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  • Report: Another high-yield fund liquidates  [View news story]
    Lucidus was only down slightly over 4 % YTD. One of their main investors simply wanted his money back. Strange how this little detail gets lost in the media frenzy to hype this into another Lehman moment.

    See also:
    Dec 14, 2015. 01:19 PM | 3 Likes Like |Link to Comment
  • Junk Bonds - Whistling Past The Junkyard  [View article]
    Hi Carno, I'm not super familiar with PHT. It looked like it used to trade at very large premiums, so obviously people really liked it in the past. It has since fallen to a discount, but there are many other closed end high yield funds that offer much steeper discounts and thus a little more safety. You may want to consider swapping some of it for something that is roughly comparable but trading at higher discounts, for example HNW.

    That being said, there seems to be something about it that people really like (and that made it hold up much better than so many other funds), and it may return back to a premium quicker than some of the others. Tough call. If you feel nervous about it, either swap some or sell some until you feel ok about the remaining position.

    I personally feel high yield is offering decent value right now, and closed end funds are trading at very attractive discounts. Just not necessarily this fund, but that does not mean it will fall further or not recover quicker.
    Dec 12, 2015. 07:00 PM | 1 Like Like |Link to Comment
  • Junk Bonds - Whistling Past The Junkyard  [View article]
    I have no idea what the author is trying to say. It's like a semi-rambling stream of consciousness.
    Dec 12, 2015. 05:03 PM | 13 Likes Like |Link to Comment
  • Long The S&P 500 But Feeling A Little Uneasy? PUTX May Be Your Answer  [View article]
    Before you guys start hyperventilating about how "risky" the strategy is why don't you check out the performance and risk characteristics of the CBOE Put index.

    This strategy has its use in a diversified portfolio, and will probably perform decently enough over long time horizons. But no, it's no "conservative" strategy and it's no bond alternative either.
    Jul 10, 2015. 08:50 PM | Likes Like |Link to Comment
  • Energy sector weighs heavily on European shares  [View news story]
    Seriouspatt, I think the worry is that the oil price collapse is at least partly due to a slowdown of economic activity, and not just because of additional supply from fracking in the U.S.
    Dec 12, 2014. 06:06 AM | 3 Likes Like |Link to Comment
  • How 2014 Could Be Like 1929  [View article]
    I think it is entirely possible and not even all that difficult to write "How 2014 could be like ANY specific year over the last 100 years" and provide some good arguments.

    The problem is that apart from the intellectual exercise all these articles are virtually useless. You will always find a number of variables that are similar and a number that are quite different. Not sure how this helps anybody in the end.
    Feb 23, 2014. 05:53 PM | 1 Like Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    US value stocks can deliver completely different returns than European value stocks, even though they are both value. And not just over one year, but easily over a much longer time period. Same with growth or small cap factors. Growth stocks can become value stocks without delivering either factor's associated return in the meantime.
    I just don't get how the factor model by itself is supposed to help you construct superior portfolios without you also having some idea of other strategies that you use to employ them.
    Even if you correctly figure out that your client loves value stocks, and you put them into 90 % global value, if over the next 20 years value strongly underperforms growth then your client did not get good advice.
    Feb 12, 2014. 07:13 PM | Likes Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    I totally agree that there are strategies you can use that utilize those factors smartly. But Larry never really mentions strategies other than "don't pay for active management".
    He has apparently come to the conclusion that the most effective use of his time is to not even try to have the highest performance and be part of the top 20 %, but instead to primarily focus on marketing and to write article after article dismissing active managers and indirectly touting his own firm.
    His repeated praises of factor models surely must sound impressive to any client with no background in finance. By mixing and mashing DFA, Vanguard and some other funds of his choice he'll create simple portfolios in no time that will most likely not blow up, and actually deliver decent results. Most clients will be happy with that, because most of Larry's competition does a worse service for their clients than he does. I just hope they never wonder how much more money they could have made had Larry spent even half his energy on being part of the top 20 % instead of just on marketing the insight that it's really, really difficult to pick those managers who will outperform their markets over the very long run in advance.
    Feb 12, 2014. 07:00 PM | 2 Likes Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    Even if somebody gave you the FUTURE factors of everything, you'd still need to know how well small cap, value and growth do over the future to make good investment decisions. So in any case you still need to be a semi decent forecaster or passive benchmarks would beat you.
    Your advantage truly is that there are no widely spread passive benchmarks for advisers or somebody could point out your wrong guesses and shortfalls. I guess you could use target date funds, but I don't think most of them are all that great. Eventually they will come though and then your marketing strategy of simply pointing towards the mutualfund industry and saying "Ha Ha" will get a little harder. But since most people stick with advisers who they like regardless of their true skill you should be fine in any case, because you strike me as a truly decent and honest fellow, and most people would be better off with you managing their portfolios.
    Feb 12, 2014. 05:34 PM | Likes Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    Take for example Brazilian stocks. 5 years ago they were probably highly correlated with growth factors. Is that still the case? Or are they now more explained by value? What about tech stocks in 2000 versus early 2003? Gold stocks 2 years ago vs now? How stable are your factors for these sectors?
    Feb 12, 2014. 05:19 PM | Likes Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    Larry, I'm seriously at a loss as to how exactly factor models help you put together portfolios for the future. I mentioned the question above, but don't want it to get lost. Please help me out.
    So you can use factor models to determine the PAST exposure of a portfolio to certain factors. For example you can run a regression on mutual fund manager A and say "well, over the last 5 years he derived 80 % from value, and 10 % from growth, and 10 % from small cap".

    What exactly is the useful takeaway from this insight? Yes, now you know that if you climb into your DeLorean and go back 5 years you can save money: Instead of giving 100 % to mutual fund manager A it's cheaper to just put 80 % into a value fund, and 10 % into a growth fund and 10 % into small cap. Is that it?
    Or do you assume that these factors are stable over time, so you only run a regression once and then you have the fund manager completely figured out and can always beat him? That may work well enough for closet indexers but probably not for capable managers.

    I also still don't understand how you can just dismiss sectors based on your factor models. The exposure of sectors to factors is not stable over time. Sometimes it will correlate more with value, sometimes more with growth, and sometimes more with small cap. And what exactly those exposures are like you can only determine in hindsight, which does not mean at all they will remain stable. A fund manager that can skillfully rotate in and out of different asset classes like Seth Klarman or Howard Marks would run circles around your factor models that they lose all applicability.

    So how does any of this help you do well for your clients in the future? How do you determine how much to put into any specific fund for your clients? Please advise.
    Feb 12, 2014. 05:15 PM | Likes Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    Client satisfaction is great, but having satisfied clients does not really mean you do a great job in your asset allocation. Absent obvious blowups and shortcomings it is very, very difficult for a layman to discern whether his adviser now did a good job or whether the market was just favorable. It takes even more skill to realize if money was left on the table, that kind of thinking is alien to most people who do not do this regularly. So I think pointing to satisfied clients alone doesn't prove that you put together fantastic portfolios.

    A good financial adviser is important and provides plenty of valuable services. And Larry, I honestly like your advocacy for index funds and low cost products. You provide a good, valuable service. But like most people you seem to turn what you believe into a religion and a dogma that everybody should follow, with no downside.

    You can point to Fama & French and factor models as much as you want, they hardly help you discern what assets will do well over the next 10-20 years.

    It's great to know what exposure something had in the past to growth and value and small cap and whatever other factors you want, but how exactly does it help put together good portfolios for the future, portfolios that will beat a completely unmanaged passive benchmark portfolio?

    I'm aware that not too many of those benchmarks exist yet, and I'm starting to believe that your self assuredness is based on that shortcoming, because if those were as readily available as they are for mutual fund managers people would be asking questions about the value added of your asset allocation process as well. It's great to be in funds that beat 80 % of mutual funds over 10 years, but not if your allocation to them seriously distracted from overall performance.
    Feb 12, 2014. 03:18 PM | 1 Like Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    Larry, can you explain to me how exactly you use your factor models in putting together client portfolios? How you derive those factors and how do you allocate assets based on them?
    Feb 12, 2014. 02:49 PM | Likes Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    Larry, I'm sure you deliver good work and you're worth the money you are being paid. But that is not really the issue here. I just wanted to see how your portfolio returns stack up compared to completely passive algorithms. Many of your articles are variations of "mutual fund managers are not worth the cost, because they cannot beat the market". However, there is also a market for you that you should be compared to, to see if your asset allocation beats a completely passive benchmark. If not, then investors are better off by completely passively investing their money (no Larry Swedroe making any decisions anymore) and to just come to you for advice in other areas unrelated to asset allocation.
    Feb 12, 2014. 02:46 PM | Likes Like |Link to Comment
  • Why I'm A Passive Investor (And You Should Be Too)  [View article]
    Larry, the question remains, do the portfolios you generate for your clients outperform a completely passive benchmark after costs over a long time horizon? I'm not talking about 5 years, but 20-30 years.

    You are essentially saying that mutual fund managers cannot reliably outperform over the very long stretch, but you exclude yourself from similar measurements, partly by counting other services you perform for your clients into your fees, so that it isn't directly comparable any more.
    Feb 11, 2014. 09:59 PM | 4 Likes Like |Link to Comment