, 2017 8:03 pm

avalpert wrote:Larry,

I have a lot of respect for you, the work you have done and your approach to portfolio construction. But your arguments here are quite off base.
larryswedroe wrote:Avalpert
I totally disagree with your statement. That model, or if you prefer to think it's misuse (which is the same thing),had literally nothing to do with it, it was frauds and excessive leverage and regulators failing to do their jobs, etc. Even making that statement IMO is totally absurd. And I was close to people in the industry and know the players well. That's nonsense. You can believe what you like but it won't make it correct.
I was close to the industry to at that moment, I was closely involved with risk management functions at the major banks and know the academic and corporate players as well. And no, it isn't at all nonsense. It is a fairly mainstream understanding of what happened. If you want to blame the whole thing on fraud and leverage you are welcome to - but pretending that it was all malfeasance and if only we let the system work as intended everything would be hunky dory is not only absurd it is dangerously oblivious to the real risks inherent in modern economies. Thinking that way almost guarantees you wouldn't learn any valuable lessons from our recent brush with disaster. In particular, you keep talking about the diversified nature of the reinsurance contracts in exactly the same way that diversification, and an assumption about correlation of those diversified entities, was used to support AAA ratings of CDOs - we now know the correlation assumptions there were dangerously wrong.

As to this
Equity risks, at least in the aggregate appear far more knowable (in the statistical sense) than the types of insurance risks you are looking at in reinsurance pools.
This is equally absurd IMO. Really, you cannot be serious. Things like wars and oil embargos and great financial crises and Great Depressions don't even compare to the risks we are talking about here for diversified portfolios of reinsurance and that is obvious from looking at historical worst case losses which are not even in ballpark of stocks.
And again it is you who can't be serious. That you don't seem to know what the LMX spiral was (i.e. those losses from the late 80's) does not bode well for the due diligence you claim to have done into historic reinsurance losses and risks. And, if you are aware of it, yet don't see the connection between that and how the entanglement between parties in the CDO market impacted the financial crises and what that implies for risks of reinsurance securities in the future does not reflect well on your appreciation for the risks you are advising others to take.
Sorry but IMO you are so far off base here there's nothing worse discussing
On this I'm afraid we agree.
Work at a hedge fund and agree with Avalpert.

It doesn't take much mispricing of insurance to blow up. And the tails are the hardest thing to predict. Network effects are huge and unexpected. When trying to price the risk of the 100-year storm, you need a few thousand years of data. Good luck.

But again when one makes their livelihood recommending alternatives it is hard to be objective. Any great investment doesn't have to be marketed, it is kept secret. Like I said I work in a hedge fund and right now there is a huge glut of capital looking for returns. Why would stone ridge look for retail money (even with advisors) when it is not that challenging to get a few $B in dedicated capital from large managers?

stlutz
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by stlutz » Sat Apr 08, 2017 9:21 pm

avalpert--Thanks for your posts--was Googling on the "LMX Spiral"--interesting stuff!

Regardless, if I'm reading you correctly, you would describe the risks of this market as being the situation where you make 8% every year for 20 years and then one year you lose 50%? Or is that overdoing it?

lazyday
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by lazyday » Sun Apr 09, 2017 5:02 am

Say there’s a bad year and reinsurance payments cause SRRIX to lose 15%. But shockingly, the reinsurance marketplace doesn’t change and insurance and reinsurance prices are not changed. So SRRIX lost 15%, a permanent loss of capital?

Or, instead let’s say there’s a bad year with 15% losses from reinsurance payments, and now reinsurers demand more favorable terms for new contracts. Are the old holdings in SRRIX repriced to reflect their current value in the marketplace? Does SRRIX lose more than 15%? If not, is it priced higher than its true economic value?

Sorry I haven't taken the time to read the prospectus, so my question might not make sense. If that's the case, maybe I should ask what assets the fund holds and how NAV is calculated.

lyrictulip
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by lyrictulip » Sun Apr 09, 2017 5:25 am

I'm not sure I understand why one couldn't just purchase an insurance sector ETF to have exposure to the same underlying diversification benefit, at significantly lower cost? Surely there's a high correlation between gains and losses in the reinsurance market and in insurance company investor returns?

Many thanks!

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sun Apr 09, 2017 8:25 am

Avalpert
That is very simple to answer---why is it different
The model was used by people who had INCENTIVE to create more product, to allow more assets to be highly rated, so they could collect more fees (including the ratings agencies). Here there are no incentives to companies and individuals to buy more INSURANCE so that reinsurers would have more product to sell. That is what allowed the idiocy to happen, that an the asymmetric risks of compensation systems at financial institutions and the too big to fail problem that leads to moral hazards. We have ENTIRELY different situations without the same incentives. And yes it was only idiots who accepted the idea that by diversifying junk you can make it investment grade. You don't see that in corporate bonds do you? Or anywhere else for that matter.

In the case of reinsurance, SRRIX doesn't invest in the equivalent of CDOs, it buys entire slices of a reinsurers businesses, not securities or packages of risks that could contain the same risks over and over again.And I would add that it reason you want a top management team with deep experience in the business to manage the underlying risks, not just buying some CAT bonds which would be cheap to do.

Lyrictulip
I already explained why several times. Because the stocks give you exposure to market beta risks. Do yourself a favor and just look at the returns of some of the reinsurance company stocks in 2008, they dropped sharply, though not as bad as the equity market, because their balance sheets have large exposures to market risks. And yet 2008 was good year for losses from insurance/reinsurance.

Lazy
First, there aren't "old" contracts to be repriced. Almost all are one year contracts and they aren't repriced. Second it's common for premiums to rise after major losses, but it's possible that they would not be--anything is possible, issue is what is likely. Same true with stocks. In that case, the recovery of losses would take longer than if they were able to raise premiums. That's it.

Matto
It's not that you make 8% every year and then lose 50%. If the average expected return is say 8% and you have some years with losses of 10-15% (possibly more) then you must have some years with returns like 10-12%. And like I said, even the worst cases are far less bad than the several 50% losses for stocks we have had in just the last 50 years. And the LMX spiral literally has nothing to do with this product. IMO it's truly nonsensical to compare the two. They have NOTHING in common.

As to why Stone Ridge would do that. Perhaps in the spirit of Vanguard and AQR they are trying to bring better products to retail investors? But even ignoring that it might be in their own interests as well ---just look how AQR has grown in assets by moving mostly away from the 2/20 hedge fund world to the retail space by charging much lower fees for hedge fund like products. That's the simple answer.

Yes tail risks are hard to model. That's one reason premiums are high and expected returns are high. And it's why you build a highly diversified portfolio, not concentrating in any one type of risk or in any geography. And it's also why one should not have ONLY reinsurance, or have it dominate a portfolio, and that holds for market beta risk (which most people have dominate their portfolios--the same 100 year flood type events happen to stocks. It constantly amazes me how people make arguments against some investments when the same type risks apply to the very investments that dominate their own portfolios.

Finally, as a fiduciary I have no incentive to market any product, required to provide advice that is in our investors interest. And beyond that I (and my firm) invest our own personal money in the funds. Just trying to educate investors.


Big thing to remember is that you are adding assets with lot less tail risk yet similar returns (partly due to illiquidity and newness of the products), and losses are lot harder to recover from ---takes 100% gain to make up for 50% loss---and that is another reason why cutting tail risk is important by diversifying risks.

Hope above is helpful
Larry

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Slick8503
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Slick8503 » Sun Apr 09, 2017 9:02 am

I would love to allocate a 10% or so portion of my portfolio to a fund such as LENDX, but I could not find an advisor willing to give me access for a low/minimal fee.

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nedsaid
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by nedsaid » Sun Apr 09, 2017 9:39 am

garlandwhizzer wrote:Personally I don't know enough about re-insurance to develop an intelligent opinion. Larry makes a convincing case for it. On the other hand, Warren Buffett, who has invested in this area for quite some time, feels that the re-insurance sector's best days are behind it, that the space is now getting too crowded with hedge fund money, and that the historical ability of re-insurance companies to make significant capital gains from their diversified investments in the future will be diminished. He feels the risk/reward balance has shifted unfavorably in re-insurance and has recently lightened Berkshire's holdings in this area. I don't know who's right, Larry of Warren, but two knowledgeable and experienced experts have come to conflicting points of view at the same time on the same asset class. So it goes in markets: the buyer believes it's future is sunny, the seller believes its future is stormy,

The following is web address of an article "Buffett on Reinsurance"
Garland Whizzer
My feeling about reinsurance is that it would be part of the equity part of the portfolio since you are aiming for equity type of returns. I am with Garland on this one, I just don't know enough about reinsurance to invest in it. It reminds me of the arguments made for REITs in a portfolio, equity-like returns with low correlation to the stock market. But REITs are liquid and these alternative vehicles like reinsurance and alternative lending are not. It sort of reminds me of the arguments for investing in such other illiquid investments like non-traded REITs. The Stone Ridge products appear to be available only through advisors. I hope these aren't like the craze for limited partnerships back in the 1980's and 1990's, illiquid investments with tax benefits, it didn't end well for most investors.

To invest in these type of vehicles seems to require access through an advisor and great trust in the advisor, the advisory firm, and the firm that packages reinsurance and alternative lending to investors. Something about illiquid investments that I don't like.

I would have to put a lot of stock in Warren Buffett's opinion on this one.
A fool and his money are good for business.

avalpert
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by avalpert » Sun Apr 09, 2017 9:46 am

stlutz wrote:avalpert--Thanks for your posts--was Googling on the "LMX Spiral"--interesting stuff!

Regardless, if I'm reading you correctly, you would describe the risks of this market as being the situation where you make 8% every year for 20 years and then one year you lose 50%? Or is that overdoing it?
I think that is likely to be the overarching cycle. But those big losses will be unpredictable and could be more frequent or in successive spurts. I also think the 8% may be overly optimistic as your return when looking at the actual returns of insurance-linked securities (see for example here and expectation of returns by institutional investors here.

After that, there are other dynamics in the market that will likely impact returns in ways you might not expect. For example, reinsurance pricing tends to come down during long runs with no big events and go up after big events - that means you may see decreasing returns for periods (like now) and recovery after a big loss may happen more quickly. Another one will be demand for capital from reinsurers, alternative sources of capital like these securities are a fairly small (though it has been growing over the past few years) source of capital and in the industry to day is not their first choice. It is possible that as the investor demand for the securities outpaces the need by the industry the cost of the capital will decline and thus returns will decrease - I think retail securities like these funds will be the first to feel that hit.

All in all, I still see a lot more unknowns in how this type of fund will behave in different environments then knowns and wouldn't rush to be first in line to be the test subject - particularly if you are taking on the additional fees of advisor just to do so. Despite what Larry said in his last reply to me, I can already see at least two parties with strong incentives to create more of this product so they could collect associated fees...

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by HomerJ » Sun Apr 09, 2017 9:55 am

larryswedroe wrote:You don't understand this fund and how it works.
Heh. I can't think of an argument that would turn me off faster.
This product is about as clear and transparent as any and easily understood. You are just taking the other side of the trade that no one likes (buying insurance and paying premiums) and getting rewarded with equity like returns (just like the insurance companies) and accepting the lack of liquidity.

This is like the Holy Grail of investing, equity like returns that are totally uncorrelated, reducing SD of portfolio and tail risks and creating a much more efficient portfolio.
Oh, there's an argument that's worse... Telling me it's the Holy Grail of investing. Talk about a red flag!

Why are they selling it if it's the Holy Grail of investing?
Last edited by HomerJ on Sun Apr 09, 2017 10:03 am, edited 1 time in total.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Trader/Investor » Sun Apr 09, 2017 9:57 am

But again when one makes their livelihood recommending alternatives it is hard to be objective. Any great investment doesn't have to be marketed, it is kept secret. Like I said I work in a hedge fund and right now there is a huge glut of capital looking for returns. Why would stone ridge look for retail money (even with advisors) when it is not that challenging to get a few $B in dedicated capital from large managers?

The Stone Ridge products appear to be available only through advisors. I hope these aren't like the craze for limited partnerships back in the 1980's and 1990's, illiquid investments with tax benefits, it didn't end well for most investors.
To invest in these type of vehicles seems to require access through an advisor and great trust in the advisor, the advisory firm, and the firm that packages reinsurance and alternative lending to investors. Something about illiquid investments that I don't like.


I don't know who's right, Larry of Warren, but two knowledgeable and experienced experts


Two posters who get it and one who doesn't. Larry has no real money documented/public track record like Mr Buffet and a host of others and never will.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by HomerJ » Sun Apr 09, 2017 10:00 am

garlandwhizzer wrote:Personally I don't know enough about re-insurance to develop an intelligent opinion. Larry makes a convincing case for it. On the other hand, Warren Buffett, who has invested in this area for quite some time, feels that the re-insurance sector's best days are behind it, that the space is now getting too crowded with hedge fund money, and that the historical ability of re-insurance companies to make significant capital gains from their diversified investments in the future will be diminished.
When it finally gets sold to the public, the best days are usually behind it.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by nedsaid » Sun Apr 09, 2017 10:07 am

My reaction to all of this is that to truly understand these type of products, I would have to own them myself and watch how they actually perform over time. Retail investors lack a history of holding these type of investments and are probably naïve to the risks they are taking. At age 57, I am not a young man anymore and don't have a very, very long investment horizon to watch these; maybe thirty years or a bit more. Thus, I would be reluctant to invest. Why would I add more risky asset classes at the precise time that I want to de-risk my portfolio?

I also am unlikely to pay an assets under management fee to get access to such investments.

If I did invest, it would be the equivalent of dipping my toe into the water to gauge water temperature. What I would be willing to invest would likely not make much difference in the long term performance of my portfolio anyway. It would be an interesting topic at a party and that would be about it.

The thing is that we all want equity-like returns with low correlation to the stock market. It is like Ponce de Leon's search for the fountain of youth. Man, I would love a portfolio whose returns I could graph with a ruler on a straight-line upwards at 8% a year. But real life just doesn't work that way. Illiquid investments fluctuate a lot in value just like everything else but you just don't see it. You get an illusion of stability. Shoot, a home can fluctuate thousands of dollars in value a day and the cause can be as simple as a lazy and/or sloppy neighbor who lets his lawn go without mowing for two or three weeks.

Another big unknown is what the gigantic hedge funds are doing. Their activity is anything but transparent but represents many billions of hot money sloshing around the world looking for a quick buck. The hedge funds are doing risky things out there that us average Jane and Joe investors are blissfully unaware. Even "smart" money does some pretty risky things not appreciating the risks they are taking with others' money.
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by stlutz » Sun Apr 09, 2017 10:16 am

avalpert--thank you for the insight. Will be interesting to check back on this 10 years from now. (Since I do not/will not use an advisor, the whole discussion is academic for me in terms of doing anything).

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Trader/Investor » Sun Apr 09, 2017 10:18 am

nedsaid wrote:My reaction to all of this is that to truly understand these type of products, I would have to own them myself and watch how they actually perform over time. Retail investors lack a history of holding these type of investments and are probably naïve to the risks they are taking. At age 57, I am not a young man anymore and don't have a very, very long investment horizon to watch these; maybe thirty years or a bit more. Thus, I would be reluctant to invest. Why would I add more risky asset classes at the precise time that I want to de-risk my portfolio?

I also am unlikely to pay an assets under management fee to get access to such investments.

If I did invest, it would be the equivalent of dipping my toe into the water to gauge water temperature. What I would be willing to invest would likely not make much difference in the long term performance of my portfolio anyway. It would be an interesting topic at a party and that would be about it.

The thing is that we all want equity-like returns with low correlation to the stock market. It is like Ponce de Leon's search for the fountain of youth. Man, I would love a portfolio whose returns I could graph with a ruler on a straight-line upwards at 8% a year. But real life just doesn't work that way. Illiquid investments fluctuate a lot in value just like everything else but you just don't see it. You get an illusion of stability. Shoot, a home can fluctuate thousands of dollars in value a day and the cause can be as simple as a lazy and/or sloppy neighbor who lets his lawn go without mowing for two or three weeks.

Another big unknown is what the gigantic hedge funds are doing. Their activity is anything but transparent but represents many billions of hot money sloshing around the world looking for a quick buck. The hedge funds are doing risky things out there that us average Jane and Joe investors are blissfully unaware. Even "smart" money does some pretty risky things not appreciating the risks they are taking with others' money.
Well said nedsaid Your posts are always incisive and much appreciated.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by matto » Sun Apr 09, 2017 10:22 am

Saying reinsurance has 'less tail risk' is hilarious.

I will add that Cliff Asness became a billionaire by marketing his 'hedge fund for the masses' to the public. I once calculated the average return of all publicly available AQR funds over their lifetimes. It was < 3.5%. Or in other words, worse than intermediate treasuries.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Trader/Investor » Sun Apr 09, 2017 10:24 am

matto wrote:Saying reinsurance has 'less tail risk' is hilarious.

I will add that Cliff Asness became a billionaire by marketing his 'hedge fund for the masses' to the public. I once calculated the average return of all publicly available AQR funds over their lifetimes. It was < 3.5%. Or in other words, worse than intermediate treasuries.
Please don't bring the realities of real money performance into this thread!!!!! Let's keep it in the realm of make believe.....

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by nedsaid » Sun Apr 09, 2017 10:31 am

HomerJ wrote:
garlandwhizzer wrote:Personally I don't know enough about re-insurance to develop an intelligent opinion. Larry makes a convincing case for it. On the other hand, Warren Buffett, who has invested in this area for quite some time, feels that the re-insurance sector's best days are behind it, that the space is now getting too crowded with hedge fund money, and that the historical ability of re-insurance companies to make significant capital gains from their diversified investments in the future will be diminished.
When it finally gets sold to the public, the best days are usually behind it.
Homer, I actually agree with you here. I am reminded of David Swenson's success with alternative investments. He was early to the party and the Yale Endowment has the scale to do things that us average Joe and Jane investors cannot. For example, if he saw great opportunity in the Phoenix real estate market after the 2008-2009 financial crisis, Yale could have formed its own management company and bought houses in huge numbers for rental and eventual resale. By the time a "Distressed Phoenix Real Estate Fund" would be available to retail investors, property values would be well on the way to recovery.

College endowments that tried to copy Swenson's strategy did not achieve his performance record. Indeed, they fell short. I saw articles that many of these college endowments did not even achieve the performance achieved by simple 60% stock/40% bond balanced funds.

That being said, I have personally ventured out with such things as TIPS, REITS, Small Value. But really, this was in essence sector investing within the already established stock and bond markets.

I do have an adventurous side and a willingness to try new things, I even ventured out into Ethanol stocks and experienced a very minor disaster. What Larry has suggested are actually not bad ideas, I am concerned about lack of liquidity and a lack of history with retail investors. An awful lot of things sound real good but I want to see them tested in the crucible of actual markets. I lot of seemingly good ideas don't always work.
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by HomerJ » Sun Apr 09, 2017 10:39 am

avalpert wrote:
larryswedroe wrote:
I would be concerned that reinsurance will be exposed to greater and more correlated risks due to the increase in extreme weather events that will accompany climate change. Fires, droughts, floods, hurricanes, and tornados are predicted to be more frequent and more severe. Political instability is a possible side effect. Is the industry pricing this in?
My usual response to such questions whether about the economy or political risks or whatever---do you think the people at the reinsurers are totally unaware of the information you just stated and therefore have not priced in the risks?
This is the kind of response that should give one pause. We are talking about risks that are inherently unknowable - they are literally impossible to accurately model. I'm certain the reinusrers are aware of that, but that doesn't mean there is anything they can do to protect you from them if you fund their bets.

We are not a decade removed from a massive failure in modeling risks that were knowable - a failure driven by one simplifying assumption in the model made by the experts (for good reasons at the time, but they never intended for the model to be used the way it ended up being used) that wasn't questioned again by the investors because of course the experts new it and priced it in, right? And of course we are less than 3 decades removed from a similar crisis in a market for these same risks - how would we expect this security to perform in an environment similar to the LMX spiral?
This. Mortgage backed securities were also created and marketed and sold by "experts". What a deal!
You should be wary of the quality of the particular investments that fall this far down the ladder and you should be very wary of mistaking access to these with some newfound way to get higher return with little risks - the risks are very real.
Every time an expert says "equity like returns with little risk", run for the hills.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sun Apr 09, 2017 10:54 am

It really amazes me how blind people are to their own beliefs which causes them to totally misinterpret things. Here are two perfect examples
Saying reinsurance has 'less tail risk' is hilarious.
No nowhere did I say anything like this. In fact reinsurance has tail risk, it has negative skewness, which is left tail risk, but that risk can be reduced by diversifying the sources of risk. Now what I said is reinsurance reduces the SD (volatility risk) and tail risk of a portfolio due to the low correlation with other portfolio assets. That's quite different.

Every time an expert says "equity like returns with little risk", run for the hills.
Again, nowhere did I say anything remotely like this. I said it has equity like returns with less than equity like risk, as the SD is about half of typical equity portfolio and again adding reinsurance to a portfolio reduces the PORTFOLIO's risk due to low correlation

Now I also have stated that just like all investments the future is unknowable as to returns. But there is very simple logic to this very simple product. If people want to be so skeptical of all new ideas that they miss the good ones, that's fine.

My last post here so not checking back as IMO the comments are now in some cases absurd, as I stated above and I don't have time to address such nonsense. Always happy to address rational questions. If anyone has any other questions feel free to email me or PM

Larry

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by matto » Sun Apr 09, 2017 11:03 am

larryswedroe wrote:
Saying reinsurance has 'less tail risk' is hilarious.
No nowhere did I say anything like this. In fact reinsurance has tail risk, it has negative skewness, which is left tail risk, but that risk can be reduced by diversifying the sources of risk. Now what I said is reinsurance reduces the SD (volatility risk) and tail risk of a portfolio due to the low correlation with other portfolio assets. That's quite different.
larryswedroe wrote: Big thing to remember is that you are adding assets with lot less tail risk yet similar returns (partly due to illiquidity and newness of the products), and losses are lot harder to recover from ---takes 100% gain to make up for 50% loss---and that is another reason why cutting tail risk is important by diversifying risks.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by nedsaid » Sun Apr 09, 2017 2:22 pm

Larry, you are thinking outside the box and asking investors to consider alternative investments to reduce the overall volatility of an investor's portfolio. I do have to commend you for eating your own cooking, owning the two investments you discuss in your own portfolio. You are taking these risks for your own money. I also recall the long thread discussing QSPIX, the AQR Style Premia Fund, which was also quite informative.

What you are running into is skepticism from investors who have seen a lot and done a lot. I know I have had a couple of individual stocks blow up either because the world changed in ways I didn't understand or because I didn't fully understand the risk I was taking.

I think of AIG, which I still own and feature as one of my Four Horsemen of Underperformance on this forum. They were doing credit default swaps and I remember how the 2008-2009 financial crisis nearly put them under. Many market professionals were mystified why the AIG stock price started just dropping for no apparent reason. Those in the know realized or suspected that AIG couldn't meet its bond insurance obligations. It was hard for me to see one of my most cherished illusions about the rock solid stability of large insurance companies disappear right before my eyes. Wouldn't you think that insurance companies would be the experts in risk? Obviously, there was a clink in the works somewhere, risks showed up that the company did not anticipate.

I also think of Lucent which cratered in price as the internet and tech bubble of the late 1990s burst. Those in the know understood that the market for a lot of Lucent's products were in decline. I had no idea of the magnitude of the switch from landlines to wireless. The ground shifted under my feet and I didn't understand what was happening. So I sold Lucent and bought Nortel with the proceeds. Fortunately, I later sold Nortel at a loss. It was more than a single company risk, indeed things were changing dramatically for the whole telecomm industry.

Fortunately, I had winners too over the years but I remember how much the losses hurt. That is why I diversify my risks. I know from experience that things can go wrong and often it is something that you couldn't anticipate. That is why I diversify as broadly as I know how to. Diversifying across securities, asset classes, and factors.

You have to understand that when you talk about alternative investments, equity-like returns, and less risk that you will be met with some skepticism. You weren't met with throngs of admirers throwing bouquets of roses. Doesn't mean you were wrong, it just means that folks are skeptical and have questions.
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by larryswedroe » Sun Apr 09, 2017 3:03 pm

nedsaid
skepticism is quite healthy and asking questions, which is fine, is another, and so is pointing out what are risks, but making statements as facts when what you don't know or don't understand is completely another.

Just look at this statement that is highlighted above
Big thing to remember is that you are adding assets with lot less tail risk yet similar returns (partly due to illiquidity and newness of the products), and losses are lot harder to recover from ---takes 100% gain to make up for 50% loss---and that is another reason why cutting tail risk is important by diversifying risks.


Now diversified equity portfolios have lost as much as 90% in Great Depression and around 50-60% 3x in last 50 years, yet a diversified reinsurance portfolio has not nowhere near that much in its worst case year. Not even close.

So as I said, and explained very clearly, reinsurance is risky, has left tail risk and negative skewness which is why you get the equity like returns (along with illiquidity premium). But that risk in diversified portfolio of reinsurance is much less historically then for equity it would replace and importantly due to low correlation with stocks lowers tail risk of portfolios.

Addressing this type stuff is why you see almost no professionals spending time on sites that have commentary. Very very few.
And now there is one less.

Thanks and feel free to email

Larry

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by nedsaid » Sun Apr 09, 2017 4:17 pm

larryswedroe wrote:
Now diversified equity portfolios have lost as much as 90% in Great Depression and around 50-60% 3x in last 50 years, yet a diversified reinsurance portfolio has not nowhere near that much in its worst case year. Not even close.

Nedsaid: This is a good point that conventional stock investments have been pretty risky. In my lifetime, we have had three 50% bear markets: 1973-74; 2000-2002; and 2008-2009. Not old enough to remember the 1929 crash but your point is made.

Also, I remember Dr. Bill Bernstein point out that bonds had a 50% loss in purchasing power from about 1945 - 1982 or so. Not sure how reinvested dividends figure into this but the point stands that bonds have their risks, inflation is the biggest enemy.

The point is that standard investments have plenty of risk in them too. Hence the desire to further diversify portfolios beyond standard stocks and bonds. It is that other investments have not lived up to their promise so you should understand the skepticism. Private equity, hedge funds, 130/30 funds, limited partnerships, non-traded REITs, precious metals, commodities, etc. had their issues too and didn't deliver for various reasons. Some of the biggest reasons are the expenses are too high, lack of investor expertise, high valuations, and bad timing. Being late to the party is a big reason for failure.


So as I said, and explained very clearly, reinsurance is risky, has left tail risk and negative skewness which is why you get the equity like returns (along with illiquidity premium). But that risk in diversified portfolio of reinsurance is much less historically then for equity it would replace and importantly due to low correlation with stocks lowers tail risk of portfolios.

Nedsaid: I remember the discussion about the big institutions piling into the commodity markets and making this a much less attractive diversifier for portfolios. You used to recommend Collateralized Futures Funds but no longer do. At one time, these were a good diversifier for bonds. Conditions changed as did your recommendations.

I suppose some of the concern expressed here is that the reinsurance market has become too financialized so to speak and that the opportunities there are less and less. Hedge funds are hungry for any source of returns they can get, I share a concern that retail investors will share the same "late to the party" problem that we faced with other such alternatives.


Addressing this type stuff is why you see almost no professionals spending time on sites that have commentary. Very very few.
And now there is one less.

Nedsaid: Most of us here are just avatars, so it is not only always easy to tell who is for real around here and who is not. There have been only a handful of posters here that I had suspicions about, most everyone here seems to be on the level. My assumption is that folks here are who they say they are unless there is clear evidence that our legs are getting pulled. At least one of the folks on the thread says that he worked in the reinsurance industry and another said that he works for a hedge fund. I suppose folks like that would have something to add to the discussion, at least my eyebrow will raise a bit when I read comments from industry people or those who represent themselves as such.

I would also point out that you have had people here that have agreed with you. I remember a poster discussing his investments in peer to peer lending and several others discussing their investments in the AQR funds that you have discussed and in some cases recommended. A lot of folks are factor investing based upon your recommendations. It isn't like you have been hooted out of the forum. Indeed, I own a couple of your books and will likely buy more.

I am an accountant and tax preparer by trade. I have a BS Degree in Business and spent a lot of time in the not for profit sector. I have been investing for over 30 years and have learned some things but I am certainly not a market professional. One of my greatest joys here has been interacting with people in the industry. My gosh, Cliff Asness reacted to one of my posts. It has been a great experience.


Thanks and feel free to email

Larry
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by nedsaid » Sun Apr 09, 2017 4:21 pm

What I am trying to say Larry is this, my Gosh you are from New York and Queens at that! Don't let disagreement get to you. You are not known around here for being a shrinking violet. Please keep posting and be assured that you add a lot to this forum. Best wishes, Ned.
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Slick8503 » Mon Apr 10, 2017 5:12 am

Couldn't have said it better nedsaid.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by nedsaid » Mon Apr 10, 2017 9:04 am

I guess it finally happened, the forum ran off one of our best contributors and we will be much poorer for it. There is a line here and it got crossed, that is when people are accused of being here for ulterior motives. It is okay to hold and express contrary views and to show a healthy skepticism but there is a need to be considerate of others' feelings. What a very sad day for the forum.
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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Jiu Jitsu Fighter » Mon Apr 10, 2017 11:22 am

nedsaid wrote:I guess it finally happened, the forum ran off one of our best contributors and we will be much poorer for it. There is a line here and it got crossed, that is when people are accused of being here for ulterior motives. It is okay to hold and express contrary views and to show a healthy skepticism but there is a need to be considerate of others' feelings. What a very sad day for the forum.
Agreed. Yes, Larry works for Buckingham Family of Financial Services (and Bam Alliance), but who else with his wealth and curriculum vitae would spend time on a message board trying to help others understand portfolio construction to reduce fat tail risk while receiving the market rates of return using passive vehicles and alt investments unless he truly thought it was a worthwhile endeavor.

Now, I'm not saying you have to agree with him on everything, but there is no point in misquoting him or creating straw man arguments to try to insinuate that he is trying to hawk products.

He could easily spend his time playing tennis, traveling, or doing whatever else he enjoys doing instead of spending a lot of time reviewing research papers, writing articles and books, and responding to others on a message board.

Larry is one of the greatest, if not the greatest contributor on this message board. Don't look a gift horse in the mouth.

JJF

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by garlandwhizzer » Mon Apr 10, 2017 11:59 am

nedsaid wrote:
I guess it finally happened, the forum ran off one of our best contributors and we will be much poorer for it. There is a line here and it got crossed, that is when people are accused of being here for ulterior motives. It is okay to hold and express contrary views and to show a healthy skepticism but there is a need to be considerate of others' feelings. What a very sad day for the forum.
1+

A very sad day indeed. Most of us have learned a lot free of charge from Larry's comments on the Forum. He has played an important role: an experienced, intelligent, knowledgeable professional sharing his original research-driven point of view with us and perhaps challenging our existing belief structure. I don't always agree with Larry, or even with Bogle or anyone else, but I believe it is helpful for us to hear divergent, well thought out and well presented points of view so that we can make better informed decisions for ourselves about portfolio construction. IMO acquiring knowledge whether it be on investing or quantum mechanics is a lifelong process which evolves over time as different points of view presented. When we lose a major contributor to this dynamic we have lost something valuable.

Garland Whizzer

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by lazyday » Mon Apr 10, 2017 12:03 pm

I think it's important that we can challenge each other's ideas and claims. Ideally with respect and grace.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by jhfenton » Mon Apr 10, 2017 12:24 pm

Jiu Jitsu Fighter wrote:Larry is one of the greatest, if not the greatest contributor on this message board. Don't look a gift horse in the mouth.

JJF
:beer Thanks, Larry.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by Trader/Investor » Mon Apr 10, 2017 1:12 pm

lazyday wrote:I think it's important that we can challenge each other's ideas and claims. Ideally with respect and grace.
That works both ways. How many times have we read we are foolish for not seeing Larry's way (backtested results) Can't anyone stand up for those who blindlessly have plowed money in funds like PCRIX and QMHRX/AQMRX. I have been standing up for the little man since the early 90s in their fight against the Dream Merchants. This is the only forum where it doesn't seem to be appreciated - most likely because the cult of the expert is so pervasive here.

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Re: Alts:new sources of risk/return improve portfolio efficiency

Post by HomerJ » Mon Apr 10, 2017 1:26 pm

nedsaid wrote:I guess it finally happened, the forum ran off one of our best contributors and we will be much poorer for it. There is a line here and it got crossed, that is when people are accused of being here for ulterior motives. It is okay to hold and express contrary views and to show a healthy skepticism but there is a need to be considerate of others' feelings. What a very sad day for the forum.
Really? Please read just this thread again, and read how many times Larry crosses this line you reference. He does not mince words if he disagrees with other posters. I don't mean to insult him or drive him away, but he does not like being questioned. I do think he adds value to the community, but he is FAR too sure of his positions. I don't trust anyone in finance or economics who thinks they are always right.
larryswedroe wrote:Addressing this type stuff is why you see almost no professionals spending time on sites that have commentary. Very very few.
Yes, because this forum questions "professionals" instead of blindly believing everything they say. Many "professionals" hate that.
Last edited by HomerJ on Mon Apr 10, 2017 1:46 pm, edited 1 time in total.

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