CEO of DFA moving to Austin, Texas

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rarvesen
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CEO of DFA moving to Austin, Texas

Post by rarvesen » Thu May 03, 2007 2:26 pm

I thought some might find this interesting…
Investment exec buys lakefront land for $30 million
Dimensional Fund Advisors' Booth to build private residence, preserve most of area
http://www.statesman.com/business/conte ... booth.html

David Booth, the top executive of a large California money-management firm that's moving its headquarters to Austin, has purchased about 45 acres off RM 2222 for $30 million.

Booth, 60, chairman and chief executive of Santa Monica, Calif.-based Dimensional Fund Advisors, and his wife bought the coveted undeveloped parcel with wildlife, birds and waterfront views in March and plan to build a house there.

...

In addition to Booth, several Dimensional Fund executives have bought million-dollar homes in Austin in the past year.

The company employs 62 people in leased offices here. Booth expects to have 150 to 200 employees by the time the company's new offices open. In 10 years, he said, the firm could employ 800 people here, or about two-thirds of its U.S. work force. The company will keep an office in Santa Monica as well.

Booth said his employees are loving it in Austin.
--
ralph (http://www.lostsprings.com)

TimDex
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Taxes

Post by TimDex » Thu May 03, 2007 2:52 pm

I don't think Texas has an income tax. I know that these fellows were probably being killed in California.

Tim

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Re: Taxes

Post by SoonerSunDevil » Thu May 03, 2007 2:56 pm

TimDex wrote:I don't think Texas has an income tax. I know that these fellows were probably being killed in California.

Tim
Texas doesn't have a state income tax, but property tax rates are among the highest in the country. I'd love to know what the property taxes are going to be for a $30,000,000 home.

John

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craigr
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Re: Taxes

Post by craigr » Thu May 03, 2007 3:30 pm

OUJohnNasr wrote:
TimDex wrote:I don't think Texas has an income tax. I know that these fellows were probably being killed in California.

Tim
Texas doesn't have a state income tax, but property tax rates are among the highest in the country. I'd love to know what the property taxes are going to be for a $30,000,000 home.

John
It will be cheaper than CA income and capital gains taxes I can assure you! Austin, TX is a great place to live.

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JohnYaker
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#30M

Post by JohnYaker » Thu May 03, 2007 3:47 pm

David Booth, the top executive of DFA is moving its headquarters to Austin, and has purchased about 45 acres off RM 2222 for $30 million....

DFA investors: That's YOUR money. Nothing wrong with rewarding good performance, but.....

John

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Post by SmallHi » Thu May 03, 2007 4:01 pm

DFA investors: That's YOUR money. Nothing wrong with rewarding good performance, but.....
Based on the last 15 years of results....I imagine investors who have been Dimensional clients that long could probably buy the neighboorhood!

Code: Select all

Growth of $1 (since 1995)

S&P 500 = $4

DFA LV = $5.5
DFA Micro = $5.8
DFA SV = $7.2

EAFE = $2.8

DFA ILV = $4.0
DFA ISV = $3.9

MSCI EM Index = $2.6

DFA EM V = $6.7
smallHI

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modal
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Post by modal » Thu May 03, 2007 4:31 pm

The taxes will depend on where they are at in Texas and how the land is treated. If it's seen as agricultural and out of the city limits, it could be really cheap.

There are some places north of Austin (I seem to recall) that had property taxes higher than 3-4%.

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jma9000
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Headquarters

Post by jma9000 » Thu May 03, 2007 4:37 pm

Why is DFA relocating its headquarters to Austin?

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craigr
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Re: Headquarters

Post by craigr » Thu May 03, 2007 5:17 pm

jma9000 wrote:Why is DFA relocating its headquarters to Austin?
I can render a few guesses why TX is a better location than CA though for DFA:

1) Lower cost of living.
2) No state income tax for businesses or individuals.
3) No capital gains taxes.
4) No dividend taxes.
5) Less business regulation and insurance costs.
6) Lower worker liability issues (Texas is a Right to Work state and it hard to get sued by employees for silly reasons).
7) TX is not big on funding every social program under the sun with taxpayer money.
8) Overall more business friendly atmosphere.

I had my technology company in Austin, TX. Some were trying to convince us to relocate to Silicon Valley. It didn't take more than a day or two of research to realize what a bad idea this would have been. Frankly, it's amazing CA has been able to keep as many businesses as they have. DFA is just one of many companies seeking exodus from CA.

If anything, I suspect DFA having operations out of TX instead of CA will result in a significant decrease in expenses for their investors. I say good for them.

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Post by SmallHi » Thu May 03, 2007 5:48 pm

If anything, I suspect DFA having operations out of TX instead of CA will result in a significant decrease in expenses for their investors. I say good for them.
Though not exactly attributable to the move to Austin, I have noticed the cost of their funds decline quite a bit (Int'l funds especially) since the early 2000s. Some Int'l and EM strategies, for example, have shed anywhere from 25% to 30% of their expenses (not a huge absolute decline given that they were low to begin with). Some of that maybe due to greater assets, ETF competition, or the general increase in competitiveness for Int'l management in the institutional arena.

I give them credit for doing this however, when, to this day, many of their asset classes are still the only game in town for institutional investors. (Int'l Small Value, Emerging Market Value, Emerging Market Small).

HI

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kramer
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Post by kramer » Thu May 03, 2007 6:15 pm

http://tinyurl.com/y6n58l

Also, a bit ironic because California's governor, Schwarzenegger, is part owner of DFA. Sometimes I don't understand why more companies don't leave California. But what happens with large companies in practice is that they just prefer hiring elsewhere so the changes are very slow. This has been happening gradually at the Fortune 500 company for which I worked here in California. At one point there was even a "California hiring freeze" and they have reduced real estate holdings in the state. But it takes years to accomplish.

A few years ago there was also a special income tax added for the highest earners, above and beyond the 9.3% state rate that kicks in around $40K for a single earner. That may have broke the camel's back for the DFA superstars.

Kramer
David Booth, Dimensional's chairman and chief executive, said the company plans to grow from 300 workers worldwide to 1,200 in the next 10 years, with 800 of those workers in Austin.

The move has "created a lot of excitement in the firm," Booth said Monday from the company's new Austin offices in the Terrace complex on South MoPac Boulevard (Loop 1) near Capital of Texas Highway (Loop 360).

The company considered more than a dozen cities when it began considering a move a year ago as the cost of living was soaring in California. Booth said the requirements included a more central location, plus a city that has good air transportation services and could meet the work force needs. Texas' pro-business climate helped, he said.
Sinquefield retired as co-chairman last year and moved back to Missouri but remains on the board. In an April interview with the St. Louis Post-Dispatch, Sinquefield said he was helping the company with the move and that rising costs in California played a role in the decision to relocate.

The region "is becoming a third-world country with increasing tax rates," Sinquefield said. "We're moving the company to Austin, Texas, where there is no personal income tax."

mchampse
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Remember Prop 13

Post by mchampse » Thu May 03, 2007 7:51 pm

California's taxes are about the middle of the road as I recall when everything is included. The big reason that they seem high, is that property taxes in California are low due to Prop 13. Firstly, Prop 13 limits property taxes to 1% of the purchase price (with allowances for a small additional amount for local bonds). Then re-assessments can't go up by more than 2% per year. The result is that if you've owned property for a long time, your taxes are going to be really low.

When I was purchasing a home, I saw one property that fetched over $1.1 million where the property taxes for the previous owner was $1000 year (the new owner will be paying over $1000 a month). This creates a situation where your overall tax burden will be lower relative to other states if you've owned your own home (or commercial property for that matter) for a long time and will be higher if you don't own property or have done so for a short period of time.

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kramer
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Re: Remember Prop 13

Post by kramer » Thu May 03, 2007 8:15 pm

mchampse wrote:California's taxes are about the middle of the road as I recall when everything is included. The big reason that they seem high, is that property taxes in California are low due to Prop 13. Firstly, Prop 13 limits property taxes to 1% of the purchase price (with allowances for a small additional amount for local bonds). Then re-assessments can't go up by more than 2% per year. The result is that if you've owned property for a long time, your taxes are going to be really low.

When I was purchasing a home, I saw one property that fetched over $1.1 million where the property taxes for the previous owner was $1000 year (the new owner will be paying over $1000 a month). This creates a situation where your overall tax burden will be lower relative to other states if you've owned your own home (or commercial property for that matter) for a long time and will be higher if you don't own property or have done so for a short period of time.
You are forgetting that property is well over twice as expensive in California as the country average due to desirable living location and insane zoning and building regulations. So 1.2% (about the average) in California on a much higher property value number is a significant tax. And that is assuming you are not under a special assessment. It is almost as much property tax as Texas for the same house. Here in Silicon Valley, it is significantly more property tax for the same house.

Yes, there are a few lucky people grandfathered in, but this is not the average. This also has the affect of forcing folks into long commutes which many of my former co-workers deal with daily to keep their property taxes down (i.e., moving is artificially expensive). The biggest tax of all in California is not even any of the direct taxes, but the indirect zoning tax that inflates building costs and keeps supply artificially low. At my local donut shop, I met a couple paying tiny property taxes on a place they bought over 30 years ago -- they were literally thrilled that young couples must pay 900K for a 60 year old 3 bedroom place in their working class neighborhood. This is why many schools have been closing each year throughout the Bay Area -- many families are just leaving. Most go to cheaper places inland within the state.

Kramer

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kramer
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Post by kramer » Thu May 03, 2007 8:18 pm

However, California taxes are not bad for a retiree with low income who already owns a place free and clear.

Kramer

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Re: #30M

Post by Wagnerjb » Fri May 04, 2007 8:05 am

JohnYaker wrote:David Booth, the top executive of DFA is moving its headquarters to Austin, and has purchased about 45 acres off RM 2222 for $30 million....

DFA investors: That's YOUR money. Nothing wrong with rewarding good performance, but.....

John
I suspect Jack Bogle could also afford the same property. Same for the founder of another low-cost outfit called "Walmart".

Remember, DFA gets the low 20-basis point ER. The advisor gets the 1% fee for financial advice and hand-holding and administration and tax planning, etc.

Best wishes.
Andy

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Re: Remember Prop 13

Post by mchampse » Sat May 05, 2007 12:09 pm

kramer wrote: You are forgetting that property is well over twice as expensive in California as the country average due to desirable living location and insane zoning and building regulations.
Its self perpetuating...Prop 13 is the cause of much of the bad zoning because it forces a lot of local governments to rely on sales tax revenue to fund operations. This creates the need for local government to encourage retail space over housing.

Also, Prop 13 inherently raises property values. When I bought, I looked at the downpayment I could afford and the total payments I would have to make, the combination of mortgage payment, property taxes and insurance. Since taxes are held to about 1.2%, that means that I can afford a larger mortgage payment (than if property taxes were 3% say) which in turn means that I can offer a higher price for the seller.

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Post by mptfan » Sat May 05, 2007 12:54 pm

kramer wrote:However, California taxes are not bad for a retiree with low income who already owns a place free and clear.

Kramer
By that standard, every state is good.

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Third world?

Post by baw703916 » Sat May 05, 2007 2:01 pm

The region "is becoming a third-world country with increasing tax rates," Sinquefield said.
I'd been under the impression that a lot of third world countries actually had low tax rates. This is due to a combination of several factors:

-The government provides very little infrastructure or social benefits. Poor people are pretty much left to fend for themselves.

-There is likely to be foreign aid money that the government can misappropriate to fund the salaries and costs that it does have to pay.

-The only people who would actually pay a significant amount of taxes are the elite who control the government and set policy--they usually aren't going to decide to tax themselves heavily to provide infrastructure and services that they don't need but will benefit everybody else.

Now admittedly, the "nominal" tax rate may actually be high...but what's relevant is what actually gets paid. :-)

On the other hand, I'd want to move out of Santa Monica...but then I grew up in northern California. :wink:

Best wishes,
Brad

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Post by austinite » Sat May 05, 2007 7:14 pm

From the Statesman article:
In addition to a home in Horseshoe Bay and an 8,500-square-foot house in Los Angeles' swanky Brentwood neighborhood, the Booths also bought a house off Westlake Drive that they are renovating. It will be ready in July. The family — Booth, wife Suzanne, son Chandler, 9, and daughter Erin, 16 — will move to Austin permanently in the summer of 2008.

FYI - His "other" Austin home that is off Westlake Drive is appraised at >$4M. This would put his taxes on this property in the close to $100K per year range. Although you could probably use the 2006 rate table and get a more exact number.

Just for those that are interested.

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Post by yobria » Sat May 05, 2007 7:29 pm

Well, I guess now the future performance of DFA can be predicted:

http://papers.ssrn.com/sol3/papers.cfm? ... _id=970413
We also find that, regardless of the source of finance, future company performance deteriorates when CEOs acquire extremely large or costly mansions and estates
ETFs anyone?

Nick

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Question

Post by Petrocelli » Sat May 05, 2007 7:35 pm

Where are the customers' lakefront homes?
Petrocelli (not the real Rico, but just a fan)

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Murray Boyd
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Post by Murray Boyd » Sat May 05, 2007 7:49 pm

Nick, I loved that paper!

I remember reading a long time ago that when a firm decides to relocate, it typically goes through an exhaustive process, considering transportation, schools, job markets, cost of living, etc ... and then puts the company HQ midway between the CEO's house and country club.

yobria
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Re: Question

Post by yobria » Sat May 05, 2007 8:14 pm

Petrocelli wrote:Where are the customers' lakefront homes?
Heh, reminds me of the best known financial planner in Arkansas when I lived there. Larry Washka, author of the dot.com boom classic "10 Stocks That Could Change The World", made enough money to create his own lake, Lake Washka there. You can imagine how his 10 world changing stocks have performed since then. I've yet to see a customer's yacht on this particular body of water.

Nick

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Black Knights
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Post by Black Knights » Sat May 05, 2007 8:39 pm

Murray,

I've had personal experience similar to your story:

In the mid-1980's, my entire division was relocated from the mid-West to Southern California. We had a temporary location but the new facility would not be announced for several months. Still, we all had to take our house-hunting trips and find new homes somewhere in the greater Los Angeles area. Daily rumors kept the expected location in constant change.

I found out where the newly designated Division head lived and looked for a house I could afford as close to him as possible. Eventual result: An hour commute for three months to the temporary location. Then a (unheard of in Southern California) 10 minute commute to the final new location :D .
Jed

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Re: Remember Prop 13

Post by tashina » Sat May 05, 2007 11:31 pm

mchampse wrote: The big reason that they seem high, is that property taxes in California are low due to Prop 13. Firstly, Prop 13 limits property taxes to 1% of the purchase price (with allowances for a small additional amount for local bonds).
Well, I wouldn't say a "small" additional amount. Last time I bought a house in California my tax rate was 1.8% (.8% for the school taxes for 30 years) and there were plenty of other communities around that were a little over 2%.

Example of how Prop 13 affects the new buyers compared to the old:

2002:

Sold very old house that had been in the family for decades. Selling price: well over a quarter million. Property taxes at time of sale:
$350 per year.
Bought brand new house for 100k less than house I sold. Taxes approx. $4500 per year.

Example of how Texas property taxes are reasonable:

2004:

Looked at condos in the East Bay Area (Dublin, Pleasanton). Could get a decent one with about 2000 sq ft for $600k (could have also bought an older house for that amount). Taxes at 1.25% would have been $7500 or so. Plus we would have paid state income taxes on top of that.

In Austin, 2000 sq ft house in a nice area of SW Austin would be about $230k. Taxes at 2.7% are $6200.

So you've got $1300 per year saved in property taxes, no state income tax, and $370k less of a mortgage or if you have the cash to buy the $600k condo, you'd have $370k to invest. The advantage of the California property is that it then falls under Prop 13. Then again, if your income goes up, you'll pay more in state income tax too.

Living in Austin, not so bad overall. 8)

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dissect the sentence

Post by Gregory » Sat May 05, 2007 11:57 pm

"The region "is becoming a third-world country with increasing tax rates," Sinquefield said. "

Dissect his statement; if you've been to southern CA lately you'll understand the "third world" part of his sentence. The increasing tax burden is apparently a separate problem. (Your interpretation of his statement may differ.)
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus

mchampse
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taxes

Post by mchampse » Sun May 06, 2007 1:43 am

So you've got $1300 per year saved in property taxes
Fast forward 20 years where the CA taxes have barely budged and the Austin taxes have gone up with the value of the property. Here is a list of the tax burdens of different states as a %age of income:

http://money.cnn.com/pf/features/lists/ ... index.html

California is 20th at 10.3% and Texas is 43rd at 9.3%. This means that the average person with a $50k income will pay $500 more in California then Texas. Of course, how much you actually pay will vary on a variety of different things. They compiled this list by taking the total taxes paid to state and local governments and dividing by total income earned in those states. However, a landless or recently landed person in California will pay much higher taxes than someone in Texas while someone who has owned property for a long time in CA will have lower total taxes than the equivalent person in Texas.

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Re: dissect the sentence

Post by Jack » Sun May 06, 2007 2:12 am

Gregory wrote:"The region "is becoming a third-world country with increasing tax rates," Sinquefield said. "

Dissect his statement; if you've been to southern CA lately you'll understand the "third world" part of his sentence. The increasing tax burden is apparently a separate problem. (Your interpretation of his statement may differ.)
I was also taken aback by his "third-world country" statement. I would have expected him to move the headquarters to Hayden Lake, Idaho.

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Re: Remember Prop 13

Post by yobria » Sun May 06, 2007 10:37 am

tashina wrote: Living in Austin, not so bad overall. 8)
Don't forget to factor in the higher incomes of the Bay Area, plus utilities, especially A/C in sweaty Austin. Taxes are high in CA, but I'm enjoying $50/month heating bills and mild weather all the time.

Nick

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Post by gkaplan » Sun May 06, 2007 12:45 pm

I live in Ventura, California. I don't have an air conditioner and don't need one. I've probably use the heater in my apartment about once a year.

(By the way, Jack, I agree with your impressions and your reaction.)
Gordon

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Re: Remember Prop 13

Post by craigr » Sun May 06, 2007 1:15 pm

yobria wrote:
tashina wrote: Living in Austin, not so bad overall. 8)
Don't forget to factor in the higher incomes of the Bay Area, plus utilities, especially A/C in sweaty Austin. Taxes are high in CA, but I'm enjoying $50/month heating bills and mild weather all the time.

Nick
My AC bill in Austin for a 2300 sq. ft. house at the peak heat season was about $200 a month. My house was pretty old though. When I ran the AC at 78 degrees it was even lower.

I spent a load of time in San Jose and lived in Austin. A two bedroom apartment in San Jose was $3K a month. In Austin, about 1.5K a month. I owned a 3 bedroom house I bought for about $200K that was in a very close-in neighborhood. That same house in the Bay Area would be close to $1 Million. Groceries were cheaper, gas was cheaper, restaurants were cheaper, electricity rates were cheaper. You had an 8% sales tax but there is no income tax. Property tax rates were not horrible compared to what you'd pay if there was an income tax.

I like San Francisco and the Bay Area, but there is absolutely no doubt that Austin is much cheaper than Silicon Valley in virtually all aspects.

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Post by SmallHi » Sun May 06, 2007 2:22 pm

Where are the customers' lakefront homes?
My guess is they are far and wide for long term Dimensional investors...Bill Bernstein for example is no doubt (or could be) one of them:
From...The Cross-Section of Expected Stock Returns:
A Tenth Anniversary Reflection
(6/02)

Ten years ago this month, Eugene Fama and Kenneth French fired the shot heard ’round the world. Its echoes still plainly reverberate today in boardrooms and trading floors. And although most investors are unaware, these effects also appear regularly in their mailboxes under the guise of investment-account statements.

The projectile in question was a 39-page piece bearing the above title, published in the June 1992 edition of Journal of Finance. It was no walk in the park; even among the Journal’s rarefied readership, I doubt many grasped the full meaning without multiple readings and hours of peer discussion.

Its import lay on three levels:

The month-to-month performance of a diversified portfolio of U.S. stocks can be explained by only three factors: the portfolio’s exposure to the market itself, to small-cap stocks, and to value orientation (the latter defined by price-to-book ratio). In plain English, "Show me the returns series of any U.S. diversified portfolio and, in almost every case, I can explain nearly all its performance based on these three factors; the precise securities are irrelevant." And, "Oh, by the way, without knowing exactly what’s in this portfolio, I can tell you the median market cap and price-to-book ratio just by looking at its returns."

The corollary of their work was that once one considered the size and value factor "loadings" of a diversified U.S. all-stock portfolio, the market loading—Sharpe’s famous "beta"—did not explain return. In other words, portfolios of high-beta stocks did not have higher returns than portfolios of low-beta stocks. Beta was dead.

Most importantly, the size and value factors, because they were surrogates for risk, had positive returns. Therefore, value stocks should have higher returns than growth stocks, and small stocks, higher returns than large stocks; small value stocks should have the highest returns of all. The one place where the model "didn’t work" was with small growth stocks, which empirically had much lower returns than expected, having the worst performance of the four "style corners" (large growth, large value, small value, and small growth).

Heeding these findings, investors (myself included) began to accumulate small- and value-weighted portfolios

Code: Select all

Growth $3.6M since 1993:

DFA US SV = $30,000,000
Russell 2000 Value Etf (hypothetical) = $20,800,000
Vanguard US Total Market = $14,700,000
I think that may explain the animosity 8) !

SmallHI

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Re: Remember Prop 13

Post by tashina » Sun May 06, 2007 3:36 pm

yobria wrote: Don't forget to factor in the higher incomes of the Bay Area, plus utilities, especially A/C in sweaty Austin. Taxes are high in CA, but I'm enjoying $50/month heating bills and mild weather all the time.

Nick
My utilities bills are about the same in Austin as they were in California (use a little more, rate is lower). Food is about 1/3rd cheaper. Traffic is far better in SW Austin than anywhere I've lived before. My auto insurance went down; homeowner's insurance is the same. I'm trying to think of anything that's higher, but honestly can't think of anything.

We left the Bay Area because we were sick of it being dreary most of the year. Dublin was 55 degrees and cloudy from about late November through April. San Diego was okay weather-wise, albeit a bit boring (lived there for my first 35 years). I like Austin's weather for the most part. Not too severe except on rare occasions, no earthquakes, and my neighborhood pool is nice and warm on summer evenings. Every few weeks in the winter, there is a day or two of 80 degree weather that I find delightful.

Can't comment on the salary difference for husband's privacy, but I can say that in the computer age, salaries in tech jobs often don't change much when you move within a company.

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preserve
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golf

Post by preserve » Mon May 07, 2007 5:15 pm

If golf matters to you, its a good deal in Austin.

I don't think many people can afford to golf 3-4 times a week in the bay area.

After moving to texas, i don't blink about golfing whenever its not raining or i'm not injured.

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Re:

Post by newbogleb » Mon Feb 17, 2014 7:14 pm

From... The Cross-Section of Expected Stock Returns:
A Tenth Anniversary Reflection(6/02)

Ten years ago this month, Eugene Fama and Kenneth French fired the shot heard ’round the world. Its echoes still plainly reverberate today in boardrooms and trading floors. And although most investors are unaware, these effects also appear regularly in their mailboxes under the guise of investment-account statements.
Heeding these findings, investors (myself included) began to accumulate small- and value-weighted portfolios

Code: Select all

Growth $3.6M since 1993:

DFA US SV = $30,000,000
Russell 2000 Value Etf (hypothetical) = $20,800,000
Vanguard US Total Market = $14,700,000


I think that may explain the animosity 8) !

SmallHI
How are these two people (Eugene Fama and Kenneth French) related to the company DFA? Does this company employee these people as consultants? Do they invest the same way?

To be provincial, is vanguard going to imitate F&F?

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Re: Re:

Post by nisiprius » Mon Feb 17, 2014 7:24 pm

newbogleb wrote:...How are these two people (Eugene Fama and Kenneth French) related to the company DFA? Does this company employee these people as consultants? Do they invest the same way?...
I don't know the history of their involvement, but co-founder David Booth has been closely connected with the University of Chicago school of business; indeed, he made the largest donation ever made to any business school, which has now been renamed Chicago Booth School of Business in his honor. The company has always identified itself with applying academic research in financial economics to its products, and currently Fama and French are indeed connected with the firm:

Academics
Eugene F. Fama, University of Chicago: Board Member of Dimensional Fund Advisors, Consultant for Dimensional's Fixed Income and Value Strategies

Kenneth R. French, Dartmouth College: Board Member of Dimensional Fund Advisors, Consultant and Head of Investment Policy
How hands-on that involvement is I don't know. The whole list has ten names on it, and I think "stellar" is a fair description, but many of the others are listed merely as "Board Member."

For more, see http://www.bogleheads.org/wiki/Dfa
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Re: CEO of DFA moving to Austin, Texas

Post by clubby » Mon Feb 17, 2014 8:20 pm

In CA we have what's called a sunshine tax. Enjoy shoveling your driveways and sliding around in your cars on the ice while the temperature where I live hasn't been below 70 since January 1st. It was 86 today. In February. :D You don't want to pay a sunshine tax, don't move here, pretty simple.

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Re: CEO of DFA moving to Austin, Texas

Post by TexasPenny » Mon Feb 17, 2014 9:04 pm

Living in Austin is awful! Awful I tell you! Ignore all the great things people are talking about...they're lying! Please...don't move here! Don't. Move. Here. (yes, it was 74 degrees today and we went kayaking on the lake.....) But, please...don't move here! Move to Dallas. I hear Dallas is lovely.

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Re: CEO of DFA moving to Austin, Texas

Post by Valuethinker » Tue Feb 18, 2014 3:06 am

Jack wrote:
Gregory wrote:"The region "is becoming a third-world country with increasing tax rates," Sinquefield said. "

Dissect his statement; if you've been to southern CA lately you'll understand the "third world" part of his sentence. The increasing tax burden is apparently a separate problem. (Your interpretation of his statement may differ.)


I was also taken aback by his "third-world country" statement. I would have expected him to move the headquarters to Hayden Lake, Idaho.
Sinquefield's politics are well known. It's a good cheap shot.

I have a lot of worries about California, but the only way you could truthfully read 'third world country' is as quasi-racist, it has a huge Hispanic (and other) influx ie people actually from the Third World.

What he wants to make is a gibe about taxes and regulations/ bureaucracy (As Baw points out, third world countries often have *low* taxation, but bad infrastructure and corrupt bureaucracies). Instead he implies CA has too many brown people-- (and a rising gap between rich and poor, another trait of 'the third world' but I doubt he is concerned about that).
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Re: Remember Prop 13

Post by Valuethinker » Tue Feb 18, 2014 3:08 am

mchampse wrote:
kramer wrote: You are forgetting that property is well over twice as expensive in California as the country average due to desirable living location and insane zoning and building regulations.
Its self perpetuating...Prop 13 is the cause of much of the bad zoning because it forces a lot of local governments to rely on sales tax revenue to fund operations. This creates the need for local government to encourage retail space over housing.

Also, Prop 13 inherently raises property values. When I bought, I looked at the downpayment I could afford and the total payments I would have to make, the combination of mortgage payment, property taxes and insurance. Since taxes are held to about 1.2%, that means that I can afford a larger mortgage payment (than if property taxes were 3% say) which in turn means that I can offer a higher price for the seller.
You are right.

All the evidence shows property taxes get capitalized into the value of the property. Higher taxes = > lower property values, and vice versa.

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Re: Headquarters

Post by Valuethinker » Tue Feb 18, 2014 3:12 am

craigr wrote:7) TX is not big on funding every social program under the sun with taxpayer money.
Not many people realize just how big 'Three strikes and you are out' *is*.

California has a prison-industrial complex: the unions scare the voters, who vote for more incarceration (of in many cases, non violent offenders). The state spends more on prisons than on higher education.

So 'every social program under the sun with taxpayer money' - a big factor (that was voted on in a referendum) is the prison system.

The problem in California is voter referendums, which is a system which is easily manipulated by vested interests, and which leads to economically incoherent policies-- such as 3 Strikes and Proposition 13. You've also got gerrymandered electoral districts and a budgetary law which says you need 66% of the legislature (?) to pass a budget. If you think about the Game Theory of that, that gives the minority party no incentive to cooperate (in fact a disincentive) in governing the state. (there have been some recent reforms in all this, I have not tracked them).
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Re: Headquarters

Post by Valuethinker » Tue Feb 18, 2014 3:20 am

craigr wrote: I had my technology company in Austin, TX. Some were trying to convince us to relocate to Silicon Valley. It didn't take more than a day or two of research to realize what a bad idea this would have been. Frankly, it's amazing CA has been able to keep as many businesses as they have. DFA is just one of many companies seeking exodus from CA.
You need to understand a cluster. Industries cluster. The best, biggest cluster of tech companies (in the world) is in the San Jose area. Even the 'social networking' companies have simply moved to the nearest 'hip' urban centre (hence the Googlebus). This goes all the way back to Mr. Hewlett and Mr. Packard and their contract with the government to produce oscilloscopes (it's often a large government contract that starts the basis for this thing: hence the European aircraft industry (civilian) is centred in Toulouse, where the French government encouraged aircraft makers to relocate both before WW2 (to avoid German bombing) and post).

It might make more sense to start a hedge fund in Austin, Texas, but hedge funds are based in Connecticut (or Park Avenue, or Mayfair in London).

Medical device manufacturers (orthopaedics) cluster around southern Michigan/ Indiana, apparently.

Southern California has at least 3 clusters of which I am aware. The first is (obviously) the movie-creative industries (Pixar etc.) that centre around Hollywood. The second is the pornographic movie industry, which is based in the San Fernando Valley (and is a world leader in that market) but in structural decline. The third is a financial services cluster around the spin offs of Michael Milliken's office of Drexel Burnham Lambert in Beverly Hills (that went bust, but the people stayed and remained innovative in the fixed income field).

The 4th was the aerospace-defence cluster, (see the impressive factory scenes in the Roy Scheider/ Elmore Leonard '52 Pickup'). That started with WW2 and lasted until the end of the Cold War. There were literally hundreds of specialized components manufacturers. I think that is pretty much all gone, now.

Why this is so is an interesting debate but goes under the name 'external economies of scale'. The infrastructure and personnel are already there for new startups, ditto the service providers (lawyers, IT, landlords etc) and the business angels. This can offset a high cost of living and doing business.

You get tech companies in Texas (Ross Perot's EDS, Dell etc.) but they don't tend to be the bleeding edge ones (the other 2 clusters are the Triangle in North Carolina, and around Boston, where DEC was founded).

On the other hand, oil drilling technology is Houston, hands down, in the world. There's stuff in Aberdeen, Stavanger etc but Houston.
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Re: Re:

Post by Valuethinker » Tue Feb 18, 2014 3:24 am

nisiprius wrote:
newbogleb wrote:...How are these two people (Eugene Fama and Kenneth French) related to the company DFA? Does this company employee these people as consultants? Do they invest the same way?...
I don't know the history of their involvement, but co-founder David Booth has been closely connected with the University of Chicago school of business; indeed, he made the largest donation ever made to any business school, which has now been renamed Chicago Booth School of Business in his honor. The company has always identified itself with applying academic research in financial economics to its products, and currently Fama and French are indeed connected with the firm:

Academics
Eugene F. Fama, University of Chicago: Board Member of Dimensional Fund Advisors, Consultant for Dimensional's Fixed Income and Value Strategies

Kenneth R. French, Dartmouth College: Board Member of Dimensional Fund Advisors, Consultant and Head of Investment Policy
How hands-on that involvement is I don't know. The whole list has ten names on it, and I think "stellar" is a fair description, but many of the others are listed merely as "Board Member."

For more, see http://www.bogleheads.org/wiki/Dfa
the founders of DFA took Fama's finance class at U Chicago MBA as I recall. So this is a very long term association.

We should recall that Long Term Capital Management, the Hedge Fund that failed, had 2 Nobel Prize winning economists on its investment committee-- Robert Merton and one other. It didn't save them.

DFA is fundamentally aligned with what Fama teaches about efficient markets, so there is not the same risk here, but having smart academics on your board does not guarantee good investment performance.

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Re: CEO of DFA moving to Austin, Texas

Post by Valuethinker » Tue Feb 18, 2014 4:47 am

It's worth noting that whilst it is OK for any individual company to move to a lower cost US state for personal tax and business cost reasons, that process does not end there.

A lot of financial services companies in London now have back offices in Hyderabad or Chennai or other Indian cities (which are themselves much cheaper than Bangalore and Mumbai). Quality of people is high-- trained accountants and lawyers, and once the teething problems are worked out, the quality can be just as good (we've all had hell with Indian call centres, but I've worked at quite high quality shops doing accounting and other back office functions).

And of course there are places with lower personal income taxes than the USA, should the founders wish to go offshore.

So Texas might win today, but in 10 years?

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Re:

Post by frugaltype » Tue Feb 18, 2014 6:46 am

kramer wrote:However, California taxes are not bad for a retiree with low income who already owns a place free and clear.

Kramer
I made a significant financial mistake moving from CA to a state with no Prop. 13. I can remember when property taxes in CA, pre-Prop. 13, were literally doubling each year. Prop. 13 saved people's homes. Where I live now, property taxes have gone up enormously since I moved here, and they will get worse due to the government employees' pension mess. Before I moved, I looked at sample property taxes here, but neglected to factor in the lack of a limit on increases. There is a per-town limit on increases, but that is of little help to the individual homeowner.

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Re: CEO of DFA moving to Austin, Texas

Post by abuss368 » Tue Feb 18, 2014 7:40 am

I did read that Arnold Schwarzenegger owns part of DFA.
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Post by richard » Tue Feb 18, 2014 7:49 am

frugaltype wrote:I made a significant financial mistake moving from CA to a state with no Prop. 13. I can remember when property taxes in CA, pre-Prop. 13, were literally doubling each year. Prop. 13 saved people's homes. Where I live now, property taxes have gone up enormously since I moved here, and they will get worse due to the government employees' pension mess. Before I moved, I looked at sample property taxes here, but neglected to factor in the lack of a limit on increases. There is a per-town limit on increases, but that is of little help to the individual homeowner.
You might consider moving back to California if it was better for you.

Why single out pension costs rather than any other cost of state and local government?

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Re: CEO of DFA moving to Austin, Texas

Post by MP173 » Tue Feb 18, 2014 8:04 am

Regarding that sunshine tax in California...we currently have about 15 inches of snow here in NW Indiana.

But, we also have plenty of water...and will have even more when it warms up!

Ed

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Re: dissect the sentence

Post by Raymond » Tue Feb 18, 2014 8:38 am

Jack wrote:
Gregory wrote:"The region "is becoming a third-world country with increasing tax rates," Sinquefield said. "

Dissect his statement; if you've been to southern CA lately you'll understand the "third world" part of his sentence. The increasing tax burden is apparently a separate problem. (Your interpretation of his statement may differ.)
I was also taken aback by his "third-world country" statement. I would have expected him to move the headquarters to Hayden Lake, Idaho.
Nice logical fallacy: False dilemma

However, I personally would not like to live in either area, anyway :twisted:

-----

So, does the availability of DFA funds in the Utah 529 college savings plan augur ill or well?
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Re: CEO of DFA moving to Austin, Texas

Post by Valuethinker » Tue Feb 18, 2014 8:51 am

Raymond wrote:
Jack wrote:
Gregory wrote:"The region "is becoming a third-world country with increasing tax rates," Sinquefield said. "

Dissect his statement; if you've been to southern CA lately you'll understand the "third world" part of his sentence. The increasing tax burden is apparently a separate problem. (Your interpretation of his statement may differ.)
I was also taken aback by his "third-world country" statement. I would have expected him to move the headquarters to Hayden Lake, Idaho.
Nice logical fallacy: False dilemma

However, I personally would not like to live in either area, anyway :twisted:

-----

So, does the availability of DFA funds in the Utah 529 college savings plan augur ill or well?
In the original point 'California becoming a third world country' does the founder of DFA mean?

- California has bureaucracy and corruption (like a 3rd world country)?

- public services are breaking down? (which ones: fire, police, roads, public transport, schools, universities?)

- taxes are high (but that's more like saying California is becoming like France or Sweden, hardly 3rd world countries)

- regulation is onerous, thus preventing him from doing what he wants? (but is that only true of 3rd World countries? He'd love the planning fights to build a new basement in London, then. Or the Co-op Board of your typical Upper West Side Co-Op)

OR

Does he mean southern California is now full of people who don't look like the white Americans of previous generations? (but look more like the original Mexican inhabitants ie the Spanish-Mexican settlers who displaced and intermarried with the locals who were in turn marginalized by the white settlers of the 19th century).

In which case I presume Idaho is much whiter?

You see it's easy to throw around these terms like 'Third World country'. But at the end it comes down to (most probably) a fairly selfish 'I can't do what I want'. Which is OK, but then he should say that.

It's OK for him to say 'cost of doing business and personal income taxes are too high'. These are real issues in California for businesses. And the State is unusually reliant on income and capital gains taxes for its revenues-- the tax base is narrow (partly due to Proposition 13). But that would sound less persuasive, and more self interested than 'becoming a Third World Country' does.

FWIW The Economist amongst others has made analogies Argentina to California. And the problem of populist measures, and not investing in the future, is there-- see the stresses UC Berkeley and UCLA are under (these have consistently ranked in the top 20 universities *in the world* and so there is a real loss there). This does not qualify California as a 'Third World country'/.

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