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Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Mon Jan 29, 2018 9:07 pm
by nedsaid
Random Walker wrote:
Mon Jan 29, 2018 3:56 pm
Larry takes attacks on his integrity VERY SERIOUSLY. He emailed me a copy of one of his investment statements to prove he takes his own advice. He has AVRPX, LENDX, SRRIX in a tax advantaged account.

Obviously I’m a highly biased huge fan of his. But just because I’m biased doesn’t mean I can’t be right. For those who haven’t done so, read his books. The clear thinking, internal consistency, and straight forward relaxed enjoyable delivery make his integrity obvious.

Dave
In defense of Larry, he is amazingly open. In response to questions, I got an e-mail from his personal e-mail account as well as his work e-mail account. His work e-mail reveals his direct phone number though I would never call him. He has revealed details of his personal finances that are really no one's business. He really does eat his own cooking. He has made a substantial personal investment in the alternatives.

The thing is, I really don't know him. I have no special access that no one else does. The few times I have contacted him by e-mail, he responded promptly as if I were his number 1 client. I am not a Buckingham client, like I said I do not know him personally. The way I was treated you would think I have $100,000,000 invested with them. I have zero invested.

No one, and I mean no one else in the investment business does this. I was a huge fan of Louis Rukeyser back in the day but I hugely doubt that he would have personally answered e-mails from fans to the degree that Larry does. It is clear that he spends a fair amount of time responding to e-mails and personal messages. He really is doing his best to help individual investors.

He has posted his work e-mail address here and one can always contact him by personal message.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Mon Jan 29, 2018 9:34 pm
by Day9
HomerJ wrote:
Mon Jan 29, 2018 6:49 pm
nedsaid wrote:
Sat Jan 27, 2018 4:04 pm
Larry Swedroe is talking up the alternatives in his columns and has been doing so for the last 2-3 years. His firm is recommending these products as well. Larry has substantial investments in these funds, so no doubt about his sincerity. He is putting is money where his mouth is. Again, reasonable people can disagree on the merits of the strategies.
I would never say Larry is insincere.

But it should be pointed out he used to talk up commodities in the past. That didn't work out so well, even though I'm quite sure he was sincere when he was talking about them.
To provide some context: Larry used to say adding a small amount of commodities, 5%-10% of the equity allocation, while simultaneously extending the duration of your bond portfolio, can improve performance in a diversified portfolio. This is because the negative correlation of the risk factors, one does well in inflation and one does well in deflation. This helps during stagflation when inflation hurts duration risk but stocks don't do well either.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Mon Jan 29, 2018 9:49 pm
by Angst
Random Walker wrote:
Mon Jan 29, 2018 3:56 pm
Larry takes attacks on his integrity VERY SERIOUSLY. He emailed me a copy of one of his investment statements to prove he takes his own advice. He has AVRPX, LENDX, SRRIX in a tax advantaged account.

Obviously I’m a highly biased huge fan of his. But just because I’m biased doesn’t mean I can’t be right. For those who haven’t done so, read his books. The clear thinking, internal consistency, and straight forward relaxed enjoyable delivery make his integrity obvious.

Dave
Dave,
1 question: No, probably 2 questions, I suppose:

Am I allowed to ask (there's 1), does Larry still hold PCRIX? It seems to me, both a reasonable and appropriate thing to ask.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Mon Jan 29, 2018 9:54 pm
by sreynard
HomerJ wrote:
Mon Jan 29, 2018 6:49 pm
nedsaid wrote:
Sat Jan 27, 2018 4:04 pm
Larry Swedroe is talking up the alternatives in his columns and has been doing so for the last 2-3 years. His firm is recommending these products as well. Larry has substantial investments in these funds, so no doubt about his sincerity. He is putting is money where his mouth is. Again, reasonable people can disagree on the merits of the strategies.
I would never say Larry is insincere.

But it should be pointed out he used to talk up commodities in the past. That didn't work out so well, even though I'm quite sure he was sincere when he was talking about them.
I would never question Larry's honesty and integrity, and he knows more about investing in his little toe... :D Especially all the academic research.

I'll start looking at alternatives, oh, in about another 50 years or so. I am thinking about buying some TIPS some day, though. Maybe even some REITs! That's new and edgy enough for me. There's nothing in those four funds that have any interest to me. Call me a simpleton, but I think I'll stick with my 3 fund portfolio. You more savvy investors can have all that reassurance and confidence investing in alternatives gives you. I'm sure you will sleep far better at night than I.... :wink:

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Mon Jan 29, 2018 10:30 pm
by Random Walker
Angst,
Don’t specifically know your PCRIX answer, but I think the answer is no.

FIREchief,
With regard to using a financial advisor, it is important to keep three entities separate.
1. Holder of the funds invested in. A company like Schwab or Fidelity holds the account, holds the funds, maintains documents, etc.
2. The funds themselves that the investor invests in: VG, DFA, etc.
3. Financial advisor: advises on holdings and trades in clients portfolio. They are paid only for their role in advising the client. The funds and holder of funds make their money independently.

Dave

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Tue Jan 30, 2018 1:04 am
by HomerJ
nedsaid wrote:
Mon Jan 29, 2018 8:50 pm
HomerJ wrote:
Mon Jan 29, 2018 6:49 pm
nedsaid wrote:
Sat Jan 27, 2018 4:04 pm
Larry Swedroe is talking up the alternatives in his columns and has been doing so for the last 2-3 years. His firm is recommending these products as well. Larry has substantial investments in these funds, so no doubt about his sincerity. He is putting is money where his mouth is. Again, reasonable people can disagree on the merits of the strategies.
I would never say Larry is insincere.

But it should be pointed out he used to talk up commodities in the past. That didn't work out so well, even though I'm quite sure he was sincere when he was talking about them.
What happened is that so much money went into commodities that the markets were distorted. Pretty much the institutional money caused commodity markets to go from backwardization to contango. So investors no longer got a roll return as lower futures prices converged towards the higher spot price. Instead, futures prices tended to be higher than spot prices, so you got a negative return as higher futures prices converged towards the lower spot price. In other words, futures are trading at a premium to the spot price. So this made collateralized commodity futures unprofitable for average investors. This is why Larry changed his mind. Would you rather that Larry not act on the new information?

The thing is, as I learn more, I change my mind. If circumstances change, so should you. This is why I warn against extreme commitment to staying the course at all costs. Staying the course with collateralized commodity futures would have been bad for investors so Larry changed his advice. Markets change, the economy changes. We should be prepared to change along with it.
My point is fairly simple. Just because Larry believes in a product, it doesn't mean it will be successful.

Lots of variables out there. Nobody knows enough to make good predictions, because, as you point out, things change.

I mean, if 5-10 years from now, these alt fund haven't done very well, I'm sure there will be very good reasons why they failed to out-perform. Just like there were very good reasons why the commodity fund he believed in and promoted failed to produce. And Larry will indeed be a smart man to change his mind as circumstances change and new information comes to light.

Still won't change the fact that anyone who followed his advice will have less money. Just like people who followed his advice before about commodities have less money. But maybe this time, all the variables are known, nothing will change, and the alt funds will perform exactly like he predicts they will.

That's certainly possible.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Tue Jan 30, 2018 9:18 pm
by nedsaid
HomerJ wrote:
Tue Jan 30, 2018 1:04 am
nedsaid wrote:
Mon Jan 29, 2018 8:50 pm
HomerJ wrote:
Mon Jan 29, 2018 6:49 pm
nedsaid wrote:
Sat Jan 27, 2018 4:04 pm
Larry Swedroe is talking up the alternatives in his columns and has been doing so for the last 2-3 years. His firm is recommending these products as well. Larry has substantial investments in these funds, so no doubt about his sincerity. He is putting is money where his mouth is. Again, reasonable people can disagree on the merits of the strategies.
I would never say Larry is insincere.

But it should be pointed out he used to talk up commodities in the past. That didn't work out so well, even though I'm quite sure he was sincere when he was talking about them.
What happened is that so much money went into commodities that the markets were distorted. Pretty much the institutional money caused commodity markets to go from backwardization to contango. So investors no longer got a roll return as lower futures prices converged towards the higher spot price. Instead, futures prices tended to be higher than spot prices, so you got a negative return as higher futures prices converged towards the lower spot price. In other words, futures are trading at a premium to the spot price. So this made collateralized commodity futures unprofitable for average investors. This is why Larry changed his mind. Would you rather that Larry not act on the new information?

The thing is, as I learn more, I change my mind. If circumstances change, so should you. This is why I warn against extreme commitment to staying the course at all costs. Staying the course with collateralized commodity futures would have been bad for investors so Larry changed his advice. Markets change, the economy changes. We should be prepared to change along with it.
My point is fairly simple. Just because Larry believes in a product, it doesn't mean it will be successful.

Lots of variables out there. Nobody knows enough to make good predictions, because, as you point out, things change.

I mean, if 5-10 years from now, these alt fund haven't done very well, I'm sure there will be very good reasons why they failed to out-perform. Just like there were very good reasons why the commodity fund he believed in and promoted failed to produce. And Larry will indeed be a smart man to change his mind as circumstances change and new information comes to light.

Still won't change the fact that anyone who followed his advice will have less money. Just like people who followed his advice before about commodities have less money. But maybe this time, all the variables are known, nothing will change, and the alt funds will perform exactly like he predicts they will.

That's certainly possible.
HomerJ,

I am not rushing out and buying alternatives. I am not recommending that others rush out and buy alternatives. What I have said is that these products are worth considering, if someone wants to buy these they need to go in with eyes wide open and aware of the risks they are taking. My posts have been more about the potential problems with such investments rather than their virtues.

The thing is, I have tried new things. I bought my first REIT fund when it became available. I bought TIPS early on. These would fit earlier definitions of alternatives. REITs were a success for me and TIPS have done okay. There was a time where the standard wisdom would have been to buy a portfolio of 15-20 blue chip paying dividend stocks, holding them forever and reinvesting the dividends. Index funds didn't become available until the mid-1970's. They were controversial when they started but they shouldn't have been, indexing is a no-brainer once you think it through.

You have to be careful about closing your mind to new concepts. It is also easy to dismiss someone because they were wrong about something once. So Larry changed his mind on Commodities. I suppose having him publicly drawn and quartered wouldn't be enough for some people. I have changed my mind on all kinds of things though my essential philosophy of life is mostly unchanged.

Did you know that John Bogle had some failures in his career? Did you know that he wrote an article under a pseudonym extolling the virtues of active management? Did you know that Mr. Stay the Course didn't stay the course in early 2000 and sold off much of his stock investments? Did you know Mr. Age in Bonds has also talked about Social Security as a bond? Seeing that this forum is named after him, perhaps he deserves a more human execution like a beheading.

I suppose that I deserve the Iron Maiden for some things I have said here. Probably deserve more punishment than Larry. I have been wrong more than once. Not only that but I posted extensively about how disappointed I was in my own investment performance in 2017. Did a lot of analysis of what went right and what went wrong. A lot of it is that Value has been on vacation since the 2008-2009 financial crisis, as a result the tilts have been disappointing. Before the financial crisis, my portfolio was hitting on all cylinders. Just goes to show that solid investing approaches don't work all of the time.

I think of Benjamin Graham. He pioneered the field of security analysis, doing painstaking analysis to discover undervalued stocks. Towards the end of his life, he gave up on the idea of stock selection as so many good analysts were extensively analyzing stocks. He thought indexing was a good idea. The markets became a lot more efficient over 40 plus years. This was in the 1970's, before the dawn of the robots and computerized analysis.

Again, I am not a Buckingham client. I know that what they have been recommending is a lot more than commodities. I actually have posted the results of Larry's recommendations dated from the first book that he wrote. As I recall, the results were good.

It is a valid criticism of Larry that he has made some changes to his recommendations over the years. The underlying philosophy underneath it all is the same. But on the other hand, he changes his mind as new information becomes available.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Tue Jan 30, 2018 11:29 pm
by golfCaddy
Random Walker wrote:
Sun Jan 28, 2018 8:19 pm
The costs of the Stone Ridge alternatives are high because one is basically entering directly into the banking business in the case of alternative lending and the reinsurance businesses in the case of reinsurance. The investor is not purchasing the equities of banks or reinsurers.
It seems that LENDX should be correlated with the performance of financial companies, although with less leverage and artificially smoothed returns due to no daily mark to market for either share price or nav.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Wed Jan 31, 2018 2:29 am
by in_reality
Random Walker wrote:
Sun Jan 28, 2018 8:19 pm
The costs of the Stone Ridge alternatives are high because one is basically entering directly into the banking business in the case of alternative lending and the reinsurance businesses in the case of reinsurance. The investor is not purchasing the equities of banks or reinsurers.
What is the advantage of using Stone Ridge over other alternative lending platforms?

For example, the current prospectus of lendx states:
The Fund has invested more than 25% of its total assets in loans originated by LendingClub Corporation, an
alternative lending platform operating in the United States that makes consumer loans, and SoFi Lending Corp.,
an alternative lending platform operating in the United States that makes consumer loans. However, there can be
no assurance that the Fund will invest more than 25% of its total assets in loans originated by any of these
platforms in the future, and if the Fund invests more than 25% of its total assets in loans originated by any
platform at any time, there can be no assurance that the Fund will remain invested in loans originated by that
platform in the future.
Another one files with the SEC lists other platforms they can use as well. (not sure if the current prospectus replaces that though).

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Fri Feb 02, 2018 8:09 pm
by inbox788
Regressor wrote:
Sat Jan 27, 2018 8:36 pm
Anyone who thinks that inflation will be lower than expected is getting a great deal with that 2.85% bond.
What's a great deal for those who think inflation will be higher than expected? I've looked at iBonds and TIPS, but don't understand it well, and while it's safe and protects against inflation, are there other alternatives, especially ones that would perform better?

https://www.kitces.com/blog/should-advi ... ortfolios/

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Fri Feb 02, 2018 8:44 pm
by Regressor
inbox788 wrote:
Fri Feb 02, 2018 8:09 pm
Regressor wrote:
Sat Jan 27, 2018 8:36 pm
Anyone who thinks that inflation will be lower than expected is getting a great deal with that 2.85% bond.
What's a great deal for those who think inflation will be higher than expected? I've looked at iBonds and TIPS, but don't understand it well, and while it's safe and protects against inflation, are there other alternatives, especially ones that would perform better?

https://www.kitces.com/blog/should-advi ... ortfolios/
Getting a 30 year old mortgage for example.
In taxable iBonds are Superior to TIPS because of tax deferral. Tips are for tax advantaged accounts.
Short term bonds too - you could go to longer term when it's more obvious that inflation is out of control and you'll lose less in nav than if you were in longer term bonds.
I think that there's some proof that equities are good too, but I wouldn't bet on it.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Fri Feb 02, 2018 10:43 pm
by willthrill81
inbox788 wrote:
Fri Feb 02, 2018 8:09 pm
Regressor wrote:
Sat Jan 27, 2018 8:36 pm
Anyone who thinks that inflation will be lower than expected is getting a great deal with that 2.85% bond.
What's a great deal for those who think inflation will be higher than expected? I've looked at iBonds and TIPS, but don't understand it well, and while it's safe and protects against inflation, are there other alternatives, especially ones that would perform better?

https://www.kitces.com/blog/should-advi ... ortfolios/
Are you wanting something guaranteed to do better than I bonds or TIPS? Over what investment period are you wanting this performance?

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 2:40 pm
by HomerJ
nedsaid wrote:
Tue Jan 30, 2018 9:18 pm
It is also easy to dismiss someone because they were wrong about something once. So Larry changed his mind on Commodities. I suppose having him publicly drawn and quartered wouldn't be enough for some people.
I agree with many things that Mr. Swedroe has written. I think he has done much good for investors. My only issue with him is that he's always so SURE. I have no problem with him being wrong at times. But he always talks with certainty. About his team of experts who have done the math, and if you don't agree with his position, then you are an IDIOT.

You'd think being wrong in the past would temper his absolute belief in his current positions.

The truth is, there are too many variables. No one knows enough to predict anything.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 9:10 pm
by nedsaid
HomerJ wrote:
Sat Feb 03, 2018 2:40 pm
nedsaid wrote:
Tue Jan 30, 2018 9:18 pm
It is also easy to dismiss someone because they were wrong about something once. So Larry changed his mind on Commodities. I suppose having him publicly drawn and quartered wouldn't be enough for some people.
I agree with many things that Mr. Swedroe has written. I think he has done much good for investors. My only issue with him is that he's always so SURE. I have no problem with him being wrong at times. But he always talks with certainty. About his team of experts who have done the math, and if you don't agree with his position, then you are an IDIOT.

You'd think being wrong in the past would temper his absolute belief in his current positions.

The truth is, there are too many variables. No one knows enough to predict anything.
HomerJ, you stumbled on a very important issue. My independent broker lost a client because he was humble and admitted that there can be wide variations in stock market returns. Stock market returns can't be projected with a ruler on a graph, those of us who have been invested in the market for a long time know this. The client took this as a lack of confidence and perhaps competence and took their money somewhere else. He said he learned an important lesson, that is to project confidence and not to dwell too much upon what could go wrong. This is a reality of the investment business when you try to draw clients to your firm. It is called putting your best foot forward.

If Larry is Director of Research for an Advisory Firm, he can't always be hedging his comments and say sort of, kind of, you know, the thing is, on the one hand. . .on the other hand. He has to project a confidence that he and is firm know what they are doing. That might come across as a bit of arrogance but that is a reality of the business.

I have been accused of being wishy-washy, hedging my comments, and admitting that I could be wrong. On a forum, that is okay, partly because hardly anyone knows who I am or that I post on this forum. In the competitive business world, this conduct would be deadly. This is probably a big reason that Larry doesn't admit to being wrong about anything. That might drive you crazy but that is the reality of what is happening.

We can disagree on the merits of Larry's arguments but clearly he believes in what he is doing and as has been pointed out, he has put substantial monies into the alternative investments he is recommending to clients.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 9:41 pm
by willthrill81
nedsaid wrote:
Sat Feb 03, 2018 9:10 pm
HomerJ wrote:
Sat Feb 03, 2018 2:40 pm
nedsaid wrote:
Tue Jan 30, 2018 9:18 pm
It is also easy to dismiss someone because they were wrong about something once. So Larry changed his mind on Commodities. I suppose having him publicly drawn and quartered wouldn't be enough for some people.
I agree with many things that Mr. Swedroe has written. I think he has done much good for investors. My only issue with him is that he's always so SURE. I have no problem with him being wrong at times. But he always talks with certainty. About his team of experts who have done the math, and if you don't agree with his position, then you are an IDIOT.

You'd think being wrong in the past would temper his absolute belief in his current positions.

The truth is, there are too many variables. No one knows enough to predict anything.
HomerJ, you stumbled on a very important issue. My independent broker lost a client because he was humble and admitted that there can be wide variations in stock market returns. Stock market returns can't be projected with a ruler on a graph, those of us who have been invested in the market for a long time know this. The client took this as a lack of confidence and perhaps competence and took their money somewhere else. He said he learned an important lesson, that is to project confidence and not to dwell too much upon what could go wrong. This is a reality of the investment business when you try to draw clients to your firm. It is called putting your best foot forward.

If Larry is Director of Research for an Advisory Firm, he can't always be hedging his comments and say sort of, kind of, you know, the thing is, on the one hand. . .on the other hand. He has to project a confidence that he and is firm know what they are doing. That might come across as a bit of arrogance but that is a reality of the business.

I have been accused of being wishy-washy, hedging my comments, and admitting that I could be wrong. On a forum, that is okay, partly because hardly anyone knows who I am or that I post on this forum. In the competitive business world, this conduct would be deadly. This is probably a big reason that Larry doesn't admit to being wrong about anything. That might drive you crazy but that is the reality of what is happening.

We can disagree on the merits of Larry's arguments but clearly he believes in what he is doing and as has been pointed out, he has put substantial monies into the alternative investments he is recommending to clients.
Many hedge fund managers tell their clients that they can achieve 20% returns even when they privately admit that they'll never do it. When asked why they make false promises, they say that if they didn't, clients who just go to someone else who was promising 20% returns. While I believe that their explanation is accurate, I don't believe that it justifies lying.

I don't think that Larry has ever done anything that egregious, but he does come across as being very confident, even though he has clearly shifted his stance on issues over time. He has even crossed over into recommending the 'milder' forms of market timing (e.g. changing AA based on valuations), though he refuses to call it market timing because he has been so death on it for years.

Meb Faber is the only 'expert' in the investment world that doesn't, at least at times, come across to me as overly proud and confident. Yet his firm manages over $1B now, so maybe there are enough potential clients out there who are still okay with a manager who doesn't claim to know it all.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 9:52 pm
by nedsaid
willthrill81 wrote:
Sat Feb 03, 2018 9:41 pm
nedsaid wrote:
Sat Feb 03, 2018 9:10 pm
HomerJ wrote:
Sat Feb 03, 2018 2:40 pm
nedsaid wrote:
Tue Jan 30, 2018 9:18 pm
It is also easy to dismiss someone because they were wrong about something once. So Larry changed his mind on Commodities. I suppose having him publicly drawn and quartered wouldn't be enough for some people.
I agree with many things that Mr. Swedroe has written. I think he has done much good for investors. My only issue with him is that he's always so SURE. I have no problem with him being wrong at times. But he always talks with certainty. About his team of experts who have done the math, and if you don't agree with his position, then you are an IDIOT.

You'd think being wrong in the past would temper his absolute belief in his current positions.

The truth is, there are too many variables. No one knows enough to predict anything.
HomerJ, you stumbled on a very important issue. My independent broker lost a client because he was humble and admitted that there can be wide variations in stock market returns. Stock market returns can't be projected with a ruler on a graph, those of us who have been invested in the market for a long time know this. The client took this as a lack of confidence and perhaps competence and took their money somewhere else. He said he learned an important lesson, that is to project confidence and not to dwell too much upon what could go wrong. This is a reality of the investment business when you try to draw clients to your firm. It is called putting your best foot forward.

If Larry is Director of Research for an Advisory Firm, he can't always be hedging his comments and say sort of, kind of, you know, the thing is, on the one hand. . .on the other hand. He has to project a confidence that he and is firm know what they are doing. That might come across as a bit of arrogance but that is a reality of the business.

I have been accused of being wishy-washy, hedging my comments, and admitting that I could be wrong. On a forum, that is okay, partly because hardly anyone knows who I am or that I post on this forum. In the competitive business world, this conduct would be deadly. This is probably a big reason that Larry doesn't admit to being wrong about anything. That might drive you crazy but that is the reality of what is happening.

We can disagree on the merits of Larry's arguments but clearly he believes in what he is doing and as has been pointed out, he has put substantial monies into the alternative investments he is recommending to clients.
Many hedge fund managers tell their clients that they can achieve 20% returns even when they privately admit that they'll never do it. When asked why they make false promises, they say that if they didn't, clients who just go to someone else who was promising 20% returns. While I believe that their explanation is accurate, I don't believe that it justifies lying.

I don't think that Larry has ever done anything that egregious, but he does come across as being very confident, even though he has clearly shifted his stance on issues over time. He has even crossed over into recommending the 'milder' forms of market timing (e.g. changing AA based on valuations), though he refuses to call it market timing because he has been so death on it for years.

Meb Faber is the only 'expert' in the investment world that doesn't, at least at times, come across to me as overly proud and confident. Yet his firm manages over $1B now, so maybe there are enough potential clients out there who are still okay with a manager who doesn't claim to know it all.
I want to make it clear that Larry has been very factual, he has not exaggerated. We all know that he changed his recommendations on Collateralized Commodity Futures, it was a matter of valuations. Institutional monies flooded the commodity markets and distorted them to the point where he felt they were an unattractive investment. You have to commend him for his honesty for making a change. Sometimes things really do change. Isn't that what you want an advisor to do?

But certainly in any business, there is the old saying about putting your best foot forward. If you are going out on a date, you will take extra care in grooming yourself and in your selection of clothing. You want to look your best and be at your best. That is a whole different thing than lying to your date.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 9:52 pm
by boglesmind
nedsaid wrote:
Sat Jan 27, 2018 4:04 pm
What I will say is that there are people on this forum that I respect who invest in the alternative funds. There are also people here that I respect who don't invest in such funds. Pretty much it boils down to whether you believe in the theories behind the alternatives. We know there are several schools of thought out there in the investing world. Here on the Bogleheads, most of what you see here are the Indexers vs. the Factor Investors. There seems to be a subset of the factor investors who are considering the alternatives.

Larry Swedroe is talking up the alternatives in his columns and has been doing so for the last 2-3 years. His firm is recommending these products as well. Larry has substantial investments in these funds, so no doubt about his sincerity. He is putting is money where his mouth is. Again, reasonable people can disagree on the merits of the strategies.
Larry mentions 2 trade-offs in his article
The trade-off is in two forms: The Stone Ridge funds are interval funds (thus, you don’t have daily liquidity), and you give up the flight-to-safety benefits that a portfolio of safe bonds can provide in severe equity bear markets.
but forgets a third one. Bogleheads typically stay away from funds with high ERs. One of the comments to Larry's article points out that
the Stone Ridge funds have high ERs of 2.29% (SRRIX), 2.68% (AVRPX), and similar. That is a huge portfolio drag and seems like a big risk factor if they fail to deliver equity-like returns.
Why would anyone touch the Stoneridge funds -- they are good for an advisor to collect his/her fees but not for the investors.

Bogleheads

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 10:01 pm
by nedsaid
My understanding of the Stoneridge Funds are this: you have direct ownership of the business in semi-liquid form and the higher expense ratios reflect that your fees are paying for the cost of running that business. If Stoneridge bought stocks of banks rather than in effect being a bank, you can see that there would be a difference in fees. In a mutual fund that bought bank stocks, you could operate with very low expense ratio. If you mutual fund was the bank, you have to pay for such things as salaries and technology out of your fees.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 10:51 pm
by boglesmind
nedsaid wrote:
Sat Feb 03, 2018 10:01 pm
My understanding of the Stoneridge Funds are this: you have direct ownership of the business in semi-liquid form and the higher expense ratios reflect that your fees are paying for the cost of running that business. If Stoneridge bought stocks of banks rather than in effect being a bank, you can see that there would be a difference in fees. In a mutual fund that bought bank stocks, you could operate with very low expense ratio. If you mutual fund was the bank, you have to pay for such things as salaries and technology out of your fees.
IMO, the analogy is incorrect. If I had direct partial ownership of a business, then some portion of the net profits would be my return and the cost of running the business is already included while calculating the net profit. In any case, if one wants reduced risk, then investing in semi-liquid businesses doesn't seem like a good idea since semi-liquid can turn to illiquid pretty quickly during market downturns.


Bogleshead.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 11:08 pm
by willthrill81
nedsaid wrote:
Sat Feb 03, 2018 9:52 pm
I want to make it clear that Larry has been very factual, he has not exaggerated. We all know that he changed his recommendations on Collateralized Commodity Futures, it was a matter of valuations. Institutional monies flooded the commodity markets and distorted them to the point where he felt they were an unattractive investment. You have to commend him for his honesty for making a change. Sometimes things really do change. Isn't that what you want an advisor to do?

But certainly in any business, there is the old saying about putting your best foot forward. If you are going out on a date, you will take extra care in grooming yourself and in your selection of clothing. You want to look your best and be at your best. That is a whole different thing than lying to your date.
Don't get me wrong; I don't think that Larry has purposefully lied about anything at all. I think he has far more integrity than most in his field.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 11:11 pm
by aristotelian
I have a great deal of respect for Swedroe and enjoy his writing. I am not convinced about alternatives. In my opinion, I do not need to reduce volatility using non-correlated assets because I have a long time horizon on the stock side of my portfolio. Rather than invest in alternative assets with the same expected risk/reward but less track record and higher fund expenses, my approach is to stay in equities and wait. History says that is the best approach.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 03, 2018 11:32 pm
by nedsaid
boglesmind wrote:
Sat Feb 03, 2018 10:51 pm
nedsaid wrote:
Sat Feb 03, 2018 10:01 pm
My understanding of the Stoneridge Funds are this: you have direct ownership of the business in semi-liquid form and the higher expense ratios reflect that your fees are paying for the cost of running that business. If Stoneridge bought stocks of banks rather than in effect being a bank, you can see that there would be a difference in fees. In a mutual fund that bought bank stocks, you could operate with very low expense ratio. If you mutual fund was the bank, you have to pay for such things as salaries and technology out of your fees.
IMO, the analogy is incorrect. If I had direct partial ownership of a business, then some portion of the net profits would be my return and the cost of running the business is already included while calculating the net profit. In any case, if one wants reduced risk, then investing in semi-liquid businesses doesn't seem like a good idea since semi-liquid can turn to illiquid pretty quickly during market downturns.


Bogleshead.
I was addressing the fees charged by Stone Ridge. The cost of owning a share of a bank stock, once you have paid the commission is nearly zero. The cost of running a lending business is considerably more than zero. Stone Ridge investment in shares of stock of lending platforms is very small, Stone Ridge IS the bank that buys loans from the lending platforms and services the loans.

As far as liquidity, that is a different issue. When you buy into the Stone Ridge fund, you are actually providing capital as well as paying the expenses of running the business. When you buy a share of a bank stock, you are simply buying that share from somebody else, you are not adding to the bank's capital unless you are buying a new offering of shares. If you need cash, you sell your stock to somebody else but the banks operations are unaffected. When you own a bank stock, you aren't writing checks to pay for salaries and technology. That is paid out of the cash flow of the business. As a Stone Ridge investor, you are in effect writing the checks. That is why the expense ratio seems high. The thing is, the costs each way should be about the same.

My understanding is that the lending fund is semi-liquid so that the fund has a stable deposit balance from which it can buy loans. If people could pull capital out of the business at will, it would make it difficult if not impossible to commit funds to buy loans with. Unlike a bank that is a Fed member, Stone Ridge does not have a line of credit with the Federal Reserve Bank. Stone Ridge's investors are their line of credit so to speak and their source of capital.

There is more to this than expense ratios of the funds. You have to understand the differences in structure in owning bank stock and in owning shares in the Stone Ridge lending fund.

Another way of looking at this is that when you buy the Stone Ridge lending fund, you are directly buying into a portfolio of loans and thus you take on the expenses of maintaining that loan portfolio. You aren't just buying shares of stock, which in themselves have very little cost of ownership.

My understanding is that you can lend monies to people through peer to peer lending. My understanding is that the lending platform will put together potential loans and assign them a credit rating. The investor picks the loans that he or she wants to purchase. As an investor, you are making loan decisions by deciding which loans to purchase. With Stone Ridge, you are doing the same thing except there is a team that does the credit analysis for you and a team that makes the decisions on which loans to buy. All you have to do is provide the capital and pay a fee to pay for the lending team. Peer to peer lending might be "cheaper" but speaking for myself, I would be willing to pay a fee to pay for people who are experienced and knowledgeable about lending.

Larry has covered this many, many times. The facts are pretty plain and the issue of fees should not be controversial. The fees seem high because of the way the Stone Ridge fund is structured. The expenses of an index fund would seem high if you took into consideration the cost of doing business for each of the companies included in the index.

If you want to debate the merits of the investment itself, that is another issue. The merits of being in liquid investments vs. semi-liquid or illiquid investments is yet another issue.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sun Feb 04, 2018 12:46 am
by Bastiat
nedsaid wrote:
Fri Jan 26, 2018 9:42 pm
garlandwhizzer wrote:
Fri Jan 26, 2018 12:24 pm
30 year Treasuries yielded 14.8% in 1981 because bond market participants saw more than a decade of ever increasing interest rates and inflation, currently at about 15% in 1981, and they expected that to continue for decades. That, of course, turned out to be totally wrong in spite of all the smart guys' pseudo-insight into the future. How nice would it be today if you could buy a bond that yielded 14.8% a year guaranteed for 30 years by the US government? Alas, those days are behind us. The take home message, however, is that the consensus can be totally wrong at any time about anything. Beware when markets of any type are at historical extremes.

Currently long term inflation expectations are the lowest in history. Today that same 30 year Treasury yields 2.85%, about the lowest rate in 4 decades. The 4 decade average yield rate on 30 year Treasuries is close to 6%, more than twice the current rate. Currently inflation is running at over 2%. Just as in 1981, bond market participants have extreme expectations for long term inflation rates based largely on past history and projecting that past history forward. Taking long bond duration positions looks great now on long term backtesting, just as it looked horrible in 1981 on long term backtesting. There is a real possibility that, as in 1981, the smart guys with their clever historical models will turn out to be wrong again. There are a number of reasons that have developed in recent years why interest rates and inflation may rise from the grave (co-ordinated world-wide economic growth, rising rates and inflation in the US, reversal of QE, massive levels of governmental and personal debt that will need to be financed, full employment but additional fiscal stimulus in terms of tax cuts, fiscal stimulus, etc.,). Whenever in the past all market participants have had a consolidated single point of view on any issue, it has often been the time historically to take the opposing position. I think it is a mistake to assume that inflation will remain in its grave for the next 3 decades. Long duration in the bond market may in the future be a headwind instead of the tailwind as in the past 3+ decades.

Garland Whizzer
Garland, great post as always. I will make the same point here that I made in another thread. Government deficits have nothing to do with interest rates. Reagan and Obama ran relatively large budget deficits and interest rates did nothing but fall each time. Reagan's economy started slow and went to a boom, Obama's economy emerged from the financial crisis and slowly recovered. Relatively strong economy vs. a relatively weaker economy, it made no difference, interest rates still fell.

I used to run the basketball scoreboard when I was in high school. When someone scored a basket, all I had to do to add a couple of points was to click the button a couple of times. I didn't have to go into a storeroom to get the points. I never had to tell the referee to stop the game because I ran out of points. Financing deficits is pretty much the same thing. People forget that the government has its own bank and that bank can buy US Government debt anytime it wants. Furthermore, the bank (the Fed) has to turn its profits over to the Treasury. So pretty much, the government can give itself an interest free loan anytime it wants. Another piece of the puzzle is that the private sector is in surplus when the public sector is in deficit. The surplus in the private sector soaks up the deficit in the public sector. The bigger picture is that the books always balance and debits always equal credits. I also read somewhere that larger budget deficits tend towards higher corporate profits.

Remember how the savings rates got so low when the Clinton administration ran surpluses? I know other factors affect savings rates rather than just budget deficits, but the deficits are a large factor. Remember also that in our economy, debt is money. More debt is more money supply and less debt is less money supply. Think of World War II, the greatest stimulus package of deficit spending of all time. The public had jobs and money but little extra to spend the money on as we had wartime rationing. Hence we had a big savings rate and a lot of those savings went into War Bonds.

A couple of anecdotal stories about War Bonds said that the buyers lost about 1/2 of the buying power of the monies used to buy the bonds. Pretty much a combination of economic growth and inflation in effect paid down our debt.

In fact, I have heard the argument that the national debt doesn't finance anything at all, we have debt to back our currency and so that the Fed can target interest rates. That argument seems to be extreme, but it makes sense to me and it might well just be right.

I know this goes against textbook economics, but textbook economics in this matter have been just plain wrong. It is counterintuitive, but it seems that larger deficits can mean higher private sector savings rates, higher money supply, higher corporate profits, and lower interest rates. The standard explanations just never worked for me. The Reagan deficits in the 1980's should have kept interest rates high but instead the rates fell and continued to fall for over 30 years. Somehow, those high deficits were always easily financed. The "crowding out effect" just never seems to happen.

Pretty much what backs currency is productivity. Inflation happens when you have too much money created versus too little increased production. Hyperinflation happens when you create huge amounts of money and productivity collapses. Interest rates on the debt that backs the currency is also a factor in how strong a currency is versus other currencies.

This is why I stated that to me, inflation is the thing to watch. The Fed controls short term rates but inflation expectations control mid and long-term rates. Which brings me to another point, that is governments can always shorten up the average maturities of their debt by increasing the issuance of short term instruments and buying long term instruments off the market.
I'd just like to point out that some of what is being presented in this post as fact is in actuality conjecture that is not widely accepted by economists. Specifically: WWII being good for the global economy (broken window fallacy); Public deficit equals private surplus (ignores capital surplus); etc.

There isn't really such a thing as "textbook economics" in this area, just different schools of thought. You're presenting essentially the Keynesian view, but there's also the Austrian, Chicago, Monetarist, Classical, and many others. Keynesianism is not established fact.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sun Feb 04, 2018 12:51 am
by Always passive
Random Walker wrote:
Fri Jan 26, 2018 10:58 am
http://www.etf.com/sections/index-inves ... nopaging=1

In this article Larry discusses the widely held expectation that the Fed will increase rates during the coming year. He distinguished between knowledge and information. Information held by everyone else is of no value. Bond market is extremely efficient. Larry makes the point that some investors have increased their equity allocations in the face of low interest rates. It’s worked out well for them. But judging a strategy on outcome is a mistake; an alternative history could have easily played out. One should not let interest rates dictate one’s equity allocation.
At the end of the article Larry discusses how four alternative funds might fit into a portfolio. Currently equities have historically high valuations and low future expected returns. Many are concerned about rising interest rates causing a bond bear. These alternatives have expected returns about same as equities, SD about half that of equities, no correlation to stocks, bonds, or to each other. One can create an alternatives position by taking from equities, bonds, or some of both. It one takes from equities, portfolio expected return about constant, volatility decreased, Sharpe ratio increased. If one takes from bonds, portfolio expected return increased, volatility increased to a lesser extent, Sharpe ratio increase expected. In both cases portfolio efficiency improves.
Larry’s new edition of Black Swans is coming out soon, and he will surely go into some good detail on the potential improved portfolio efficiency obtained through these alternatives.

Dave
Is there a way to accomplish his ideas with ETFs? I live overseas and funds are a no no

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sun Feb 04, 2018 1:11 am
by nedsaid
I have read through the LENDX prospectus. It is an illiquid investment but investors can sell back 5% of their investment to the fund each quarter or 20% a year. The prospectus does say there is no guarantee that the fund will buy back shares and to consider this an illiquid investment.

The fund mainly invests in alternative loans and the prospectus discusses buying the loans from other lending platforms. So it is sort of like a bank buying mortgage loans from another bank. The fund can also purchase stock of the various lending platforms.

I looked at the annual report of LENDX and looked at the schedule of investments. The loans are mainly consumer loans, small business loans, asset backed securities, and student loans. I lot of loans from the platform Zopa in the United Kingdom, loans from the platform Sofi, Lending Club, Funding Circle, Square, Common Bond, and Upstart in the United States. Ownership of equity securities was relatively small, a bit more than 3% of the fund.

Pretty much what this fund does is buy loans underwritten by Alternative Lending Platforms listed above and services the loans. So it does not appear to be underwriting the loans themselves.

The fund had $148 million in investment income and took $41 million in expenses for running the loan portfolio. This left investors with about $107 million in net investment income. In addition, there was about $31 million in realized and unrealized losses in the portfolio.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sun Feb 04, 2018 2:07 am
by nedsaid
Bastiat wrote:
Sun Feb 04, 2018 12:46 am
nedsaid wrote:
Fri Jan 26, 2018 9:42 pm
garlandwhizzer wrote:
Fri Jan 26, 2018 12:24 pm
30 year Treasuries yielded 14.8% in 1981 because bond market participants saw more than a decade of ever increasing interest rates and inflation, currently at about 15% in 1981, and they expected that to continue for decades. That, of course, turned out to be totally wrong in spite of all the smart guys' pseudo-insight into the future. How nice would it be today if you could buy a bond that yielded 14.8% a year guaranteed for 30 years by the US government? Alas, those days are behind us. The take home message, however, is that the consensus can be totally wrong at any time about anything. Beware when markets of any type are at historical extremes.

Currently long term inflation expectations are the lowest in history. Today that same 30 year Treasury yields 2.85%, about the lowest rate in 4 decades. The 4 decade average yield rate on 30 year Treasuries is close to 6%, more than twice the current rate. Currently inflation is running at over 2%. Just as in 1981, bond market participants have extreme expectations for long term inflation rates based largely on past history and projecting that past history forward. Taking long bond duration positions looks great now on long term backtesting, just as it looked horrible in 1981 on long term backtesting. There is a real possibility that, as in 1981, the smart guys with their clever historical models will turn out to be wrong again. There are a number of reasons that have developed in recent years why interest rates and inflation may rise from the grave (co-ordinated world-wide economic growth, rising rates and inflation in the US, reversal of QE, massive levels of governmental and personal debt that will need to be financed, full employment but additional fiscal stimulus in terms of tax cuts, fiscal stimulus, etc.,). Whenever in the past all market participants have had a consolidated single point of view on any issue, it has often been the time historically to take the opposing position. I think it is a mistake to assume that inflation will remain in its grave for the next 3 decades. Long duration in the bond market may in the future be a headwind instead of the tailwind as in the past 3+ decades.

Garland Whizzer
Garland, great post as always. I will make the same point here that I made in another thread. Government deficits have nothing to do with interest rates. Reagan and Obama ran relatively large budget deficits and interest rates did nothing but fall each time. Reagan's economy started slow and went to a boom, Obama's economy emerged from the financial crisis and slowly recovered. Relatively strong economy vs. a relatively weaker economy, it made no difference, interest rates still fell.

I used to run the basketball scoreboard when I was in high school. When someone scored a basket, all I had to do to add a couple of points was to click the button a couple of times. I didn't have to go into a storeroom to get the points. I never had to tell the referee to stop the game because I ran out of points. Financing deficits is pretty much the same thing. People forget that the government has its own bank and that bank can buy US Government debt anytime it wants. Furthermore, the bank (the Fed) has to turn its profits over to the Treasury. So pretty much, the government can give itself an interest free loan anytime it wants. Another piece of the puzzle is that the private sector is in surplus when the public sector is in deficit. The surplus in the private sector soaks up the deficit in the public sector. The bigger picture is that the books always balance and debits always equal credits. I also read somewhere that larger budget deficits tend towards higher corporate profits.

Remember how the savings rates got so low when the Clinton administration ran surpluses? I know other factors affect savings rates rather than just budget deficits, but the deficits are a large factor. Remember also that in our economy, debt is money. More debt is more money supply and less debt is less money supply. Think of World War II, the greatest stimulus package of deficit spending of all time. The public had jobs and money but little extra to spend the money on as we had wartime rationing. Hence we had a big savings rate and a lot of those savings went into War Bonds.

A couple of anecdotal stories about War Bonds said that the buyers lost about 1/2 of the buying power of the monies used to buy the bonds. Pretty much a combination of economic growth and inflation in effect paid down our debt.

In fact, I have heard the argument that the national debt doesn't finance anything at all, we have debt to back our currency and so that the Fed can target interest rates. That argument seems to be extreme, but it makes sense to me and it might well just be right.

I know this goes against textbook economics, but textbook economics in this matter have been just plain wrong. It is counterintuitive, but it seems that larger deficits can mean higher private sector savings rates, higher money supply, higher corporate profits, and lower interest rates. The standard explanations just never worked for me. The Reagan deficits in the 1980's should have kept interest rates high but instead the rates fell and continued to fall for over 30 years. Somehow, those high deficits were always easily financed. The "crowding out effect" just never seems to happen.

Pretty much what backs currency is productivity. Inflation happens when you have too much money created versus too little increased production. Hyperinflation happens when you create huge amounts of money and productivity collapses. Interest rates on the debt that backs the currency is also a factor in how strong a currency is versus other currencies.

This is why I stated that to me, inflation is the thing to watch. The Fed controls short term rates but inflation expectations control mid and long-term rates. Which brings me to another point, that is governments can always shorten up the average maturities of their debt by increasing the issuance of short term instruments and buying long term instruments off the market.
I'd just like to point out that some of what is being presented in this post as fact is in actuality conjecture that is not widely accepted by economists. Specifically: WWII being good for the global economy (broken window fallacy); Public deficit equals private surplus (ignores capital surplus); etc.

There isn't really such a thing as "textbook economics" in this area, just different schools of thought. You're presenting essentially the Keynesian view, but there's also the Austrian, Chicago, Monetarist, Classical, and many others. Keynesianism is not established fact.
Yes, the point of view that I described is probably neo-Keynesianism. I have posted on this issue many times and the fact is that no one theory or school of thought fully explains how the monetary system works.

What is not conjecture is that the Federal Reserve Bank has to return its profits to the US Treasury. So to the extent that the Fed buys US Treasury Debt, the US Government is essentially making an interest free loan to itself.

I have been very dissatisfied with the standard explanations for a couple of reasons. First, it has never been shown that there is a relationship between deficits and the level of interest rates. As I pointed out, both the Reagan and Obama Administrations ran relatively large deficits and yet interest rates fell. The "crowding out" effect where supposedly government crowds private borrowers out of the credit markets just never seems to happen. Somehow deficits, even large deficits seem to be financed rather effortlessly. As someone described it, pretty much entering numbers into a computer.

It also isn't conjecture that the level of interest rates on sovereign debt does effect the strength of a nation's currency. All other things being equal, money will flow to the sovereign debt with the highest interest rates. Of course, in the real world all other things are never equal. The underlying productivity of a nation's economy and a nation's perceived political stability are also factors in the strength of a currency. Also, the confidence the rest of the world places in a nation's economic policies also affect the strength of a currency.

The other thing I didn't cover is the effect of trade deficits in all of this. China and Japan have large trade surpluses with the United States so it shouldn't be surprising that they own large amounts of our US Treasury Debt. It is also not a big surprise that China and Japan have made substantial investments here. You have to do something with those excess dollars. This would be a factor when you talk about surpluses and deficits in the private and public sectors. Japan runs big budget deficits but has very high productivity and runs large trade surpluses. Though Japanese interest rates are very low, the trade surpluses and high economic productivity help make the YEN a strong currency.

As far as WWII being "good" for the economy, it certainly was good for the United States but not for Japan or Europe. There is no doubt that the War jolted the economy out of the Great Depression. I would not recommend war as an economic policy. It is just that it so happened that WWII stimulated our economy, that we were on the winning side, and that our economic capacity was not damaged during the war. Germany and Japan were just devastated, I am certain they have a different view of how the war affected their economy.

I am also not saying that governments can just spend with impunity and run deficits with no economic effect. The risk with too high of deficit spending is not with outright default but debasement of the currency through inflation. An argument can be made that inflation is technically default as you pay back debts with debased currency.

I actually have a lot of sympathy for the views of Milton Friedman and the monetarists. The problem is that money supply is hard enough to define and even harder to control. It seems that the Fed gave up on money supply targets a while back ago. I am not even convinced 100% by the explanations of how money is created. My views lean conservative and not liberal, so one should be surprised that it seems like I am a Keynesian. What I will say is that Keynes was right about a lot of things and he made huge contributions to the understanding of economics. But Keynes had his limits and Keynesian economics don't explain everything. One example is that I believe that markets and not governments set prices.

I also have some sympathy with Austrian views, looking for behavioral explanations for economic activity and having skepticism of mathematical models. I believe much more in the efficiency of markets than in central planning.

The problem with economic views is that any good idea taken to an extreme breaks down pretty quickly. As much as I believe in free markets, I still want the Health Department to inspect the restaurants. Also with ideas, there seems to be a happy medium where things work best. It isn't so much that free markets are good and government is bad, it is that both have their roles in a modern economy and somewhere there is a balance between the two. Pretty much, politics decide which way and how far the pendulum swings.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sun Feb 04, 2018 10:02 am
by Regressor
nedsaid wrote:
Sun Feb 04, 2018 2:07 am

What is not conjecture is that the Federal Reserve Bank has to return its profits to the US Treasury. So to the extent that the Fed buys US Treasury Debt, the US Government is essentially making an interest free loan to itself.

I have been very dissatisfied with the standard explanations for a couple of reasons. First, it has never been shown that there is a relationship between deficits and the level of interest rates. As I pointed out, both the Reagan and Obama Administrations ran relatively large deficits and yet interest rates fell. The "crowding out" effect where supposedly government crowds private borrowers out of the credit markets just never seems to happen. Somehow deficits, even large deficits seem to be financed rather effortlessly. As someone described it, pretty much entering numbers into a computer.
FED does return profits to the treasury, but that covers only a small part of what our government pays for issuing debt because FED owns only a small portion of all available treasuries (2.5 trillion from what I found online and payed 80 billion of profits in 2017). So issuing debt definitely has its costs.
Also, government can issue new debt to refinance old one only as long as appetite for its debt exists in the market. Over the past decades that appetite has grown as population was getting older (the older you are the more bonds you want, the cheaper for treasury to issue debt) and as inflation expectation was getting lower. But now that our government owes so much money, refinancing that debt would become very hard if inflation expectation starts growing significantly. That would cause deficits to have a larger impact on interest rates.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sun Feb 04, 2018 1:33 pm
by nedsaid
Regressor wrote:
Sun Feb 04, 2018 10:02 am
nedsaid wrote:
Sun Feb 04, 2018 2:07 am

What is not conjecture is that the Federal Reserve Bank has to return its profits to the US Treasury. So to the extent that the Fed buys US Treasury Debt, the US Government is essentially making an interest free loan to itself.

I have been very dissatisfied with the standard explanations for a couple of reasons. First, it has never been shown that there is a relationship between deficits and the level of interest rates. As I pointed out, both the Reagan and Obama Administrations ran relatively large deficits and yet interest rates fell. The "crowding out" effect where supposedly government crowds private borrowers out of the credit markets just never seems to happen. Somehow deficits, even large deficits seem to be financed rather effortlessly. As someone described it, pretty much entering numbers into a computer.
FED does return profits to the treasury, but that covers only a small part of what our government pays for issuing debt because FED owns only a small portion of all available treasuries (2.5 trillion from what I found online and payed 80 billion of profits in 2017). So issuing debt definitely has its costs.
Also, government can issue new debt to refinance old one only as long as appetite for its debt exists in the market. Over the past decades that appetite has grown as population was getting older (the older you are the more bonds you want, the cheaper for treasury to issue debt) and as inflation expectation was getting lower. But now that our government owes so much money, refinancing that debt would become very hard if inflation expectation starts growing significantly. That would cause deficits to have a larger impact on interest rates.
This is what I used to believe but the real world doesn't seem to work this way. Deficits do have a role in the creation of new money, how big of a role is up to debate. If indeed, public deficits create private surpluses, this builds in a demand for the debt. I have heard it said that public debt equals private savings, I am sure it isn't quite that simple but I believe there is a lot of truth to that. Why does the government have to issue debt at all? Couldn't the government just issue more currency to cover budget shortfalls? The Dollar Bill says Federal Reserve Note. The currency in your pocket is really a zero percent loan.

The problem is that we equate households to governments. I am revenue constrained, I can spend only what I can earn, borrow, or take from my accumulated savings. I cannot create, at least legally, my own currency to pay bills. Governments can create currency whenever they want. In effect, when the Fed buys up Treasury instruments, it does exactly that.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sun Feb 04, 2018 1:38 pm
by SeeMoe
RAchip wrote:
Sat Jan 27, 2018 3:18 pm
"30 year Treasuries currently offer a yield of 2.85%"

I would be worried. The Vanguard prime MMF is yielding about 1.45% and rising rapidly. Who would tie up money for 30 years now at 2.85% when interest paid for fully liquid ultra short term is 1.45% and is not locked in? It makes no sense to me.
Good point made! I have felt the same and have been building up our Prime MM fund waiting to see how the year shakes out before doing any AA adjustments. 1.45% interest looks pretty good now vs 0.20% interest in our credit union MM fund.

SeeMoe.. :confused

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Fri Feb 09, 2018 11:34 pm
by Bastiat
nedsaid wrote:
Sun Feb 04, 2018 2:07 am
Bastiat wrote:
Sun Feb 04, 2018 12:46 am
I'd just like to point out that some of what is being presented in this post as fact is in actuality conjecture that is not widely accepted by economists. Specifically: WWII being good for the global economy (broken window fallacy); Public deficit equals private surplus (ignores capital surplus); etc.

There isn't really such a thing as "textbook economics" in this area, just different schools of thought. You're presenting essentially the Keynesian view, but there's also the Austrian, Chicago, Monetarist, Classical, and many others. Keynesianism is not established fact.
Yes, the point of view that I described is probably neo-Keynesianism. I have posted on this issue many times and the fact is that no one theory or school of thought fully explains how the monetary system works.

As far as WWII being "good" for the economy, it certainly was good for the United States but not for Japan or Europe. There is no doubt that the War jolted the economy out of the Great Depression. I would not recommend war as an economic policy. It is just that it so happened that WWII stimulated our economy, that we were on the winning side, and that our economic capacity was not damaged during the war. Germany and Japan were just devastated, I am certain they have a different view of how the war affected their economy.

I am also not saying that governments can just spend with impunity and run deficits with no economic effect. The risk with too high of deficit spending is not with outright default but debasement of the currency through inflation. An argument can be made that inflation is technically default as you pay back debts with debased currency.

I actually have a lot of sympathy for the views of Milton Friedman and the monetarists. The problem is that money supply is hard enough to define and even harder to control. It seems that the Fed gave up on money supply targets a while back ago. I am not even convinced 100% by the explanations of how money is created. My views lean conservative and not liberal, so one should be surprised that it seems like I am a Keynesian. What I will say is that Keynes was right about a lot of things and he made huge contributions to the understanding of economics. But Keynes had his limits and Keynesian economics don't explain everything. One example is that I believe that markets and not governments set prices.

I also have some sympathy with Austrian views, looking for behavioral explanations for economic activity and having skepticism of mathematical models. I believe much more in the efficiency of markets than in central planning.

The problem with economic views is that any good idea taken to an extreme breaks down pretty quickly. As much as I believe in free markets, I still want the Health Department to inspect the restaurants. Also with ideas, there seems to be a happy medium where things work best. It isn't so much that free markets are good and government is bad, it is that both have their roles in a modern economy and somewhere there is a balance between the two. Pretty much, politics decide which way and how far the pendulum swings.
There absolutely is doubt that WWII ended the Great Depression. Not only is there doubt, there are volumes of research which assert the opposite.

If war did increase real economic output, why wait around for a war? We could reinstitute the draft, build new weapons factories and ship yards, and bomb the desert in Nevada, or maybe the ocean, into submission. We could even build entire cities to destroy if bombing the desert doesn't raise output enough. If destruction was the cure in the 1950's surely that would raise employment and economic output, right? Except that's not how wealth is created. What all that actually does is divert capital and resources which would otherwise be used by the market in a more productive manner and destroy them. Wealth is created through trade and value creation, not destruction.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 10, 2018 8:22 am
by packer16
Although Larry has some good advice & is a really nice guy, he has some weaknesses. He appears to be in the hunt for alternative assets to generate returns, just like the active managers he rails on. This quest IMO leads him to risky & expensive alternative which IMO have little or no place in a Boglehead type of portfolio. I could see if after his recommendation the funds he suggested provided equity like returns with less correlation. However, this is not the case.

First, lets start with SCV and the Larry Portfolio. This was published in 2011. So lets look at the returns of the 60/40 non-tilted portfolio to the 40/60 SCV tilted portfolio from 2012 to 2107. Both portfolio have about the same SD but the returns the tilted LP is 8.1% per year to 10.5% per year. So here we got the same risk & lower retuns thusfar.

Second, lets look at Commodities. Using the PCRIX fund as a proxy, the returns over the past 5 years have been -9.4% per year versus 15.6% per year for VFINX.

Third, lets look at the alternative fund recommended. These were beginning to be recommended in 2013, so lets use 2014 as the starting point. If you use a an average of SRRIX, QSPIX & LENDX (when it became available) what would the returns be from 2014 to 2017? By may calculations the returns would be 6.1% per year. How does this compare to equities & balanced portfolio? Equities have an 11.7% return per year & the balanced fund 7.9%. So what we are getting so far (similar to the SCV tilted portfolio & PCRIX above) is lower than equity returns & given the expense ratios of the alternatives holding a balanced fund would be better. Now if you add back the fess of these alternative funds they may become more interesting. Given how they are currently configured they are more like the fund Larry (& rightfully so) rails against high cost active funds.

From the above either a) Larry is terribly unlucky in his timing or b) the quest for equity like returns & lower risk is like looking for the fountain of youth, not really there in an ever more efficient market. The other note is the amount Larry has discussed allocating these strategies. Initially, I thought it was 5 to 10% which may not impact the portfolio very much one way or the other, however, the recommendation to go to 20% is more concerning as the past record here has not been good.

I also wonder how the expected returns are estimated as the actual returns have been so much lower than expectations in the past. Just my 2 cents.

Packer

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 10, 2018 10:28 am
by nedsaid
Bastiat wrote:
Fri Feb 09, 2018 11:34 pm
nedsaid wrote:
Sun Feb 04, 2018 2:07 am
Bastiat wrote:
Sun Feb 04, 2018 12:46 am
I'd just like to point out that some of what is being presented in this post as fact is in actuality conjecture that is not widely accepted by economists. Specifically: WWII being good for the global economy (broken window fallacy); Public deficit equals private surplus (ignores capital surplus); etc.

There isn't really such a thing as "textbook economics" in this area, just different schools of thought. You're presenting essentially the Keynesian view, but there's also the Austrian, Chicago, Monetarist, Classical, and many others. Keynesianism is not established fact.
Yes, the point of view that I described is probably neo-Keynesianism. I have posted on this issue many times and the fact is that no one theory or school of thought fully explains how the monetary system works.

As far as WWII being "good" for the economy, it certainly was good for the United States but not for Japan or Europe. There is no doubt that the War jolted the economy out of the Great Depression. I would not recommend war as an economic policy. It is just that it so happened that WWII stimulated our economy, that we were on the winning side, and that our economic capacity was not damaged during the war. Germany and Japan were just devastated, I am certain they have a different view of how the war affected their economy.

I am also not saying that governments can just spend with impunity and run deficits with no economic effect. The risk with too high of deficit spending is not with outright default but debasement of the currency through inflation. An argument can be made that inflation is technically default as you pay back debts with debased currency.

I actually have a lot of sympathy for the views of Milton Friedman and the monetarists. The problem is that money supply is hard enough to define and even harder to control. It seems that the Fed gave up on money supply targets a while back ago. I am not even convinced 100% by the explanations of how money is created. My views lean conservative and not liberal, so one should be surprised that it seems like I am a Keynesian. What I will say is that Keynes was right about a lot of things and he made huge contributions to the understanding of economics. But Keynes had his limits and Keynesian economics don't explain everything. One example is that I believe that markets and not governments set prices.

I also have some sympathy with Austrian views, looking for behavioral explanations for economic activity and having skepticism of mathematical models. I believe much more in the efficiency of markets than in central planning.

The problem with economic views is that any good idea taken to an extreme breaks down pretty quickly. As much as I believe in free markets, I still want the Health Department to inspect the restaurants. Also with ideas, there seems to be a happy medium where things work best. It isn't so much that free markets are good and government is bad, it is that both have their roles in a modern economy and somewhere there is a balance between the two. Pretty much, politics decide which way and how far the pendulum swings.
There absolutely is doubt that WWII ended the Great Depression. Not only is there doubt, there are volumes of research which assert the opposite.

If war did increase real economic output, why wait around for a war? We could reinstitute the draft, build new weapons factories and ship yards, and bomb the desert in Nevada, or maybe the ocean, into submission. We could even build entire cities to destroy if bombing the desert doesn't raise output enough. If destruction was the cure in the 1950's surely that would raise employment and economic output, right? Except that's not how wealth is created. What all that actually does is divert capital and resources which would otherwise be used by the market in a more productive manner and destroy them. Wealth is created through trade and value creation, not destruction.
My views lean conservative so I am pretty surprised that Reason would assert that WWII had nothing to do with the end of the Great Depression. There are all kinds of "studies" out there that are just pure rubbish. I am pretty amazed at these assertions. I do agree there are better ways for economic growth, we just happened to be on the winning side of a big war. The thing is, we were thrust into the war and we didn't fight it to stimulate the economy but to save Western Civilization.

I also want to make it clear that I don't advocate war for any reason other than defending our country and our allies. It is the bluntest object I can imagine to stimulate the economy, WWII stimulated our economy but devastated others. The two World Wars were catastrophies, WWI probably set back the progress of civilization at least 25 years. But there is no doubt that WWII
was the greatest stimulus of all time for the US economy but again Japan and Germany were utterly devastated. Had the war never happened, the economy would have eventually recovered but it would have been slow. The policy changes needed were just not in the cards.

There were other ways to get the economy going other than going to War. The Roosevelt Administration did some big things right. First, a whole lot of infrastructure was built. Second, a good regulatory framework was built, particularly for the securities markets. Third, when Roosevelt died, we were on the cusp of victory in WWII. There are some good arguments that the Administration micromanaged too many things and that this kept the economy from recovering.

We also forget the role of public confidence which was shattered by the Great Depression. There gets to be a certain mentality that is hard to break. The economy made several attempts to work its way back but sank again each time. In fact economists were concerned that the country would sink back into depression at war's end.

We also have to remember that we have learned a lot about how economies work since the Great Depression. Roosevelt experimented with a lot of things not knowing what would work and what would not work or even if any of it would work. He did what he could to restore confidence, implemented all kinds of programs but the economy never really did recover until the war.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 10, 2018 10:38 am
by nedsaid
The thing is, of course consumers suffered from war time rationing. We were marshalling resources for the war effort. In a guns vs. butter battle for priorities, guns won. This should hardly be surprising.

Again, as much as I like Reason Magazine, there was just no political will for the type of policies that the magazine advocates in the late 1930's. Roosevelt did win four Presidential elections and Truman after that. Congress was solidly Democratic also. The 1940's were not the 1980's. There was not going to be a return to Warren Harding and Calvin Coolidge. Herbert Hoover rightly or wrongly was blamed for the Depression for a generation.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 10, 2018 10:52 am
by grayfox
Bastiat wrote:
Fri Feb 09, 2018 11:34 pm

If war did increase real economic output, why wait around for a war? We could reinstitute the draft, build new weapons factories and ship yards, and bomb the desert in Nevada, or maybe the ocean, into submission. We could even build entire cities to destroy if bombing the desert doesn't raise output enough. If destruction was the cure in the 1950's surely that would raise employment and economic output, right? Except that's not how wealth is created. What all that actually does is divert capital and resources which would otherwise be used by the market in a more productive manner and destroy them. Wealth is created through trade and value creation, not destruction.
I like this idea. Let's declare war on the Moon. Invade and occupy it. Then invade Mars. Claim the asteroid belt. Conquer the Solar System. To the victor go the spoils.

Maybe it will take a pretext to sell the invasion of the Moon and Mars. Have the news media start reporting that Moonmen have WMDs and Martian bots are spreading fake news and interfering in our elections. Then we send in the Marines.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 10, 2018 11:37 am
by Bastiat
nedsaid wrote:
Sat Feb 10, 2018 10:28 am
Bastiat wrote:
Fri Feb 09, 2018 11:34 pm
There absolutely is doubt that WWII ended the Great Depression. Not only is there doubt, there are volumes of research which assert the opposite.

If war did increase real economic output, why wait around for a war? We could reinstitute the draft, build new weapons factories and ship yards, and bomb the desert in Nevada, or maybe the ocean, into submission. We could even build entire cities to destroy if bombing the desert doesn't raise output enough. If destruction was the cure in the 1950's surely that would raise employment and economic output, right? Except that's not how wealth is created. What all that actually does is divert capital and resources which would otherwise be used by the market in a more productive manner and destroy them. Wealth is created through trade and value creation, not destruction.
My views lean conservative so I am pretty surprised that Reason would assert that WWII had nothing to do with the end of the Great Depression. There are all kinds of "studies" out there that are just pure rubbish. I am pretty amazed at these assertions. I do agree there are better ways for economic growth, we just happened to be on the winning side of a big war. The thing is, we were thrust into the war and we didn't fight it to stimulate the economy but to save Western Civilization.

I also want to make it clear that I don't advocate war for any reason other than defending our country and our allies. It is the bluntest object I can imagine to stimulate the economy, WWII stimulated our economy but devastated others. The two World Wars were catastrophies, WWI probably set back the progress of civilization at least 25 years. But there is no doubt that WWII
was the greatest stimulus of all time for the US economy but again Japan and Germany were utterly devastated. Had the war never happened, the economy would have eventually recovered but it would have been slow. The policy changes needed were just not in the cards.

There were other ways to get the economy going other than going to War. The Roosevelt Administration did some big things right. First, a whole lot of infrastructure was built. Second, a good regulatory framework was built, particularly for the securities markets. Third, when Roosevelt died, we were on the cusp of victory in WWII. There are some good arguments that the Administration micromanaged too many things and that this kept the economy from recovering.

We also forget the role of public confidence which was shattered by the Great Depression. There gets to be a certain mentality that is hard to break. The economy made several attempts to work its way back but sank again each time. In fact economists were concerned that the country would sink back into depression at war's end.

We also have to remember that we have learned a lot about how economies work since the Great Depression. Roosevelt experimented with a lot of things not knowing what would work and what would not work or even if any of it would work. He did what he could to restore confidence, implemented all kinds of programs but the economy never really did recover until the war.
You can say there is no doubt until you're blue in the face; I've shown there obviously is. There may be all kinds of "studies" that are "pure rubbish" (which ones, exactly?) but Robert Higgs is a recognized expert in this field and you've presented nothing to refute his work.

Keynesianism is not conservative. There's nothing conservative about your assertion.

The Roosevelt administration was the proximate cause for the length and depth of the great depression. It started with the Smoot-Hawley Tariff during the Hoover administration and was exacerbated by Roosevelt.

Again, if there is no doubt, why are we not "building infrastructure" in the desert and subsequently blowing it up with other infrastructure? You say this benefits the economy. The broken window fallacy shows it does nothing but destroy wealth.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 10, 2018 5:52 pm
by nedsaid
Bastiat wrote:
Sat Feb 10, 2018 11:37 am
nedsaid wrote:
Sat Feb 10, 2018 10:28 am
Bastiat wrote:
Fri Feb 09, 2018 11:34 pm
There absolutely is doubt that WWII ended the Great Depression. Not only is there doubt, there are volumes of research which assert the opposite.

If war did increase real economic output, why wait around for a war? We could reinstitute the draft, build new weapons factories and ship yards, and bomb the desert in Nevada, or maybe the ocean, into submission. We could even build entire cities to destroy if bombing the desert doesn't raise output enough. If destruction was the cure in the 1950's surely that would raise employment and economic output, right? Except that's not how wealth is created. What all that actually does is divert capital and resources which would otherwise be used by the market in a more productive manner and destroy them. Wealth is created through trade and value creation, not destruction.
My views lean conservative so I am pretty surprised that Reason would assert that WWII had nothing to do with the end of the Great Depression. There are all kinds of "studies" out there that are just pure rubbish. I am pretty amazed at these assertions. I do agree there are better ways for economic growth, we just happened to be on the winning side of a big war. The thing is, we were thrust into the war and we didn't fight it to stimulate the economy but to save Western Civilization.

I also want to make it clear that I don't advocate war for any reason other than defending our country and our allies. It is the bluntest object I can imagine to stimulate the economy, WWII stimulated our economy but devastated others. The two World Wars were catastrophies, WWI probably set back the progress of civilization at least 25 years. But there is no doubt that WWII
was the greatest stimulus of all time for the US economy but again Japan and Germany were utterly devastated. Had the war never happened, the economy would have eventually recovered but it would have been slow. The policy changes needed were just not in the cards.

There were other ways to get the economy going other than going to War. The Roosevelt Administration did some big things right. First, a whole lot of infrastructure was built. Second, a good regulatory framework was built, particularly for the securities markets. Third, when Roosevelt died, we were on the cusp of victory in WWII. There are some good arguments that the Administration micromanaged too many things and that this kept the economy from recovering.

We also forget the role of public confidence which was shattered by the Great Depression. There gets to be a certain mentality that is hard to break. The economy made several attempts to work its way back but sank again each time. In fact economists were concerned that the country would sink back into depression at war's end.

We also have to remember that we have learned a lot about how economies work since the Great Depression. Roosevelt experimented with a lot of things not knowing what would work and what would not work or even if any of it would work. He did what he could to restore confidence, implemented all kinds of programs but the economy never really did recover until the war.
You can say there is no doubt until you're blue in the face; I've shown there obviously is. There may be all kinds of "studies" that are "pure rubbish" (which ones, exactly?) but Robert Higgs is a recognized expert in this field and you've presented nothing to refute his work.

Keynesianism is not conservative. There's nothing conservative about your assertion.

The Roosevelt administration was the proximate cause for the length and depth of the great depression. It started with the Smoot-Hawley Tariff during the Hoover administration and was exacerbated by Roosevelt.

Again, if there is no doubt, why are we not "building infrastructure" in the desert and subsequently blowing it up with other infrastructure? You say this benefits the economy. The broken window fallacy shows it does nothing but destroy wealth.
I would rather that private enterprise build infrastructure as Government has built a lot of boondoggles. I think of an article a few years back that called Washington State Boondogglia. The article particularly references WPPSS otherwise known as WHOOPS. Whoops, there goes another billion! Whoops, there goes another billion. I am concerned that the rush to wind and solar will have similar results.

But certainly no one can deny all the infrastructure that the Roosevelt Administration left us with: Bonneville Dam, Grand Coulee Dam, the Columbia Basin Project, the Tennessee Valley Authority, Hoover Dam, Rural Electrification. In my geographic area, we can still see the leftovers from various WPA projects. An argument can be made that private enterprise could have done it better but I cannot deny the positive impact these projects had on the economy. A lot of farm land in Eastern Washington was irrigated and the relatively cheap hydroelectric power powered the Aluminum industry. I have seen many of these things with my own eyes and it just seems silly to think all of this had no effect. I have never heard of Robert Higgs.

Remember the political climate during the 1930's and well into the 1940's. There was just no political consensus for tax cuts, deregulation, and reliance upon the private sector. Belief in Roosevelt and his policies was pretty strong as his party won five consecutive Presidential elections. There was a pretty strong belief at the time in the Government's ability to manage the economy. If Higgs was 100% right about the policies that were needed at the time, there wasn't the political will to carry them out. People blamed Hoover for all of this for a generation. The public was not going to go back to the laissez-faire policies of the Harding and Coolidge Administrations.

I certainly have my views, but I am not so partisan that I cannot see the good things that the Roosevelt Administration did. My belief is that they micromanaged the economy and that this stifled the recovery. But history is what it is, I can't go back and change it.

Pretty much, I am saying that Keynes was right about a lot of things and he added greatly to our understanding of economics. But it is another thing altogether to say that I am a Keynesian. I suppose my views draw from at least three schools of economic thought.

As far as Higgs, I glanced one of his articles that he wrote and the subtext seems to be that both WWII and the Cold War were more or less manufactured crisis so that the US Government could expand its power. I reject this view. I don't think there was a master plan at all. Roosevelt knew that our involvement in WWII was inevitable and he did what he could to prepare the country. The rise of fascism and militarism in Germany, Italy, and Japan is not something I would blame on the other side of the aisle. We were allies with the Soviets during WWII and the ensuing Cold War was not foreseen by our Government. Churchill might have foreseen it but warnings about the Soviets were a minority opinion. Plus there was a lot we did not know until after the fall of the Berlin Wall. What is obvious now in hindsight was not known as it happened. Certainly, a lot of things would have been done different had we known then what we know now. I would say that Higgs is a distinctly minority opinion. It just seems like the work of a Monday morning Quarterback.

Re: Larry Swedroe: Rising Rates Increase Worries

Posted: Sat Feb 10, 2018 7:13 pm
by nedsaid
I never thought I would be posting on a forum defending some of the policies of the Roosevelt Administration. Certainly, I am on the other side of the aisle but I will acknowledge the good things that they did. The thing is, I knew a lot of people with memories of the Great Depression and WWII including my parents and grandparents. I also knew a lot of people through organizations such as Rotary who were old enough to remember. I also have read a lot of books about that era and it was a big interest of mine as a boy. I also have seen with my own eyes much of the infrastructure and projects that were built during the Depression. It is like I am not supposed to believe what my eyes and ears tell me and what my elders, who lived through that period, have told me personally. When someone writes papers and says it all wasn't so, I am going to react. We are judging the policymakers of the 1930's and 1940's by today's standards and today's knowledge some 70-80 years after the fact. Were all those people I talked to just fibbing? Was it my Grandfather's imagination that he worked long hours in the Kaiser shipyards as an electrician during the War? Was it a mass delusion that we went from high unemployment to full employment? I am sorry, I just have talked to too many people, read too much history, and seen too much with my own eyes. I just don't buy it. As sympathetic as I am to the views of reason magazine, I just cannot agree with these particular articles.