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  • The Real Bubble Market: Avoid Treasuries And Lending To The U.S. Government For Zero Real Return [View article]
    Robert : You say "Grexit has been priced in by markets". How is it that the market is wise enough to do that but hasn't priced in what you think is a given--rising bond prices?
    May 29, 2015. 11:54 AM | 3 Likes Like |Link to Comment
  • Why The Efficient Market Hypothesis Is Useless [View article]
    Yes, a good definition of total return is stock market return minus taxes and fees but the taxes vary dramatically among investors. The investor in the 10-15% marginal tax brackets pays no Fed tax on dividends and long term gains. The actively managed fund that invests in low/no dividend stocks and limits turnover will be more tax efficient than an index fund that will include a chunk of dividends. The investments held in a Roth pay no taxes at all. That is why all comparisons of active versus passive (that I have seen) ignore taxes. Fees are important so maybe you should stick with that argument--a recent article on Morningstar made the case that Vanguard's actively managed funds outperformed their passive funds (I know you don't buy the definitions of active versus passive but you are just about alone in that debate). My take is that actively managed funds can (and often will) outperform if they keep their fees low.
    May 27, 2015. 07:49 PM | 2 Likes Like |Link to Comment
  • Why The Efficient Market Hypothesis Is Useless [View article]
    Not clear what you refer to in saying that investment managers incur 2% in taxes. At least with mutual fund managers they incur no taxes--the tax liability is passed to the customer (or avoided by the customer depending). Index funds generally (but not always) have a tax advantage over actively managed mutual funds but I have never seen it addressed in any comparison of the two. So when you see a Bogle comparison that says x percentage of actively managed funds under perform their index over some period of time, taxes are not a factor in that under performance.
    May 27, 2015. 10:07 AM | 2 Likes Like |Link to Comment
  • The Risks Of Owning An Individual Stock [View article]
    Keith: Maybe that is the point of the article but the conclusion paragraph is very fuzzy if that was the intent. And what investor has only one stock? Especially on SA. My guess is that the typical investor problem is the exact opposite--way to many positions that don't focus on our best ideas. When in the conclusion he says " individual stock picking can result in large drawdowns..."sounds to me he is advising not to buy stocks at all, no matter the number.
    May 23, 2015. 12:36 PM | 1 Like Like |Link to Comment
  • The Risks Of Owning An Individual Stock [View article]
    Probability theory: The branch of mathematics that studies the likelihood of occurrence of RANDOM EVENTS. Flipping a coin is a random event, picking a stock isn't. If Tiger Woods (during his prime) and I played a par 5, his chance of getting an eagle is far greater than mine. Without a large handicap it would be foolish for me to bet on my chances.

    As golfers and stock pickers, before we bet we need to know what our skills are and your "probabilities" are worthless until we do that.

    Isn't Alpha Architect in the business of picking individual stocks in an effort to beat the market?
    May 23, 2015. 08:28 AM | 2 Likes Like |Link to Comment
  • The 'Great Fund Debate' About Indexing Isn't Much Of A Debate [View article]
    Web; A perfect index team. None of those pesky injuries and salaries. Of course no ticket sales or TV revenue since you have no fans--in fact no revenue of any kind so a pointless exercise. My baseball analogy might not be perfect but to me it makes the important point that if you want to go the index route at least understand your chances and they aren't what Bogle tells you. If your chances of success are only 20% to beat the market you have to decide if you will be in that 20% and most will be better off in index funds. But what if they are 35%? 40%? At what point do you decide that the chances of outperformance are large enough to go active? One of the comments below tells us that the "math doesn't lie" but of course it does--happens every day. Listen to most politicians and salesmen. Whoever does the analysis comes up with the assumptions and the assumptions largely determine the outcome of the analysis. So if you look at the number of active funds that outperform versus the amount of assets that outperform you get two very different numbers. That is math lying.
    May 15, 2015. 12:05 PM | Likes Like |Link to Comment
  • The 'Great Fund Debate' About Indexing Isn't Much Of A Debate [View article]
    I see a lot of arguments that are based on the Sharpe statement, that as a group actively managed money must under perform--duh! You could say the same for professional baseball (or any other sport). After playing 162 games during the year the average team will win exactly 81 games. So your philosophy must be-- why bother playing? But some teams will win far more than 81 games just like some small investors, endowment funds and pension funds will grossly under perform the markets and others will outperform.

    Another meaningless statistic thrown around in the active/index debate is that x percent of funds under perform their index (instead of comparing actively managed results to the return of the average index fund which would be far more meaningful). The percent used, always shown as the number of funds under performing as opposed to the more meaningful "percent of assets that under perform", is typically in the 70% range. What isn't mentioned is that 100% of index funds under perform their index.

    I suggest that we not automatically take the statistics in the active/passive debate as gospel. John Bogle (as with most of us) has an agenda and biases and distorts his case accordingly. Jim Grant is the rare contrarian who doesn't roll over.
    May 15, 2015. 09:08 AM | Likes Like |Link to Comment
  • Fink And Capitalism: Need 4 Kitchens In Your House? [View article]
    If you are right about US companies having $1.4 trillion in cash, they also have $2 trillion in cash trapped overseas. That tells me they have a negative usable cash position of $600 billion. That shortfall is being funded by cheap borrowing. GE, which can't seem to do anything right, has finally capitulated and will bring back some of that overseas cash--most corporations are too smart to do that.
    Apr 19, 2015. 07:34 PM | Likes Like |Link to Comment
  • REITs: FFO And AFFO And Other Fun Acronyms [View article]
    Reuben: Good start for REIT valuation but you might want to take it a few steps further. What I see is a lot of investors looking at the FFO of a REIT, say 16, and comparing that to a PE of 16 for a C-Corp, figuring they are comparable. Don't see all that many AFFO comparisons but I would guess that happens to. But are they comparable? C-corps have depreciation also, some of them like MCD might have huge real estate depreciation charges. All C-Corps have some real estate depreciation (not to mention that some REIT depreciation is real--how often do we see an empty outlet mall or normal mall that has died from old age?). So if we were to remove all the real estate depreciation from C-Corps, what would the adjusted PE be? Then there is the tax issue--REITs generally pay no income tax but the dividends are taxed at full marginal rates. C-Corps pay tax so to avoid a full double taxation we get a "qualified dividend" of 15% in most cases. That tells me that an FFO of 16 for a REIT is much more expensive than a C-Corp PE of 16. I am always surprised that no SA author has tried to make the comparison between REIT FFO and C Corp PE.
    Apr 16, 2015. 07:45 PM | 2 Likes Like |Link to Comment
  • 3 Costs Investors Must Control [View article]
    Rick: Good idea for an article but with mutual funds being mostly new to this site you might want to expand and explain in a little more detail. Most investors think commissions and related costs are included in the expense ratio--they are not. Look at the Morningstar breakdown of expenses into sub categories and you will see there is no item for commissions. So there are at least four costs investors should be aware of. You mention that "security law" requires that commissions be identified--I think you are wrong--if they were identified they would be included in the expense ratio. Another cost for some funds is the foreign tax withholding, which can be very important if a fund is held in an IRA/401k--since if paid it is lost and can't be recovered as it can be in a taxable account.
    Mar 29, 2015. 06:18 PM | Likes Like |Link to Comment
  • Investing In High Dividend Yield Stocks: A Sucker Bet? [View article]
    Willam: I guess I agree with Matthew below. It seems to me the author is making the case that high dividend yield stocks in this environment have been bid up (as have bonds) and therefore are risky. The fact that you have prospered in the runup doesn't say they are a good investment going forward. And if you looked at your after tax return you might have been better off with non dividend paying stocks. Wouldn't you want to know that as an investor? All I was saying about REITs, MLPs and BDCs (of which I own a fair number) is that they might distort his findings and if he focused totally on C-Corporation stocks it would be easier to digest his theory for those DGIs that love dividends regardless of the total return. I am guessing, just based on market cap, that most of the 50 stocks he is using are C-Corp so why not just clean it up?
    Mar 28, 2015. 03:20 PM | Likes Like |Link to Comment
  • Investing In High Dividend Yield Stocks: A Sucker Bet? [View article]
    Dr. Gray: It must be frustrating for you to write articles for this site. The DGI crowd tends to get very defensive if you question their philosophy. You note the suggestions that you are writing the article to "get clicks". These petty comments are not untypical of the DGI crowd--happens on a regular basis so don't take it personally.

    I do agree with some of the comments related to PE--if your 50 stocks include REITs, the PE for those stocks would seem to be meaningless in any comparison with C-Corporation stocks and would skew the results. Suggest you either tell the readers that there are no REITs included or revise the analysis to exclude them (as well as MLPs and BDCs).
    Mar 26, 2015. 09:24 AM | 2 Likes Like |Link to Comment
  • Why Everyone Is Wrong About Whole Foods Market (Again) [View article]
    You state "comparable sales have been in decline". Seems like what your chart shows is not that comparable sales have been declining but that the rate of growth of comparable sales has been declining. There is a big difference between those two statements. Comparable sales continue to grow--but at a 4-5% rate instead of 8-10%. On the surface if you can continue to grow comparable sales at a rate larger than inflation, even at a 4% level, while opening additional stores your business model is working. Not saying that those sales numbers justify the current PE but that is a different argument that you don't seem to be making.
    Mar 11, 2015. 07:41 AM | 7 Likes Like |Link to Comment
  • Vanguard ETF Vs. Index Fund [View article]
    Scott: The author makes that statement but the numbers he provided tell me a different story. Why give us tax efficiency numbers and then tell us what seems like a large benefit for the ETF is an edge for the index fund? And why tell us the ETF has lower expenses but bid/ask spread more than offsets them--which of course depends on how big the bid/ask spread is on your trades, how many times you buy and how long you hold. I would suggest that if you are a buy and hold investor that the difference in expenses will soon pay for any minor bid/ask spread (and all bonus for the ETF after that) and the tax savings will be there every year as long as you own the ETF (assuming it is in a taxable account). Not to mention the flexibility of being able to trade without waiting to after the market closes. If there is a case for the index fund I don't think the author has come close to making it.
    Feb 25, 2015. 01:29 PM | 3 Likes Like |Link to Comment
  • Vanguard ETF Vs. Index Fund [View article]
    I must be missing something. It looks like the ETF has the better tax efficiency (.48 to .61) and the lower expense (.15 to .18) so other than the bid/ask spread which you don't quantify, why are you selecting the index fund?
    Feb 24, 2015. 03:27 PM | 1 Like Like |Link to Comment