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JasonC

JasonC
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  • Futures slide as Russian troops reportedly enter Ukraine [View news story]
    The Russian side of this is rather like the Nazi side in WW II. No thank you.
    Aug 29 03:14 AM | 3 Likes Like |Link to Comment
  • Futures slide as Russian troops reportedly enter Ukraine [View news story]
    I suggest selling Ukraine 50 nuclear weapons. On credit, easy terms, and cheap.
    Aug 28 09:11 AM | 5 Likes Like |Link to Comment
  • Ukraine's Crisis: It Is Not About The Geopolitics; It Is The Economy [View article]
    Nothing is relative. Putin is a mass murderer. His paid enablers are going straight to hell.
    Aug 27 09:41 PM | 2 Likes Like |Link to Comment
  • Ukraine's Crisis: It Is Not About The Geopolitics; It Is The Economy [View article]
    There is a country by the name Ukraine today.

    And there is a lawless murdering dictator by the name Putin today.
    Aug 27 08:30 PM | 2 Likes Like |Link to Comment
  • Ukraine's Crisis: It Is Not About The Geopolitics; It Is The Economy [View article]
    Serbia didn't matter either, 100 years ago. Until leaders in great powers decided that it did. Then it kind of mattered...
    Aug 27 01:22 PM | 1 Like Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    AuCoaster - I don't disagree that risk tolerance, especially when one is right, can significantly increase the rewards of investing. I just use overall leverage as my control dial for that purpose, most of all. Yes I will also vary my asset mix and go higher on equities *when they look undervalued*. I am willing to really gun the leverage when I think *everything* is undervalued. But I call my shots on that stuff, and cut it back if and when the bets work out (let the equity run, repay some of the leverage etc). What I don't do is stay 100% in stocks regardless of how their valuation looks to me, just to increase overall risk run for possible reward. I want to concentrate my risks in time, to the times I think things are all undervalued, and keep diversified, always. Just what works for me...
    Aug 27 12:40 AM | 1 Like Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    Tack - sounds very reasonable. I run higher risk on the leverage side (my carry cost works out to 2.5% nominal, seems easy to beat, to me), but then I have the longer time horizon and ongoing saving additions to handle it easily. Cheers...
    Aug 27 12:29 AM | 1 Like Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    mike904 - personally, I've made good money in Arizona real estate, by buying when everyone else was selling. Just saying - every pundits mass disaster has a counter party trading it right.
    Aug 27 12:26 AM | 2 Likes Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    Leverage is the best friend of a value investor who understands volatility.

    Personally, judicious use of leverage at the crash bottom at the start of 2009 has enabled me to increase my net worth by a factor of 9 since that time. Yes you read that correctly. I was levered 6.7 times at the start of that period (only 15 cents of each dollar I had invested was my own, the other 85 cents were borrowed), tapering to 3 to 2 leverage now. There is no reason whatever to limit your returns to your own capital if you know how to allocate capital successfully. Precisely if you actually do know you are buying dollar bills for 50 cents, it is crazy to turn down others men's offers to lend you more capital at 2.5% per year.
    Aug 27 12:14 AM | 3 Likes Like |Link to Comment
  • Ukraine's Crisis: It Is Not About The Geopolitics; It Is The Economy [View article]
    The violent crisis is not over. Putin has not been checked. He will choose his speed and tactics, which may include a gas cut off through the coming winter, peace offensives to keep the west out, direct intervention nibbles by the Russian military, on top of continued arms, leaders, and operatives running the proxy war in the east. Nothing Russia has faced in terms of costs have given him any reason to stop. He isn't going to, unless and until he is forced.
    Aug 26 11:46 PM | 4 Likes Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    My bias is to be invested in a balanced and diversified portfolio, with real estate, stocks and investment grade bonds and preferreds, and to carry all of the above with moderate leverage and add to the positions continually, dollar cost averaging in new savings. It isn't just theoretical, it works just fine in practice, as well. MPT is simply an advance on thinking that doesn't know or understand MPT. It is just how sensible and businesslike people go about portfolio investment.
    Aug 26 05:45 PM | 1 Like Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    Tack - my financial preferreds in PGF returned a cumulative 50% over that same stretch; so did my real estate pretty much. Loomis Sayles bond fund also returned a cumulative 49%. Yes those are each less than the SP500; the vols were also lower for the mix. And with my balanced asset mix, chosen for those modest vols and diversification, I can and do run 3 to 2 leverage. YMMV, but it works fine for me.
    Aug 26 05:40 PM | 1 Like Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    Tack - my investment cash is minimal (I don't consider transactions accounts), my liquid assets are currently 60-40 stock to bond. (A bit of the stock is actually REIT, a bit is foreign; some of the bond portion is actually preferred, most are intermediate corporates, etc). But really I also have real estate equal to those liquid assets (again) and an overall 3 to 2 leverage, so that doesn't cover the whole positioning. As for age, I am 48. FWIW.
    Aug 26 05:29 PM | 1 Like Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    We bought heavily. The asset allocation increase was a modest 10% increase, but the rebalancing discipline already had a large effect. That meant a buy order for one quarter equal to about 18% of the whole portfolio, and a 25% increase in the stock portion. That was certainly heavy buying for us.
    Aug 26 04:55 PM | 1 Like Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    AuCoaster - no, sorry, that doesn't remotely follow. To see why we have to look at what the different approaches achieve in modern portfolio theory terms - what we achieve in return for what we accept in risk.

    An all stock portfolio achieved a 9.2% annual return from the 1929 buy in point, but the standard deviation accepted to get that is 21.4% per year.

    A permanently balanced portfolio of 60/40 stock and bond achieves a slightly lower 8.1% annual return for a much lower 12.4% risk.

    All bond achieves only a 5% annual return for a 7.6% risk.

    And the CAPE rule portfolio? 9.0% return for 13.5% risk. It gives up only 0.2% in annual return and it cuts the risk by more than a third, to within 1% of that of the permanently balanced portfolio. Otherwise put, it gets 1% higher returns than the permanently balanced portfolio for only 1% higher standard deviation. It is, in fact, above the entire "frontier" of all fixed mixes of stock and bond.

    You would be better off using the CAPE portfolio and very modest leverage, than the all stock portfolio.

    Suppose our cost of carry point is 0 SD and 3%. Then the Sharpe ratios of the different pure instruments are 2% excess return for 7.6% risk in bonds, and 6.2% for 21.4% risk in stocks, which are actually quite comparable to each other - 0.26 for bonds and 0.29 for stocks, excess return per unit of risk. That is saying that roughly, stocks are like bonds carried with 33% down and 67% borrowed, in both risk and reward terms.

    The balanced portfolio turns in a superior Sharpe ratio of 5% excess return for 12.4% risk, for a 0.40 Sharpe, a third better than pure stock and half again better than pure bonds. But the CAPE portfolio turns in 6% excess return for 13.5% risk, Sharpe ratio 0.44, 50% better than pure stock and 10% better than the permanently balanced portfolio.

    Again, there is no reason to switch to inferior instruments or strategies just to increase total return if that is the objective; use the right asset mix or strategy and just add leverage, and you get the same reward with lower risk, or a higher reward for the same accepted risk.

    In this case, if your target return is the 9.2% achieved by pure stock, you only need 5% borrowed money in the CAPE portfolio, and you get there with a 14.2% risk vs the 21.4% of pure stock. Same reward, 2/3rds of the risk. Or if you are willing to accept higher risk, you could use 3 to 2 leverage (1/3rd borrowed money) and get a 13.5/.67 = 20.1% standard deviation of returns, less than pure stock, and a 12% expected return, 2.8% higher than pure stock (a 30% increase in expected return, with 10% lower risk).

    Personally my risk tolerance is closer to the balanced portfolio. But even if yours is as high as the pure stock portfolio, you should be using a price rule like CAPE to shave off the tops of bull markets, invest balanced rather than pure stock, but then also borrow up to half your invested equity again, to carry more earning assets in that balanced portfolio. You aren't running any higher risk doing so than someone is running by owning pure stock.

    Plot the points I give above as pairs. Realize that every point on straight lines between any of the assets is available by mixing them. Then realize that every point along the line from the Y axis at "cost of carry", to any of those points, is also available by using leverage (or mixing any of those portfolios with cash, in the lower risk direction).
    Aug 25 06:04 PM | 3 Likes Like |Link to Comment
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