Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
InvestInPasta
Posts: 59
Joined: Sat Sep 16, 2017 12:42 pm
Location: Italy

Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by InvestInPasta » Wed Jul 04, 2018 6:01 pm

By reading this forum I have always felt like most users here think CAPE and other stocks valuations are useless.
The only motto for many people seems to be: "buy&hold, never mind stocks valuations, just buy&hold!"

Well I have just seen this video where Jack Bogle himself says he sold his stocks in year 2000 because valuations did not make any sense to him in those years. :shock:

https://youtu.be/k6ra5POdsYg

Minute 2:57
"I said, you know... with bonds yielding around 7% today, stocks yielding around 1%... stock market being at that point closer to 40 times earnings than 30, I think it's impossible that in next decade stocks will outperform bonds"

Minute 3:46
"I was in the process of reducing my equity position, that's normal abot 70/75%... to about 30/25%, and I did that"

Cheers :beer:
When studying English I am lazier than my portfolio. Feel free to correct my english and investing mistakes.

User avatar
DanMahowny
Posts: 515
Joined: Sun Aug 06, 2017 8:25 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by DanMahowny » Wed Jul 04, 2018 6:04 pm

Yep. That's what I do, and I do it well.

Not too hard to tell if equities are expensive, or cheap.

It's common sense, not market timing.
Funding secured


All Seasons
Posts: 61
Joined: Sun Dec 10, 2017 4:14 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by All Seasons » Wed Jul 04, 2018 6:07 pm

In all fairness to Bogle, he was also motivated to de-risk his portfolio at that time because his health was failing him. He wanted to make sure his estate was safe.
The market portfolio is always a legitimate portfolio.

TheAncientOne
Posts: 140
Joined: Wed Jul 19, 2017 8:53 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by TheAncientOne » Wed Jul 04, 2018 6:14 pm

I hope this doesn't sound too cynical but lots of folks came up with the same conclusion and sold when Nasdaq hit 3000 the year before. They had to watch it go past 5000 in March 2000 before it cracked. I do wonder if Bogle really sold at the very top of the market.

H-Town
Posts: 1255
Joined: Sun Feb 26, 2017 2:08 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by H-Town » Wed Jul 04, 2018 6:15 pm

Sure... he might get better sleep at night. Still we can't run away from the fact that a 70/30 portfolio buy & hold would perform much better than a 30/70 portfolio buy & hold, or a "market timing" portfolio. Don't believe me? Go to portfoliovisualizer and test it yourself.

The loss of return won't affect Bogle's wealth. But for folks that don't save enough and bank on >5% return, this market timing strategy is risky. You can make more money and choose a more conservative AA. Problem solved.

The message here is that: determine your risk averse and choose your asset allocation and stick with it.

metalworking
Posts: 138
Joined: Sun Jan 03, 2016 9:20 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by metalworking » Wed Jul 04, 2018 6:33 pm

DanMahowny wrote:
Wed Jul 04, 2018 6:04 pm
Yep. That's what I do, and I do it well.

Not too hard to tell if equities are expensive, or cheap.

It's common sense, not market timing.
So what are you doing now :D

bmelikia
Posts: 542
Joined: Mon Jun 15, 2009 9:23 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by bmelikia » Wed Jul 04, 2018 6:38 pm

If I were following that logic I would have probably sold at DOW 18,000. . .and that’s only if I didn’t sell at DOW 16,000. . .

Instead of messing with my asset allocation I am choosing to take “extra” money and put it towards paying down our 4% mortgage - which is giving me similar result to if I were able to put money in a 5%+ interest rate CD. . .so I am diversifying where my savings goes!

I’ll just have to live long enough to find out if that was a good strategy or not - stay tuned!
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

User avatar
linenfort
Posts: 2104
Joined: Sat Sep 22, 2007 9:22 am
Location: #96151D

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by linenfort » Wed Jul 04, 2018 6:47 pm

TheAncientOne wrote:
Wed Jul 04, 2018 6:14 pm
I hope this doesn't sound too cynical but lots of folks came up with the same conclusion and sold when Nasdaq hit 3000 the year before. They had to watch it go past 5000 in March 2000 before it cracked. I do wonder if Bogle really sold at the very top of the market.
That’s not cynical, but rather an important counterexample.
bogleheads, don't knock state lotteries. They helped defund the mafia.

InvestInPasta
Posts: 59
Joined: Sat Sep 16, 2017 12:42 pm
Location: Italy

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by InvestInPasta » Wed Jul 04, 2018 6:49 pm

All Seasons wrote:
Wed Jul 04, 2018 6:07 pm
In all fairness to Bogle, he was also motivated to de-risk his portfolio at that time because his health was failing him. He wanted to make sure his estate was safe.
True!
But he still says "if for whatever sound reason, and not emotional reason, and market looks substantially overvalued (don't worry about if it's 20/25% overvalued), but if it seems to get out of line by a substantial amount, take that 65 to 50." - Minute 0:39
TheAncientOne wrote:
Wed Jul 04, 2018 6:14 pm
I hope this doesn't sound too cynical but lots of folks came up with the same conclusion and sold when Nasdaq hit 3000 the year before. They had to watch it go past 5000 in March 2000 before it cracked. I do wonder if Bogle really sold at the very top of the market.
I agree, it's hard to see the Joneses driving a new Ferrari, while we wait for the bubble to burst. :wink:
When studying English I am lazier than my portfolio. Feel free to correct my english and investing mistakes.


FactualFran
Posts: 729
Joined: Sat Feb 21, 2015 2:29 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by FactualFran » Wed Jul 04, 2018 7:02 pm

InvestInPasta wrote:
Wed Jul 04, 2018 6:01 pm
Well I have just seen this video where Jack Bogle himself says he sold his stocks in year 2000 because valuations did not make any sense to him in those years. :shock:

https://youtu.be/k6ra5POdsYg

Minute 2:57
"I said, you know... with bonds yielding around 7% today, stocks yielding around 1%... stock market being at that point closer to 40 times earnings than 30, I think it's impossible that in next decade stocks will outperform bonds"

Minute 3:46
"I was in the process of reducing my equity position, that's normal abot 70/75%... to about 30/25%, and I did that"
Please read The Twelve Pillars of Wisdom Lessons We Should Have Learned before the Bear Market Arrived, but are Only Learning Now remarks that Bogle made in 2001 at a time much closer to what he did. Those remarks include
I have been gradually reducing my equity percentage for years, reflecting first my fight for an uncertain survival from congenital heart disease and my desire to assure my wife’s financial security, and, second, reflecting my increasing age and declining earning power. With some 75% of my retirement plan and personal account in equities throughout most of my career, I had gradually reduced the ratio to below 45% by last summer. Still, deeply concerned about the NASDAQ bubble and cautious about the outlook for future stock returns, I even wondered aloud at the Morningstar Conference last June why I held any equities at all. But—'physician heal thyself,' writ large!—I took no further action.
Reducing his equity personal was a gradual process that was done because of his health and desire to provided for his wife's financial security, not market valuations. He took no action due to the "NASDAQ bubble" or "the outlook for future stock returns".

drk
Posts: 753
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by drk » Wed Jul 04, 2018 7:18 pm

jacoavlu wrote:
Wed Jul 04, 2018 6:56 pm
7% bonds lol
Right. Currently we've got, what, 3% and 2% for 10-year Treasury and S&P 500 dividend yields, respectively?

Dandy
Posts: 5350
Joined: Sun Apr 25, 2010 7:42 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Dandy » Wed Jul 04, 2018 10:00 pm

To be fair Jack is not a market timer in any real sense. He made a significant reduction in equities due to "extreme" valuations and said that would be rare.

But the OP is right that there is a consistent message on this board that any attempt at looking to take valuation into account is just plain old market timing and basically looks past Jack's action/message. A valid principle, not to market time, shouldn't be unquestioned dogma especially since the thought leader this forum follows not only seems to think tactical changes, on a rare occasion, are warranted but gave what seems to me a stunning example of his own action.

As I have said before I think the real learning point would be a better discussion on what measures of extreme valuation should be considered. It's a given that there are bubbles and that they often last for years. Some investors might want to take the "risk" of getting out early and missing some of the appreciation vs taking a big hit to their nest egg. A retiree that has surpassed his/her "number" for example.

Miriam2
Posts: 2290
Joined: Fri Nov 14, 2014 11:51 am

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Miriam2 » Wed Jul 04, 2018 10:13 pm

FactualFran wrote: Please read The Twelve Pillars of Wisdom Lessons We Should Have Learned before the Bear Market Arrived, but are Only Learning Now remarks that Bogle made in 2001 at a time much closer to what he did.
Thank you for this, "The Twelve Pillars of Wisdom." I simply enjoy reading Jack Bogle. He writes so well it is just a pleasure.

User avatar
nedsaid
Posts: 10334
Joined: Fri Nov 23, 2012 12:33 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by nedsaid » Wed Jul 04, 2018 10:16 pm

InvestInPasta wrote:
Wed Jul 04, 2018 6:01 pm
By reading this forum I have always felt like most users here think CAPE and other stocks valuations are useless.
The only motto for many people seems to be: "buy&hold, never mind stocks valuations, just buy&hold!"

Well I have just seen this video where Jack Bogle himself says he sold his stocks in year 2000 because valuations did not make any sense to him in those years. :shock:

https://youtu.be/k6ra5POdsYg

Minute 2:57
"I said, you know... with bonds yielding around 7% today, stocks yielding around 1%... stock market being at that point closer to 40 times earnings than 30, I think it's impossible that in next decade stocks will outperform bonds"

Minute 3:46
"I was in the process of reducing my equity position, that's normal abot 70/75%... to about 30/25%, and I did that"

Cheers :beer:
I do wish that Taylor Larimore would watch this video, he didn't seem to believe me when I referenced this video.

In other remarks, Bogle seemed to backtrack on this. He indicated that he gradually took his stock allocation down from 70-75% down to 50% and that over two years. So there is some contradictory statements out there and this would be a good thing to ask Mr. Bogle to clear up at the next Bogleheads conference.
A fool and his money are good for business.

stlutz
Posts: 4741
Joined: Fri Jan 02, 2009 1:08 am

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by stlutz » Wed Jul 04, 2018 10:30 pm

I've noted in the past that a lot of the "experts" that we like around here are not actually all that adverse to some limited market timing. Our religious fervor about it does not emanate from Boglehead writers.

The valid reason that folks here are absolutely against this type of market timing is that most people don't follow markets that closely, haven't studied market history etc. As such, market timing moves are as likely to be due to something heard on CNBC or read on Seeking Alpha as opposed to dispassionate and independent analysis. For these people, rigorously rebalancing is sufficient to reduce risk at valuation extremes.

One of my rules is that people potentially have only one or two great market timing calls in them over an investing career. If you make such a call, then it's good to quit while you're ahead.

fennewaldaj
Posts: 208
Joined: Sun Oct 22, 2017 11:30 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by fennewaldaj » Wed Jul 04, 2018 10:41 pm

One thing that rarely seems to be mentioned with regard to this subject is that often if the market is super expensive you have more money than you planned to have/need. Like for example I have planned for 2-3% real for the next decade given current valuations. If PEs keep expanding and we get say 7-8% real I will have a fair bit more money than I planned to have so it can make sense to trim back. It is market timing in a way but not really.

CarpeDiem22
Posts: 108
Joined: Tue May 22, 2018 11:20 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by CarpeDiem22 » Wed Jul 04, 2018 10:53 pm

Agree with the OP.

I was watching a TV show where two guys were discussing the Nifty Fifty crash. One of them said, "If you are looking to buy a car, and I'm looking to sell a car, and after checking my car you decide that you like it and want to buy it, I hope one question you ask me is that how much I'm selling it for!"

User avatar
Taylor Larimore
Advisory Board
Posts: 27433
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Taylor Larimore » Wed Jul 04, 2018 10:57 pm

I do wish that Taylor Larimore would watch this video, he didn't seem to believe me when I referenced this video.
nedsaid:

I have watched this video and I most certainly do believe you.

I have also read both editions of Common Sense on Mutual Funds in which Mr. Bogle writes (bold is his):
Stay the course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Fallible
Posts: 6498
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Fallible » Wed Jul 04, 2018 11:50 pm

FactualFran wrote:
Wed Jul 04, 2018 7:02 pm
InvestInPasta wrote:
Wed Jul 04, 2018 6:01 pm
Well I have just seen this video where Jack Bogle himself says he sold his stocks in year 2000 because valuations did not make any sense to him in those years. :shock:

https://youtu.be/k6ra5POdsYg

Minute 2:57
"I said, you know... with bonds yielding around 7% today, stocks yielding around 1%... stock market being at that point closer to 40 times earnings than 30, I think it's impossible that in next decade stocks will outperform bonds"

Minute 3:46
"I was in the process of reducing my equity position, that's normal abot 70/75%... to about 30/25%, and I did that"
Please read The Twelve Pillars of Wisdom Lessons We Should Have Learned before the Bear Market Arrived, but are Only Learning Now remarks that Bogle made in 2001 at a time much closer to what he did. Those remarks include
I have been gradually reducing my equity percentage for years, reflecting first my fight for an uncertain survival from congenital heart disease and my desire to assure my wife’s financial security, and, second, reflecting my increasing age and declining earning power. With some 75% of my retirement plan and personal account in equities throughout most of my career, I had gradually reduced the ratio to below 45% by last summer. Still, deeply concerned about the NASDAQ bubble and cautious about the outlook for future stock returns, I even wondered aloud at the Morningstar Conference last June why I held any equities at all. But—'physician heal thyself,' writ large!—I took no further action.
Reducing his equity personal was a gradual process that was done because of his health and desire to provided for his wife's financial security, not market valuations. He took no action due to the "NASDAQ bubble" or "the outlook for future stock returns". ...
Yes, health and the need to plan for his wife's financial well-being are reasons he has given for reducing equity. These are among legitimate reasons for anyone to change an allocation. This is neither market timing nor failure to stay the course.

I seem to recall this has come up before on the forum where an OP thought he caught Jack contradicting himself and failing to hold course. It was, as I recall, explained then that health reasons were causing him to lower equities.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

User avatar
JoMoney
Posts: 5884
Joined: Tue Jul 23, 2013 5:31 am

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by JoMoney » Thu Jul 05, 2018 12:03 am

Yes, Mr. Bogle has made some tactical changes in his portfolio. At one point in the recent passed he poo-pooed government bonds and the 'Total Bond' index for not having enough in corporate bonds.

He's also cautioned people to be careful about this, even in the video you shared.

Anybody attempting to do this should be careful... "Markets can remain irrational longer than you can remain solvent" ...
In the late 1950's stocks began getting overpriced by most any standard, and remained that way (or even higher priced) by historical standards for 20+ years outperforming bonds and most other investments.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

InvestInPasta
Posts: 59
Joined: Sat Sep 16, 2017 12:42 pm
Location: Italy

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by InvestInPasta » Thu Jul 05, 2018 4:27 am

JoMoney wrote:
Thu Jul 05, 2018 12:03 am
Yes, Mr. Bogle has made some tactical changes in his portfolio. At one point in the recent passed he poo-pooed government bonds and the 'Total Bond' index for not having enough in corporate bonds.

He's also cautioned people to be careful about this, even in the video you shared.

Anybody attempting to do this should be careful... "Markets can remain irrational longer than you can remain solvent" ...
In the late 1950's stocks began getting overpriced by most any standard, and remained that way (or even higher priced) by historical standards for 20+ years outperforming bonds and most other investments.
Yes it's true!
Anyway at some point valuations should matter!

I can make an example with bonds.

I live in EU, in my lazy portfolio my 40% of bonds are 5-10Y Euro Sovereign Bonds that yield ZERO or even NEGATIVE. :shock:
If I would ignore valuations I should keep a 40% of my money in these bonds that yield less than cash.
It's nonsense!

But if I look at bonds valuations and based on these valuations I decide to move out from bonds into cash, why should I ignore equity valuations if in future they become extremely overvalued?
When studying English I am lazier than my portfolio. Feel free to correct my english and investing mistakes.

User avatar
nedsaid
Posts: 10334
Joined: Fri Nov 23, 2012 12:33 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by nedsaid » Thu Jul 05, 2018 9:51 am

Taylor Larimore wrote:
Wed Jul 04, 2018 10:57 pm
I do wish that Taylor Larimore would watch this video, he didn't seem to believe me when I referenced this video.
nedsaid:

I have watched this video and I most certainly do believe you.

I have also read both editions of Common Sense on Mutual Funds in which Mr. Bogle writes (bold is his):
Stay the course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.
Best wishes.
Taylor
Taylor, my take is that Mr. Bogle was thinking aloud and floating ideas at the Morningstar Conference. He is no shrinking violet and he will say what is on his mind. It turned out his bark was worse than his bite, that he probably didn't cut back as much on stocks as he earlier said and did it over a longer period of time. This would be something to ask him about. There is inconsistency in his statements about what he actually did.

This brings to mind statements that I made way back that in early 2000 that I cut my stocks back by 30%. I went back through my records and saw that before my portfolio adjustments, my stock mutual funds were about 45% of my retirement portfolio and my individual stocks were another 45%. What I actually did was sell 30% of my stock mutual funds and leave my individual stocks intact. In reality, my sales of stock were about 15% of my portfolio and not 30%. Memories do get a bit foggy over time but I kept excellent records.

Thanks Taylor for watching the video. What Bogle said was very reasonable and it turned out that his projections of stock and bond returns during the 2000's were pretty accurate. US Stocks were essentially flat from 2000-2012. Bogle is a very smart guy and we would do well to listen to him.
A fool and his money are good for business.

User avatar
nedsaid
Posts: 10334
Joined: Fri Nov 23, 2012 12:33 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by nedsaid » Thu Jul 05, 2018 10:07 am

JoMoney wrote:
Thu Jul 05, 2018 12:03 am
Yes, Mr. Bogle has made some tactical changes in his portfolio. At one point in the recent passed he poo-pooed government bonds and the 'Total Bond' index for not having enough in corporate bonds.

He's also cautioned people to be careful about this, even in the video you shared.

Anybody attempting to do this should be careful... "Markets can remain irrational longer than you can remain solvent" ...
In the late 1950's stocks began getting overpriced by most any standard, and remained that way (or even higher priced) by historical standards for 20+ years outperforming bonds and most other investments.
Well maybe there were flaws in the valuation measurements and maybe stocks in the late 1950's were not as expensive as they appeared at the time. It reminds me of when Warren Buffett was asked if the stock market was expensive. He replied, "Yes, but not as expensive as it looks." Stocks always look expensive during bull markets. When stocks go up, isn't that what we want?
A fool and his money are good for business.

User avatar
BrandonBogle
Posts: 2097
Joined: Mon Jan 28, 2013 11:19 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by BrandonBogle » Thu Jul 05, 2018 10:37 am

InvestInPasta wrote:
Wed Jul 04, 2018 6:49 pm
All Seasons wrote:
Wed Jul 04, 2018 6:07 pm
In all fairness to Bogle, he was also motivated to de-risk his portfolio at that time because his health was failing him. He wanted to make sure his estate was safe.
True!
But he still says "if for whatever sound reason, and not emotional reason, and market looks substantially overvalued (don't worry about if it's 20/25% overvalued), but if it seems to get out of line by a substantial amount, take that 65 to 50." - Minute 0:39
I have a slightly different take here, ignoring the desire to de-risk his portfolio due to his health or other reasons (which change the amplitude of the change, not the decision), we should keep in mind that Jack has previously said he doesn't bother rebalancing. So when the market looks substantially overvalued, once could be selling to rebalance their portfolio to their desired asset allocation (stocks to bonds in this case). It just so happened that Jack was also looking to change his risk tolerance and further lower his stock allocation, but I still see this not as market timing, but as checking in after a long period of time and rebalancing to your ideals (vs. rebalancing regularly).

MnD
Posts: 3745
Joined: Mon Jan 14, 2008 12:41 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by MnD » Thu Jul 05, 2018 10:50 am

Jack Bogle characterizes the total bond market index as "deeply flawed and that's coming from an indexer"" and makes the specific suggestion to split fixed income holdings 50% in Total Bond Market and 50% in intermediate term corporate bond index fund to achieve an overall allocation around 1/3 government and 2/3rds corporate bonds.
https://www.nytimes.com/2013/04/28/your ... lance.html

Its interesting that even the most vocal and dogmatic Jack Bogle adherents, who quote him here on almost a daily basis when it comes to things like ex-US allocation to equities, conveniently forget this particular edict.

User avatar
nedsaid
Posts: 10334
Joined: Fri Nov 23, 2012 12:33 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by nedsaid » Thu Jul 05, 2018 10:55 am

MnD wrote:
Thu Jul 05, 2018 10:50 am
Jack Bogle characterizes the total bond market index as "deeply flawed and that's coming from an indexer"" and makes the specific suggestion to split fixed income holdings 50% in Total Bond Market and 50% in intermediate term corporate bond index fund to achieve an overall allocation around 1/3 government and 2/3rds corporate bonds.
https://www.nytimes.com/2013/04/28/your ... lance.html

Its interesting that even the most vocal and dogmatic Jack Bogle adherents, who quote him here on almost a daily basis when it comes to things like ex-US allocation to equities, conveniently forget this particular edict.
Mr. Bogle, were he to post under a pseudonym, would likely be hooted out of the forum that bears his name. He is not as doctrinaire as we suppose. He has a flexible mind, thinks aloud, floats ideas, and speaks his mind. I will say that over his lifetime that his underlying philosophy has been remarkably consistent. His internal compass always brings him back to center. The more I see of him on videos, the more I like him.
A fool and his money are good for business.

User avatar
Ricola
Posts: 644
Joined: Sat Apr 26, 2008 10:38 am

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Ricola » Thu Jul 05, 2018 11:29 am

Well, how did that decision play out...75% vs 35% stock allocation from 2000 to 2018? I am guessing, but thinking stay-the-course won.

User avatar
bottlecap
Posts: 5823
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by bottlecap » Thu Jul 05, 2018 11:56 am

I invest like I do after thorough research into the subject, not on the advice of any one individual. And I certainly do not justify my conclusions with snippets from experts repeated without context. Even if it is Jack Bogle.

If Jack Bogle ever truly decides to play valuations, it won’t make my conclusion not to any less worthy.

JT

garlandwhizzer
Posts: 1985
Joined: Fri Aug 06, 2010 3:42 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by garlandwhizzer » Thu Jul 05, 2018 12:27 pm

nedsaid wrote;
Mr. Bogle, were he to post under a pseudonym, would likely be hooted out of the forum that bears his name. He is not as doctrinaire as we suppose. He has a flexible mind, thinks aloud, floats ideas, and speaks his mind. I will say that over his lifetime that his underlying philosophy has been remarkably consistent. His internal compass always brings him back to center. The more I see of him on videos, the more I like him.
1+

Bogle saw that the market was grossly overvalued in 1999 and made appropriate portfolio moves based on that analysis. Market timing in general does not work but there are times, often at market extremes in valuation like 1999 (S&P 500 PE 32) and 1982 (S&P 500 PE 7.6) where market timing may work very well. These points in time are typically only defined in retrospect and are very hard to pick out in real time. None the less, Bogle and Buffett, both of whom profess to be buy-and-hold investors, do take advantage of occasional excessive market swings in sentiment and do market timing. I think this is to their credit. Inflexible and thoughtless adherence to a rigid set of investing rules can get you in trouble. Ralph Waldo Emerson put it best: "Foolish consistency is the hobgoblin of little minds." Notice not all consistency, just foolish consistency. These two giants of investing and finance clearly do not have "little minds" and are sometimes able by careful analysis to determine those rare times when consistency is foolish and therefore counterproductive. Bogle in 1999 saw that rigid consistency in buy-and-hold was in fact foolish at that time. He made his move and profited greatly from it. Isn't that something that should be applauded rather than scorned? Some flexibility is appropriate to any investing method IMO although I think most on the Forum disagree with this.

Garland Whizzer

dkturner
Posts: 1355
Joined: Sun Feb 25, 2007 7:58 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by dkturner » Thu Jul 05, 2018 1:06 pm

nedsaid wrote:
Thu Jul 05, 2018 10:55 am
Mr. Bogle, were he to post under a pseudonym, would likely be hooted out of the forum that bears his name. He is not as doctrinaire as we suppose. He has a flexible mind, thinks aloud, floats ideas, and speaks his mind. I will say that over his lifetime that his underlying philosophy has been remarkably consistent. His internal compass always brings him back to center. The more I see of him on videos, the more I like him.
Well said!

It’s always beneficial to,listen to what Mr. Bogle actually said, rather than listen to the palaver that some of his self appointed “followers” put out whenever some poor soul inquires whether it’s ok to lighten up on equities due to perceived excessive valuations.

michaeljc70
Posts: 3601
Joined: Thu Oct 15, 2015 3:53 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by michaeljc70 » Fri Jul 06, 2018 10:09 am

I'd like to know the difference in his portfolio from this move vs. if he had kept it the way it was. As I understand it, he is at 50/50 now. I'm not saying that makes it a mistake as people need to adjust their AA to what makes them comfortable but I am curious what difference it made over 17 years.

azanon
Posts: 1921
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by azanon » Fri Jul 06, 2018 11:04 am

InvestInPasta wrote:
Wed Jul 04, 2018 6:01 pm
By reading this forum I have always felt like most users here think CAPE and other stocks valuations are useless.
The only motto for many people seems to be: "buy&hold, never mind stocks valuations, just buy&hold!"
It's just called "buy&hold"; You don't actually just hold your stocks and bonds! What bogleheads do with a "buy&hold" portfolio is rebalance between the bonds and stocks, typically on an annual basis, so from 1980 to 2000, Bogleheads would have been consistently selling stocks and buying more bonds. By the time a "buy&holder" would have gotten to 2000, massive amounts of money would have been banked in bonds by then, all set and ready to start buying more stocks during the following drop.

Hope that helps.

dkturner
Posts: 1355
Joined: Sun Feb 25, 2007 7:58 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by dkturner » Fri Jul 06, 2018 1:20 pm

azanon wrote:
Fri Jul 06, 2018 11:04 am
InvestInPasta wrote:
Wed Jul 04, 2018 6:01 pm
By reading this forum I have always felt like most users here think CAPE and other stocks valuations are useless.
The only motto for many people seems to be: "buy&hold, never mind stocks valuations, just buy&hold!"
It's just called "buy&hold"; You don't actually just hold your stocks and bonds! What bogleheads do with a "buy&hold" portfolio is rebalance between the bonds and stocks, typically on an annual basis, so from 1980 to 2000, Bogleheads would have been consistently selling stocks and buying more bonds. By the time a "buy&holder" would have gotten to 2000, massive amounts of money would have been banked in bonds by then, all set and ready to start buying more stocks during the following drop.

Hope that helps.
That’s nice, but Mr. Bogle doesn’t rebalance. He believes it doesn’t add much return in the long run, particularly for investors who have taxable portfolios (just about anyone with serious money).

User avatar
BrandonBogle
Posts: 2097
Joined: Mon Jan 28, 2013 11:19 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by BrandonBogle » Fri Jul 06, 2018 1:53 pm

dkturner wrote:
Fri Jul 06, 2018 1:20 pm
azanon wrote:
Fri Jul 06, 2018 11:04 am
InvestInPasta wrote:
Wed Jul 04, 2018 6:01 pm
By reading this forum I have always felt like most users here think CAPE and other stocks valuations are useless.
The only motto for many people seems to be: "buy&hold, never mind stocks valuations, just buy&hold!"
It's just called "buy&hold"; You don't actually just hold your stocks and bonds! What bogleheads do with a "buy&hold" portfolio is rebalance between the bonds and stocks, typically on an annual basis, so from 1980 to 2000, Bogleheads would have been consistently selling stocks and buying more bonds. By the time a "buy&holder" would have gotten to 2000, massive amounts of money would have been banked in bonds by then, all set and ready to start buying more stocks during the following drop.

Hope that helps.
That’s nice, but Mr. Bogle doesn’t rebalance. He believes it doesn’t add much return in the long run, particularly for investors who have taxable portfolios (just about anyone with serious money).
Hence my post upthread where I view this simply as Jack rebalancing while he was reducing his risk factors anyway. Put another way, even if he wasn't trying to reduce his risk level b/c of his health and simple sold stocks to get to a 50/50 mix (or whatever other ratio), I would simple see this as rebalancing after a long time vs. doing so regularly, such as annually.

User avatar
nisiprius
Advisory Board
Posts: 36663
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by nisiprius » Fri Jul 06, 2018 2:15 pm

I haven't hear the phrase "buy and hold at any price goose" before. It this a well-known phrase?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

hilink73
Posts: 280
Joined: Tue Sep 20, 2016 3:29 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by hilink73 » Fri Jul 06, 2018 4:00 pm

nisiprius wrote:
Fri Jul 06, 2018 2:15 pm
I haven't hear the phrase "buy and hold at any price goose" before. It this a well-known phrase?
I'm with goose.

User avatar
willthrill81
Posts: 5791
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by willthrill81 » Fri Jul 06, 2018 4:34 pm

Dandy wrote:
Wed Jul 04, 2018 10:00 pm
But the OP is right that there is a consistent message on this board that any attempt at looking to take valuation into account is just plain old market timing and basically looks past Jack's action/message. A valid principle, not to market time, shouldn't be unquestioned dogma especially since the thought leader this forum follows not only seems to think tactical changes, on a rare occasion, are warranted but gave what seems to me a stunning example of his own action.
I think it's a bit unfortunate that the "never time the market" message is taken to extremes by many on this forum, as if any regard to market conditions is going to lead investors to ruin.

I'm a trend follower. Emotions and subjective thoughts have no place in my simple system. I just do what the numbers tell me to do. This is where I see a big departure from what I do and the "market timing" that so many here think of, which seems to be driven by emotions and a cognitive belief that one can outplay the market.

Paul Merriman employs trend following with half of his portfolio, has done so for my entire lifetime, and has been content with the long-term results.

It's clear that even Bogle himself is not so diametrically opposed to making changes to one's portfolio based on market conditions as many here are.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
tadamsmar
Posts: 7780
Joined: Mon May 07, 2007 12:33 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by tadamsmar » Fri Jul 06, 2018 5:06 pm

InvestInPasta wrote:
Wed Jul 04, 2018 6:01 pm
By reading this forum I have always felt like most users here think CAPE and other stocks valuations are useless.
The only motto for many people seems to be: "buy&hold, never mind stocks valuations, just buy&hold!"

Well I have just seen this video where Jack Bogle himself says he sold his stocks in year 2000 because valuations did not make any sense to him in those years. :shock:

https://youtu.be/k6ra5POdsYg

Minute 2:57
"I said, you know... with bonds yielding around 7% today, stocks yielding around 1%... stock market being at that point closer to 40 times earnings than 30, I think it's impossible that in next decade stocks will outperform bonds"

Minute 3:46
"I was in the process of reducing my equity position, that's normal abot 70/75%... to about 30/25%, and I did that"

Cheers :beer:
Minute 9:00
He said that maybe he was a buy&hold at any price goose: "...a buy and hold proposition, don't do something, stand there, no matter, almost no matter what happens, and maybe no matter what happens"

Beensabu
Posts: 186
Joined: Sun Aug 14, 2016 3:22 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Beensabu » Fri Jul 06, 2018 5:10 pm

Ricola wrote:
Thu Jul 05, 2018 11:29 am
Well, how did that decision play out...75% vs 35% stock allocation from 2000 to 2018? I am guessing, but thinking stay-the-course won.
Pretty well, actually.

The 75/25 portfolio finally pulled ahead in 2017.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

Park
Posts: 550
Joined: Sat Nov 06, 2010 4:56 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Park » Sat Jul 07, 2018 1:00 am

https://www.morningstar.com/videos/7165 ... locat.html

"Ptak: Vanguard at one time had its own dynamic asset allocation strategy; it was the Asset Allocation fund, which was merged into another of your offerings back in 2011. Can you take us through the thought process that informed the decision to merge that strategy away, and maybe any implications that it might have on an investor who was considering a strategy like it for their own use?

Kinniry: I would say we mostly were happy with the performance of the fund. The fund was around for over 20 years and actually had large assets under management. And I think the good thing at Vanguard, what we always do, is we are diligent about making sure that our funds still meet the requirements for investor success. At Vanguard, we actually have a core purpose, and that's to give investors the best chance of success. And we look at some of our funds, even though the performance may be good, and we ask, "Are investors using this to their own benefit?" And after looking at all that, we came to the conclusion that while it was a good offer, it had done well, and had large assets, we decided it would be best just to go into a strategic asset allocation. So we wound that fund into the Balanced Index Fund, as you mentioned."

IMO, dynamic asset allocation is a synonym for market timing. And this fund could switch between US stocks, bonds and money market instruments: it wasn't limited to switching between equity asset classes.

Vanguard had a market timing fund (Asset Allocation fund) from 1988-2011. The fact that it had a market timing fund for 23 years says something. So there's a bit of a mixed message here.

Jack Bogle left Vanguard in the last 1990s. So a market timing fund was set up at Vanguard while he was there, and persisted afterwards. That also says something.

InvestInPasta
Posts: 59
Joined: Sat Sep 16, 2017 12:42 pm
Location: Italy

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by InvestInPasta » Sat Jul 07, 2018 5:06 am

Beensabu wrote:
Fri Jul 06, 2018 5:10 pm
Ricola wrote:
Thu Jul 05, 2018 11:29 am
Well, how did that decision play out...75% vs 35% stock allocation from 2000 to 2018? I am guessing, but thinking stay-the-course won.
Pretty well, actually.

The 75/25 portfolio finally pulled ahead in 2017.
:|

Let's put "Pretty well" in perspective.
In order to get a 0.5% more CAGR, the investor with 75% equity had to go through a -39% MaxDD and huge pains for 20 years (Stdev of 10.88), whilst Dr. Bogle with its 25% stocks portfolio had to go through a puny -10% MaxDD and almost no pain (Stdev 4.2).
When studying English I am lazier than my portfolio. Feel free to correct my english and investing mistakes.

david1082b
Posts: 371
Joined: Fri Jun 09, 2017 12:35 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by david1082b » Sat Jul 07, 2018 8:03 am

InvestInPasta wrote:
Sat Jul 07, 2018 5:06 am
Beensabu wrote:
Fri Jul 06, 2018 5:10 pm
Ricola wrote:
Thu Jul 05, 2018 11:29 am
Well, how did that decision play out...75% vs 35% stock allocation from 2000 to 2018? I am guessing, but thinking stay-the-course won.
Pretty well, actually.

The 75/25 portfolio finally pulled ahead in 2017.
:|

Let's put "Pretty well" in perspective.
In order to get a 0.5% more CAGR, the investor with 75% equity had to go through a -39% MaxDD and huge pains for 20 years (Stdev of 10.88), whilst Dr. Bogle with its 25% stocks portfolio had to go through a puny -10% MaxDD and almost no pain (Stdev 4.2).
Jack was 71 in 2000, so if we use age = bond % then Jack should have been in a high bond % much sooner anyway. 25% in bonds is not recommended for a 71 year old by standard Boglehead dogma. The Target Retirement Income fund is closer to the basic recommendation for someone of that age:

"The fund holds approximately 30% of assets in stocks and 70% in bonds" https://personal.vanguard.com/us/JSP/Fu ... IntExt=INT

If someone was young in 2000 and in the accumulation phase, then the bad drawdowns were less relevant, since most of a young person's earnings are in their future. They would have had almost no money in a portfolio and would hopefully have been adding new money regularly during the bad times, helping juice their returns by buying low. A Target Retirement fund appropriate to their age would then move gradually into bonds as they got closer to retirement.

So Jack did the smart thing eventually, but what if 1997 had been the top instead? Summer of 1997 saw the same CAPE valuations as the summer of 1929 right before the massive crash. Jack would have looked less smart if the top had been 1997 instead. So I'd say he got lucky that the dot-com bubble carried on booming until 2000. Praising him for only doing age = bond % when he was 71 is a bit weird to me.

User avatar
Taylor Larimore
Advisory Board
Posts: 27433
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Taylor Larimore » Sat Jul 07, 2018 10:16 am

Praising him for only doing age = bond % when he was 71 is a bit weird to me.
David:

It is important to understand that Mr. Bogle is not like you and me. He could have any stock/bond allocation he wanted and it would make little difference to his family security.

It is usually a mistake to copy someone else's portfolio.
This is the reason The Bogleheads' Three-Fund Portfolio can be tailored to each investors' personal situation.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Ben Mathew
Posts: 96
Joined: Tue Mar 13, 2018 11:41 am
Location: Seattle
Contact:

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Ben Mathew » Sat Jul 07, 2018 11:07 am

I think the "stay the course" maxim is most valuable when people want to do the exact opposite of what Jack Bogle did--buy stocks during runups (when valuations are high) and sell stocks during a market panics (when valuations are low). It is less applicable to someone changing allocations as a response to valuation changes, as Mr. Bogle seems to have done.

Any rational form of investing has to involve looking at valuations and associated expected rate of returns. Otherwise it becomes a faith-based mantra not far removed from cargo cults.

I have remained 100% stocks since we first started saving and investing in earnest (around 2006). So thus far I have stayed the course. But if stock valuations rise a lot and bond valuations drop a lot, then I am open to owning more bonds. If the changes are extreme enough, I imagine I could be 100% bonds. That's unlikely to happen. But if it does, I have no qualms about changing my course.

Beensabu
Posts: 186
Joined: Sun Aug 14, 2016 3:22 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by Beensabu » Sat Jul 07, 2018 2:05 pm

InvestInPasta wrote:
Sat Jul 07, 2018 5:06 am
Beensabu wrote:
Fri Jul 06, 2018 5:10 pm
Ricola wrote:
Thu Jul 05, 2018 11:29 am
Well, how did that decision play out...75% vs 35% stock allocation from 2000 to 2018? I am guessing, but thinking stay-the-course won.
Pretty well, actually.

The 75/25 portfolio finally pulled ahead in 2017.
:|

Let's put "Pretty well" in perspective.
In order to get a 0.5% more CAGR, the investor with 75% equity had to go through a -39% MaxDD and huge pains for 20 years (Stdev of 10.88), whilst Dr. Bogle with its 25% stocks portfolio had to go through a puny -10% MaxDD and almost no pain (Stdev 4.2).
:)

I actually agree with you and meant pretty well in favor of 25/75 (way less risk + outperformed 75/25 for 16 years), but the beauty is that it can be taken as "pretty well" from either perspective:

- If needing to draw funds over the 16 years from 2000-2016, it was (in retrospect) an excellent decision to go to 25/75 in 2000.

- If not needing to touch the funds and being disciplined in buying, holding, and rebalancing, no matter what, staying 75/25 worked out okay by this point in time.

Take away: Asset allocation is specific to your situation and investment horizon, and it is prudent to reduce risk when nearing your withdrawal phase.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

ThrustVectoring
Posts: 498
Joined: Wed Jul 12, 2017 2:51 pm

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by ThrustVectoring » Sat Jul 07, 2018 3:07 pm

InvestInPasta wrote:
Sat Jul 07, 2018 5:06 am
Beensabu wrote:
Fri Jul 06, 2018 5:10 pm
Ricola wrote:
Thu Jul 05, 2018 11:29 am
Well, how did that decision play out...75% vs 35% stock allocation from 2000 to 2018? I am guessing, but thinking stay-the-course won.
Pretty well, actually.

The 75/25 portfolio finally pulled ahead in 2017.
:|

Let's put "Pretty well" in perspective.
In order to get a 0.5% more CAGR, the investor with 75% equity had to go through a -39% MaxDD and huge pains for 20 years (Stdev of 10.88), whilst Dr. Bogle with its 25% stocks portfolio had to go through a puny -10% MaxDD and almost no pain (Stdev 4.2).
To be quite fair, that was a generational bull market in bonds that can't happen again due to interest rate floors near 0%. Next time bonds get beat down that hard, sure, pick up some. At their current yields it makes zero sense to me to hold any bonds whatsoever.

InvestInPasta
Posts: 59
Joined: Sat Sep 16, 2017 12:42 pm
Location: Italy

Re: Jack Bogle is not a "buy&hold at any price goose", he looks at valuations, he sold his stocks in year 2000

Post by InvestInPasta » Sun Jul 08, 2018 6:58 am

ThrustVectoring wrote:
Sat Jul 07, 2018 3:07 pm
To be quite fair, that was a generational bull market in bonds that can't happen again due to interest rate floors near 0%. Next time bonds get beat down that hard, sure, pick up some. At their current yields it makes zero sense to me to hold any bonds whatsoever.
Hence you don't buy&hold bonds at any price, you look at bonds valuations.
Do you do the same with equity?
Thanks
When studying English I am lazier than my portfolio. Feel free to correct my english and investing mistakes.

Post Reply