Larry Swedroe: Prepare For The Bear

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Re: Larry Swedroe: Prepare For The Bear

Post by MJW » Wed Oct 17, 2018 1:02 pm

Wow, lots of nastiness in here.

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Re: Larry Swedroe: Prepare For The Bear

Post by larryswedroe » Wed Oct 17, 2018 1:06 pm

My last comment, as I have pointed out investors need to understand that prospectuses are written by lawyers to avoid lawsuits so statements are always the broadest and most conservative that they can be and very often do not reflect the reality. This is a good example

If you knew what you were talking about you would know this, and in fact much of the loans are replacing higher rate loans charged by banks!!!! The banks are being disintermediated with good credits able to get lower rates . The loss estimates are based on experience with the same type of credit ratings.

You would be far better served if you asked questions, like is this true? rather than make statements as if they were true when you really have no clue
Bye
Larry

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nedsaid
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Re: Larry Swedroe: Prepare For The Bear

Post by nedsaid » Wed Oct 17, 2018 2:13 pm

larryswedroe wrote:
Wed Oct 17, 2018 1:06 pm
My last comment, as I have pointed out investors need to understand that prospectuses are written by lawyers to avoid lawsuits so statements are always the broadest and most conservative that they can be and very often do not reflect the reality. This is a good example

If you knew what you were talking about you would know this, and in fact much of the loans are replacing higher rate loans charged by banks!!!! The banks are being disintermediated with good credits able to get lower rates . The loss estimates are based on experience with the same type of credit ratings.

You would be far better served if you asked questions, like is this true? rather than make statements as if they were true when you really have no clue
Bye
Larry
I rarely rise to Homer's defense but I think he made reasonable assumptions, though they might not be true. For one, I would assume that folks would resort to alternative lending if they couldn't get a loan from a bank. It also wouldn't be unreasonable to assume that people who resort to alternative lending have lesser credit ratings. This assumptions from what you said are not true but it isn't unreasonable that people would assume them. This is partly because the field of alternative lending is not well understood by most people, including myself. It is a relatively new thing.

Prospectuses are written for a reason and we should not assume people are idiots for actually reading them. You make the point that these are ultra conservatively written documents that probably overstate certain risks. But this is a nuance that many folks wouldn't quite understand. That doesn't mean that alternative lending doesn't have its unique risks. It is all in how well the loans are underwritten. Hopefully, the risks, loan by loan, have been carefully evaluated. But this doesn't always happen as it should, particular in the run up to the financial crisis, when lending standards were tossed out of the window.

But yes, prospectuses get to be a bit ridiculous. I am surprised they don't write about the risks of breaking your toe if the prospectus gets dropped on your foot. On the other hand, banks put these questionable loans off the balance sheet through structured investment vehicles, it was not understood that when the loans went bad that they would go back on the balance sheet of the banks. Not sure this risk was even disclosed in notes to the financial statements of the annual reports of the banks. Even if the footnotes existed, and people read them, its not clear people would have truly understood the risks. Indeed, much of the junk was mixed with the good stuff and the whole thing given a AAA credit rating. Investors would assume that credit rating agencies would know what they were doing but this turned out to be a big whoopsie instead. Cynics could say it wasn't just a whoopsie but outright fraud.

So you shouldn't be surprised when you encounter skepticism about Alternative Lending. The experts told us that Subprime was a tempest in a teapot when in fact there was a lot more such loans out there than perceived. As I recall, this even caught Mr. Bogle off guard. Very few realized how potentially dangerous the Subprime loans were or even how big it was. Folks get skeptical when told that the experts have it all figured out.

So not an attack on you, just explaining the reasons for Homer's objections. He might be entirely wrong but he made a lot of points I would have made myself. It is just that Alternative Lending is so new and not well understood. In any case, LENDX probably is about 5% of your client's portfolios as you are also recommending Variance Risk Premium, Reinsurance, and Factor funds that use leverage and shorts. I don't believe having 5% in LENDX is irrational or wild. it seems to me to be a reasonable bet. And you are doing the responsible thing by putting your own money in the investments that your firm is recommeding. I commend you for eating your own cooking.
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Re: Larry Swedroe: Prepare For The Bear

Post by diy60 » Wed Oct 17, 2018 2:39 pm

larryswedroe wrote:
Wed Oct 17, 2018 12:55 pm
Homer
you have literally no clue what you are talking about,
Wow.

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Re: Larry Swedroe: Prepare For The Bear

Post by larryswedroe » Wed Oct 17, 2018 2:56 pm

Nedsaid,
Pretty simple, as I said if Homer had simple said something like I read in the prospectuses the following, does this mean... Or I believe that it might be the case that.... I would never have a problem. But Homer, and others, make these declarative statements as if they were facts when they are not. They think they know but they don't. When I don't know I don't make declarative statements. They make statements which to someone who does know it's obvious the person making them has no knowledge yet acts as if they do. And I have explained these issues in fact many times, even related to this very subject in the papers I've written on the subject and what losses might be like in high UE periods, which is clearly a risk, one you are getting compensated for. And as I have pointed out in other discussions, specifically I recall on SRRIX and LENDX, the issues about what is written in prospectus. And the misunderstandings that it can lead to. Even had these discussions related to DFA funds way back.

Now people borrow from banks via credit cards often with very high rates. The fintech firms who are originating the loans have much lower costs than banks as they don't have the infrastructure nor regulatory regimes. Note I have pointed this out in papers. That allows them to offer lower rates. And they are massively disintermediating banks, so much to the point that the banks are now buying loans from them,, just as Stone Ridge does, and often in securities form with even lower yields (soon as you securitize it the yield goes down due to enhanced liquidity-and btw SR takes advantage of that by sometimes packaging their loans and pooling them with those of the originator and selling them (at gains due to the lower yield on the security). This has enhanced returns of the fund.

Again, I have never had any problem with anyone ever asking a question or asking me to explain things, My thousands of posts, let alone the thousands of PM's I answer regularly (with no expectation of any reward mind you, yet I have to put up with absurd accusations from people like Elysium), as you yourself know.

So I decided it was not worth spending time having to answer over and over again the same questions while still being accused of all kinds of things, including most recently by all people that gentleman Taylor Larimore of being a scoundrel. So I stopped posting. Then I thought I would try on occasion to help by not getting in debates though by at least correcting misperceptions, providing the facts. But I know see that was foolish.

Still happy to answer emails or PMs. But sad to say even my attempts at just being helpful are not worth it.
Best wishes
Larry

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Re: Larry Swedroe: Prepare For The Bear

Post by columbia » Wed Oct 17, 2018 2:59 pm

I appreciated the link in the OP.

It’s always good to get positive reinforcement for being properly cautious; my 50/50 mix feels right for the duration of my working years.

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Re: Larry Swedroe: Prepare For The Bear

Post by bearcub » Wed Oct 17, 2018 3:02 pm

Zvi Bodie promoted TIPS years ago. I have plenty. Still waiting for that unexspected inflation + bear market. Tom Petty.... the waiting is the hardest part.LOL.

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Re: Larry Swedroe: Prepare For The Bear

Post by linenfort » Wed Oct 17, 2018 4:22 pm

bearcub wrote:
Wed Oct 17, 2018 3:02 pm
Zvi Bodie promoted TIPS years ago. I have plenty. Still waiting for that unexspected inflation
Well, there’s your problem. You’re expecting it. :wink:
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Scoundrel?

Post by Taylor Larimore » Wed Oct 17, 2018 5:23 pm

So I decided it was not worth spending time having to answer over and over again the same questions while still being accused of all kinds of things, including most recently by all people that gentleman Taylor Larimore of being a scoundrel.
Larry:

I cannot recall ever accusing you of being a "scoundrel." If you took it that way, I apologize.

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

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Re: Larry Swedroe: Prepare For The Bear

Post by larryswedroe » Wed Oct 17, 2018 5:45 pm

Taylor
Thanks, it wasn't diredt but it was about diversification which you did call the something of scoundrels, implying it. Again thanks for the apology
What amazes me still is that my motives are questioned when I've tireless answered thousands of questions and PMs and gotten so many thank yous from people who I will never meet nor ever do business with. And I think I'm pretty smart guy having successfully helped build three great businesses. So why would I spend my time on a site for do it yourselvers if I was trying to get business. Surely there would be more productive uses of my time. I think that over the years maybe three or four Bogleheads have become clients, seems like I'm wasting my time if that was truly my objective.
This WAS my way of giving back, but got too tireesome [OT Comment removed by admin LadyGeek], having your name and reputation put in question., even worse as it is by people who hide behind fake names, saying things that in most cases they would never say publicly.
Larry

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Re: Larry Swedroe: Prepare For The Bear

Post by Elysium » Wed Oct 17, 2018 5:58 pm

I find it very amusing that Larry has no problem implying other posters as "foolish" "uninformed" "clueless" "nonsensical" and other such choice words, even though not directed at them but implied, but took offense at a comment from a quote from Taylor that wasn't directed at him. I know that Larry and his views would get better acceptance here if it were not for his take no prisoner approach in trying to prove his points.

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Re: Scoundrel?

Post by nedsaid » Wed Oct 17, 2018 7:29 pm

Taylor Larimore wrote:
Wed Oct 17, 2018 5:23 pm
So I decided it was not worth spending time having to answer over and over again the same questions while still being accused of all kinds of things, including most recently by all people that gentleman Taylor Larimore of being a scoundrel.
Larry:

I cannot recall ever accusing you of being a "scoundrel." If you took it that way, I apologize.

Best wishes
Taylor
Taylor, if memory serves me right, this was a quote from John Bogle. I don't think you were calling anybody anything, indeed you have said lots of nice things about Larry. You have done "Taylor's Gems" on at least one of his books.

I think the origins of the quote has to do with Bogle's opinion that diversification seems to justify a lot of bad and expensive products that are not necessarily in the interest of the small investor. I doubt Mr. Bogle had Larry or Paul Merriman or Rick Ferri or Bill Schultheis in mind when he made this comment. All those gentlemen have posted here. Mr. Bogle has been interviewed by Paul Merriman, one of the folks who has inspired a lot of Small/Value tilting here. Mr. Bogle generously agreed to be interviewed on at least one of Merriman's podcasts. Also want to point out that Mr. Bogle got along famously well with Cliff Asness.

Whatever Larry has recommended is based upon the Academic research, while not perfect, has added a lot of insight into the workings of the stock and bond markets. Larry's work has been to attempt to make portfolios more efficient while cutting the left tail risk or the risk of really bad outcomes. Larry sincerely believes in his work and has invested his own money in a consistent manner to his recommendations. In other words, he eats his own cooking.

Those of you who remember the Miller Light "Tastes Great" vs. "Less Filling" ad campaign from the 1980's, the ads featured two groups of people who could never agree about the beer. One crowd said that it "Tastes Great" and the other crowd said that is was "Less Filling." The people depicted in the ads would argue back and forth about this. Sort of like the Red Sox vs. Yankees.

In a similar manner, there are the market cap weighted indexers who favor simpler 3-5 fund portfolios and there are the factor investors who favor more complex portfolios trying to gain a performance edge over the indexes. So naturally people gather into the two camps and some spirited discussions have resulted. A similar type of discussion revolves around whether alternative investments are worthwhile diversifiers or not. Pretty much, is this for real or just a fad?

So unfortunately, the discussions got a bit heated and feelings got hurt a bit. Pretty inevitable when you have bright and spirited people involved. As long as feelings don't get out of control, it makes for an interesting forum. I still remember the Ferri vs. Swedroe debate over Commodities. It was fun, in a way that battlebots is fun, seeing the robots bash the heck out of each other. When you get two experts debating, it brings out a lot of good points that is very informative to the reader. Sort of a we report, you decide type of thing. People can see Swedroe and Ferri discuss a topic and then make up their own minds.

So there is a balance here. We want spirited debate but we don't want hurt feelings over this. Personally I favor Small/Value tilting and I would consider the use of alternatives for my portfolio. I know folks disagree with this but I can see the merit of a Taylor Larimore 3 fund portfolio as well. Factor tilting is not a hill I want to die on. I recognize and respect the different opinions out there.
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Re: Larry Swedroe: Prepare For The Bear

Post by nedsaid » Wed Oct 17, 2018 7:52 pm

larryswedroe wrote:
Wed Oct 17, 2018 5:45 pm
Taylor
Thanks, it wasn't diredt but it was about diversification which you did call the something of scoundrels, implying it. Again thanks for the apology
What amazes me still is that my motives are questioned when I've tireless answered thousands of questions and PMs and gotten so many thank yous from people who I will never meet nor ever do business with. And I think I'm pretty smart guy having successfully helped build three great businesses. So why would I spend my time on a site for do it yourselvers if I was trying to get business. Surely there would be more productive uses of my time. I think that over the years maybe three or four Bogleheads have become clients, seems like I'm wasting my time if that was truly my objective.
This WAS my way of giving back, but got too tireesome [OT Comment removed by admin LadyGeek], having your name and reputation put in question., even worse as it is by people who hide behind fake names, saying things that in most cases they would never say publicly.
Larry
I believe pretty strongly that criticism is a sign of success. People who never get criticized probably have never accomplished much in their lives. You are an accomplished expert in your field and an accomplished author. Your opinions are out there for anyone to read and inevitably people will criticize your opinions and even your motives. It just comes with the territory. I know that I appreciate your contributions and have learned a lot from you. And again, as I have said many times, the Bogleheads can be a tough crowd.

On a small scale, I have had experiences here that didn't sit too well with me, particularly when certain quants pretty much implied that I didn't quite have it up there upstairs. My style is narrative in form, I try to tell a story and try to present information in an enjoyable manner. I just don't think a dry discussion of math and statistics will hold the attention of most people. This forum, in order to be successful needs to appeal to a larger audience than just mathematicians, statisticians, engineers, and actuaries. The math is extremely important but it isn't always easy to explain. Also different people respond to different styles of presenting information. The Quant stuff is really important but it can't be the whole thing. So I have faced criticism here as well.

I just think that the criticism in a way is a badge of honor. It means that you have actually stood for something. It also means you have accomplished something. It also means that people here actually read your stuff. I am always amazed when anyone comments on my stuff, always surprised that anyone reads it. Gee whiz Larry, what if you had posted here 15,000 times only to find that no one ever commented on it? The fact that people even bother to comment is a good sign.

There is the old saying that there is no such thing as bad publicity. What matters is that they spell your name right. Certainly this is not entirely true but there is a big grain of truth to it. As far as I know, I have never misspelled your name.

I don't know Larry. You just never know what will get people to respond. Sometimes I have waxed eloquently and brilliantly only to get no response. Other times, I said some silly, off the wall thing, and I would get lots of response from that. Sometimes I wonder if I just simply reposted my old stuff, if anyone would know the difference. Even more depressing is wondering if an algorithm could produce better posts than mine. Just keep this in perspective.
A fool and his money are good for business.

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Re: Larry Swedroe: Prepare For The Bear

Post by james22 » Thu Oct 18, 2018 12:48 am

smectym wrote:
Wed Oct 17, 2018 1:04 am
But my main point is this: if you want to quote the Bible, then cite the Bible; if you don’t consider the Bible a valid authority, or don’t wish to be seen as citing it, then don’t cite it.
Matthew 7:6

Give not that which is holy unto the dogs, neither castye your pearls before swine, lest they trample them under their feet, and turn again and rend you.
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

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Re: Larry Swedroe: Prepare For The Bear

Post by nedsaid » Thu Oct 18, 2018 1:38 am

I guess it is time for my last comment on this topic. Larry has certainly helped a lot of people with his unselfishness in talking to a lot of Bogleheads and answering their questions. The exchange of information has been good too. But Larry, and ultimately his firm, have benefitted from feedback from real life investors. He is getting feedback not only from investors but a good segment of the better informed and motivated investors. We are telling Larry for free what a firm would have spent millions of dollars on consultants to discover. As Director of Research for his firm, what better way to understand individual investors than to actually interact him them without the filter of expensive consultants. Or hearing things indirectly from the network of advisors.

What an amazing thing for an author to be able to float ideas to an informed audience and to be able to not only hone those ideas but to also learn to better explain those ideas. Sometimes those ideas get pretty well trashed here but it is an accomplishment that a significant group here have adopted or at least considered his ideas. Mr. Bogle himself is skeptical about factors, indeed he gave the famous Telltale Chart speech at a Morningstar conference. It is even more remarkable that a smaller group have embraced an even more controversial idea around here, the idea of alternative investments. Mr. Bogle would not be for either factor investing or alternatives. So Larry has helped to achieve the creation of another school of thought on this forum. Not bad.

The back and forth has been a huge benefit for the forum. If we all agreed on everything all the time, there would be little interest here and folks would drop out. Sort of like the old story about the only attorney in town who had difficulty making a living. Another attorney moved into town, and problem solved! He had somebody to fight with now and both could profit. In the same way, having significant debate helps fuel interest in the forum as important ideas are discussed, challenged, and defended.

As I said, there is a bit of the Battlebots or even Professional Wrestling on the forum. Not saying Bogle is the hero and Larry is the villian, but the conflict of ideas adds entertainment value. I very much enjoyed the Swedroe vs. Ferri pillow fight over commodities. It was very informative as well as good clean fun. Nothing more fun than a good, spirited debate. We need a bit of the Yankees vs. the Red Sox here.

The moderators act as referees and keep the discussion from getting too rowdy. I appreciate their contributions to the forum as well.
A fool and his money are good for business.

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Re: Larry Swedroe: Prepare For The Bear

Post by smectym » Thu Oct 18, 2018 1:41 am

nedsaid wrote:
Wed Oct 17, 2018 10:02 am
smectym wrote:
Wed Oct 17, 2018 1:04 am
Swedroe’s article disingenuously offers that “there is an old saying” that “there is a time for every activity...” etc. (pre-lapsarians may recall the literate version of Ecclesiastes 3.1,”To everything there is a season; and a time to every purpose under heaven.”)

This is Swedroe stealth quoting from the Bible. His abysmal taste in Bible translations (NIV, Larry? Really?) perhaps calls into question his broader judgment. But my main point is this: if you want to quote the Bible, then cite the Bible; if you don’t consider the Bible a valid authority, or don’t wish to be seen as citing it, then don’t cite it.

Perhaps this post is headed for the memory hole, but I would argue that as a critique of Swedrovian obfuscation (an “old saying” Larry copies directly from a translation of the Bible without attribution? Come on) should be allowed to stand.

Smectym
I don't get this criticism. Those of us raised in a religious environment are pretty familiar with the Bible and there are many common expressions in our language that come from the Bible, particularly the King James Version. The Bible gets quoted or at least alluded to quite often in spoken or written discussion. Larry's faith tradition might use different translations than what others are used to. What Larry has done is perfectly acceptable and is common form in writing and in speech. He is using things that are commonly known so that others can better relate to his article. I have done similar things countless times here. I have found Larry's writings to be pretty clear and precise.
Fair enough, and while I wrote the post tongue-in-cheek I see now that it wasn’t received that way. No offense intended.

Smectym

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Re: Larry Swedroe: Prepare For The Bear

Post by larryswedroe » Thu Oct 18, 2018 8:51 am

My last comments to explain a few things
Homer
The problem is that you fail to recognize what I have pointed out repeatedly in many discussions over the years about even DFA funds, you cannot extrapolate from a prospectus because it is written by lawyers to preclude lawsuits and often includes many things that will almost certainly never happen. What you might have said is can you explain.... but you take the prospectus literally which leads to wrong conclusions unless one actually performs due diligence by meeting with a firm

As to Taylor's comment, here is the direct quote from his post on the discussion about diversification using alternatives.

"Good investors are wary.
Better diversification is the last refuge of the scoundrel. -- Jack Bogle
Best wishes.
Taylor""

Now I accepted his apology as sure sounded to me as lumping me in with scoundrels.

Nedsaid,
I've actually made the point you made several times in past on the board. I explained that I had two main reasons for spending time here. And note I don't post on any other general public website, none. And the last place I would be spending my time on if I was trolling for business would be a do it yourselfer site. Perhaps three clients for tens of thousands of hours? The three reasons were to give back, helping others by providing insights from the research and explaining it in plain language. Second, by discussing viewpoints and having to explain and defend a viewpoint you get better at it. That's the point you made. But I get that on professional sites like AlphaArchitect and Advisor Perspectives and at conferences where I speak.



Larry

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Re: Larry Swedroe: Prepare For The Bear

Post by nedsaid » Thu Oct 18, 2018 9:50 am

It shouldn't be hard to see what I am trying to do here, be conciliatory and to encourage people to agree to disagree. The moderators do a great job but it is up to forum members to police themselves as much as possible. It is fun when investment authors post here, it adds to the forum. Larry is certainly the most prolific but Rick Ferri has posted a lot here too. Bill Bernstein, Bill Schultheis, and Paul Merriman have also posted here less frequently. But this forum also benefits from everyone else who posts here. It would be a darned shame if folks didn't feel comfortable asking questions or making points, even if the knowledge is incomplete.

There is a lot of talent here, not bad for do-it-yourself investors who have limited time because of such things as jobs and family. Can't tell you how impressed I have been with the analysis here. One good example is the QSPIX thread that generated a lot of discussion about the alternatives. Folks who are skilled with math and statistics have produced excellent posts, as I said, the math and stats can be hard to explain but having a grasp of certain concepts are vital for successful investing.

So thanks to everyone here who has contributed to making this a successful forum.
A fool and his money are good for business.

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Re: Larry Swedroe: Prepare For The Bear

Post by HomerJ » Thu Oct 18, 2018 10:26 am

larryswedroe wrote:
Thu Oct 18, 2018 8:51 am
My last comments to explain a few things
Homer
The problem is that you fail to recognize what I have pointed out repeatedly in many discussions over the years about even DFA funds, you cannot extrapolate from a prospectus because it is written by lawyers to preclude lawsuits and often includes many things that will almost certainly never happen. What you might have said is can you explain.... but you take the prospectus literally which leads to wrong conclusions unless one actually performs due diligence by meeting with a firm
All I have the prospectus. I don't get to perform due diligence by meeting with Stone Ridge and asking them what they are REALLY doing.

I wrote my "common sense" thoughts FIRST, and checked the prospectus later.

The parts I quoted from the prospectus were not crazy outliers. This statement seems pretty accurate to me
"the credit profile and interest rates available to certain borrowers who seek credit through alternative lending platforms may result in a higher rate of default for alternative lending related securities as compared with the debt instruments associated with more traditional lending models, such as banks"
I don't think "a higher rate of default" is something that "will almost certainly never happen". That's all I was talking about.

LENDX, by definition, has to be more risky than the general credit market. That's where the return comes from. Yet your posts sound like the risk is very minimal. I was questioning that. It appeared to me that you were talking about the general consumer loan market, not the more risky end of it.
First, re consumer loans during 2008, which was highest UE in post Depression era, saw losses about double from defaults. So with leverage we estimate fund would have lost about 6-7% or so. Have to remember that even at 10% employment since these are prime only loans they are made to people who are less likely to be unemployed (more stable income gets you higher credit rating).
I wasn't trying to insult YOU by questioning your posts. You're making estimates about what would have happened in 2008. It appears you're looking at the entire consumer loan market, not just the LENDX riskier side of it. Or maybe you were looking at the correct sub-section, but your estimates are wrong. Or maybe your estimates are right, but the next crash will be different.

I was stating that there's no free lunch. Common sense tells me one is not getting 6% returns (in a 2% fee product) with bond like safety. But it appears sometimes you are selling it like that.

Like nedsaid posted, this should be a discussion. You say we should just ask questions, and you'll make all the statements. You're not the teacher, and we're not students. You've been wrong before, so it's perfectly reasonable for us to not accept everything you say blindly.

Ironically, if you actually were less certain about things, I'd probably be more inclined to believe you more often. :)
The J stands for Jay

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Re: Larry Swedroe: Prepare For The Bear

Post by ResearchMed » Thu Oct 18, 2018 10:43 am

HomerJ wrote:
Thu Oct 18, 2018 10:26 am
larryswedroe wrote:
Thu Oct 18, 2018 8:51 am
My last comments to explain a few things
Homer
The problem is that you fail to recognize what I have pointed out repeatedly in many discussions over the years about even DFA funds, you cannot extrapolate from a prospectus because it is written by lawyers to preclude lawsuits and often includes many things that will almost certainly never happen. What you might have said is can you explain.... but you take the prospectus literally which leads to wrong conclusions unless one actually performs due diligence by meeting with a firm
All I have the prospectus. I don't get to perform due diligence by meeting with Stone Ridge and asking them what they are REALLY doing.

I wrote my "common sense" thoughts FIRST, and checked the prospectus later.

The parts I quoted from the prospectus were not crazy outliers. This statement seems pretty accurate to me
"the credit profile and interest rates available to certain borrowers who seek credit through alternative lending platforms may result in a higher rate of default for alternative lending related securities as compared with the debt instruments associated with more traditional lending models, such as banks"
I don't think "a higher rate of default" is something that "will almost certainly never happen". That's all I was talking about.

LENDX, by definition, has to be more risky than the general credit market. That's where the return comes from. Yet your posts sound like the risk is very minimal. I was questioning that. It appeared to me that you were talking about the general consumer loan market, not the more risky end of it.
First, re consumer loans during 2008, which was highest UE in post Depression era, saw losses about double from defaults. So with leverage we estimate fund would have lost about 6-7% or so. Have to remember that even at 10% employment since these are prime only loans they are made to people who are less likely to be unemployed (more stable income gets you higher credit rating).
I wasn't trying to insult YOU by questioning your posts. You're making estimates about what would have happened in 2008. It appears you're looking at the entire consumer loan market, not just the LENDX riskier side of it. Or maybe you were looking at the correct sub-section, but your estimates are wrong. Or maybe your estimates are right, but the next crash will be different.

I was stating that there's no free lunch. Common sense tells me one is not getting 6% returns (in a 2% fee product) with bond like safety. But it appears sometimes you are selling it like that.

Like nedsaid posted, this should be a discussion. You say we should just ask questions, and you'll make all the statements. You're not the teacher, and we're not students. You've been wrong before, so it's perfectly reasonable for us to not accept everything you say blindly.

Ironically, if you actually were less certain about things, I'd probably be more inclined to believe you more often. :)
This ^^

... and especially the last three lines.

And as a suggestion to Larry (for here on BH or elsewhere), it would be helpful if you were less dismissive of opinions that differ from yours, whether they are other finance professionals, or the great unwashed like most of us here.

After all, there is no "proof" of how most (all?) investments will work in the future.
It's a shame there isn't, but nevertheless, there just isn't.

As someone mentioned just now in another thread, even a so-called Stable Value fund can have a large loss. :shock:

And even IF the trajectory of funds (or specific stocks, even), with all the ups and downs, were truly *known* in advance, we would not all agree on "which is best".
Some of us would be willing to "risk" needing the money at a known future "down" date. Others, not so much...
Etc.

RM
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Taylor Larimore
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Warren Buffett: "True Power"

Post by Taylor Larimore » Thu Oct 18, 2018 8:07 pm

Bogleheads:

Words of wisdom from Warren Buffett:
You will continue to suffer if you have emotional reaction to everything that is said to you. True power is sitting back and observing things with logic. True power is restraint. If words control you that means everyone else can control you. Breathe and allow things to pass.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Miriam2
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Re: Warren Buffett: "True Power"

Post by Miriam2 » Thu Oct 18, 2018 8:19 pm

Taylor Larimore wrote: Bogleheads:

Words of wisdom from Warren Buffett:
You will continue to suffer if you have emotional reaction to everything that is said to you. True power is sitting back and observing things with logic. True power is restraint. If words control you that means everyone else can control you. Breathe and allow things to pass.
Best wishes.
Taylor
Taylor, very thoughtful - sounds like advice you take to heart :happy

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Taylor Larimore
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Re: Warren Buffett: "True Power"

Post by Taylor Larimore » Thu Oct 18, 2018 8:53 pm

Miriam2 wrote:
Thu Oct 18, 2018 8:19 pm
Taylor Larimore wrote: Bogleheads:

Words of wisdom from Warren Buffett:
You will continue to suffer if you have emotional reaction to everything that is said to you. True power is sitting back and observing things with logic. True power is restraint. If words control you that means everyone else can control you. Breathe and allow things to pass.
Best wishes.
Taylor
Taylor, very thoughtful - sounds like advice you take to heart :happy
Miriam:

After suffering bullying in my childhood, I learned to box with some proficiency. Funny thing, I never backed-down but never felt the need hit anyone outside the ring. Buffett is right. True power is restraint.

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

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Re: Larry Swedroe: Prepare For The Bear

Post by Elysium » Thu Oct 18, 2018 9:51 pm

HomerJ wrote:
Thu Oct 18, 2018 10:26 am
larryswedroe wrote:
Thu Oct 18, 2018 8:51 am
My last comments to explain a few things
Homer
The problem is that you fail to recognize what I have pointed out repeatedly in many discussions over the years about even DFA funds, you cannot extrapolate from a prospectus because it is written by lawyers to preclude lawsuits and often includes many things that will almost certainly never happen. What you might have said is can you explain.... but you take the prospectus literally which leads to wrong conclusions unless one actually performs due diligence by meeting with a firm
All I have the prospectus. I don't get to perform due diligence by meeting with Stone Ridge and asking them what they are REALLY doing.

I wrote my "common sense" thoughts FIRST, and checked the prospectus later.

The parts I quoted from the prospectus were not crazy outliers. This statement seems pretty accurate to me
"the credit profile and interest rates available to certain borrowers who seek credit through alternative lending platforms may result in a higher rate of default for alternative lending related securities as compared with the debt instruments associated with more traditional lending models, such as banks"
I don't think "a higher rate of default" is something that "will almost certainly never happen". That's all I was talking about.

LENDX, by definition, has to be more risky than the general credit market. That's where the return comes from. Yet your posts sound like the risk is very minimal. I was questioning that. It appeared to me that you were talking about the general consumer loan market, not the more risky end of it.
First, re consumer loans during 2008, which was highest UE in post Depression era, saw losses about double from defaults. So with leverage we estimate fund would have lost about 6-7% or so. Have to remember that even at 10% employment since these are prime only loans they are made to people who are less likely to be unemployed (more stable income gets you higher credit rating).
I wasn't trying to insult YOU by questioning your posts. You're making estimates about what would have happened in 2008. It appears you're looking at the entire consumer loan market, not just the LENDX riskier side of it. Or maybe you were looking at the correct sub-section, but your estimates are wrong. Or maybe your estimates are right, but the next crash will be different.

I was stating that there's no free lunch. Common sense tells me one is not getting 6% returns (in a 2% fee product) with bond like safety. But it appears sometimes you are selling it like that.

Like nedsaid posted, this should be a discussion. You say we should just ask questions, and you'll make all the statements. You're not the teacher, and we're not students. You've been wrong before, so it's perfectly reasonable for us to not accept everything you say blindly.

Ironically, if you actually were less certain about things, I'd probably be more inclined to believe you more often. :)
+1 to that. Totally agree. I am always amused when Larry says things like hope that helps and he is answering questions here.. well, who is asking :shock: apart from a few, among them 1 or 2 are his clients, the rest of us haven't accepted his superior wisdom that he claims to have. He's been wrong before, so it is right to be very skeptical.

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Re: Larry Swedroe: Prepare For The Bear

Post by LadyGeek » Thu Oct 18, 2018 10:17 pm

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