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Bogle "Market Expectations" interview with Morningstar
11-20-2017, 10:58 AM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
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Bogle "Market Expectations" interview with Morningstar
2017 interview with Morningstar, an annual discussion of his expectations: Bogle's 'Reasonable Expectations' for Market Returns
He thinks what is reasonable to expect from now is: - 4% nominal for equities which he computes from 4% growth, 2% divs, -2% valuations.
- 3% nominal for 50% 10 year Treasury + 50% corporate bond index.
- 1.5% for inflation — not clear if that's today's inflation or expected inflation.
So you can plug these into your AA and model your nominal and real inflation.
50/50 would be 3.5% nominal and 2% real. I would be more inclined to use 2% for inflation, so 1.5% real.
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11-20-2017, 11:28 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Here's another recent one: https://www.cnbc.com/2017/11/20/jack...nd-beyond.html
One of life's little mysteries for me is why Bogle and Buffet see no attraction in investing outside the US. I wonder if they do not travel and just have not seen the world. Really, one only has to go to India and China to see the immense potential. And, with the US backing away from international trade, international commerce is going to have a long term party to which we won't be invited. Among other things, this party has the potential to substantially diminish the dollar's role as a reserve currency, leading to a decline in value and consequent skyrocketing of overseas investments.
In Africa Chinese investments are everywhere. Mass transit and superhighways in Ethiopia, for example. The top three beer companies, all overseas, control 40% of the world market and they have really just started.
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11-20-2017, 11:43 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Location: DC area
Posts: 2,464
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I like the simple math that Jack uses to estimate returns. But, I've never gotten my head around why Bogle uses Dividend Yield+Earnings Growth in his estimate. Dividends are a component of earnings that a company may or may not pay out. Shouldn't it be Earnings Yield+Earnings Growth?
That would be 1/PE or 1/CAPE plus a growth estimate. So perhaps, following his logic, nominal returns on equities would be more like 5%.
Also, keep in mind that this is a 10-year estimate. It speaks to sequence of returns risk, but be careful about plugging this into a 30- or 40-year Monte Carlo.
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FI and Semi-ER March 24, 2017
Consulting to stay engaged
"All models are wrong, some are useful." - George Box
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11-20-2017, 11:55 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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He was predicting nominal to zero real returns in 2015 for the coming decade:
“When you factor in the costs associated with index funds, inflation, and taxes, you are actually looking at real returns of nominal to zero,” Bogle explained."
https://www.benzinga.com/analyst-rat...ects-nominal-t
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11-20-2017, 12:14 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,704
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So he's a 'day late, dollar short' or just really simplistic?
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11-20-2017, 12:15 PM
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#6
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gone traveling
Join Date: Oct 2015
Posts: 138
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Quote:
Originally Posted by OldShooter
One of life's little mysteries for me is why Bogle and Buffet see no attraction in investing outside the US. I wonder if they do not travel and just have not seen the world. Really, one only has to go to India and China to see the immense potential.
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Not sure about Bogle, but suspect that Buffet and his aides have a distrust of the financial reporting practices and accuracy of Asian and African enterprises, and for a good reason, which makes any diligent analysis prior to investing impossible; hence they shy away.
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11-20-2017, 12:22 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by OldShooter
Here's another recent one: https://www.cnbc.com/2017/11/20/jack...nd-beyond.html
One of life's little mysteries for me is why Bogle and Buffet see no attraction in investing outside the US. I wonder if they do not travel and just have not seen the world. Really, one only has to go to India and China to see the immense potential. And, with the US backing away from international trade, international commerce is going to have a long term party to which we won't be invited. Among other things, this party has the potential to substantially diminish the dollar's role as a reserve currency, leading to a decline in value and consequent skyrocketing of overseas investments.
In Africa Chinese investments are everywhere. Mass transit and superhighways in Ethiopia, for example. The top three beer companies, all overseas, control 40% of the world market and they have really just started.
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+1. International equities seem like a good way to further diversify equity risk.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
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11-20-2017, 02:11 PM
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#8
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Recycles dryer sheets
Join Date: May 2012
Location: Brewster
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With all respect to Mr. Bogle, his crystal ball is no better than mine. He said the same thing last year, and in 2015, and 2014, and 2013 ...
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11-20-2017, 03:03 PM
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#9
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Full time employment: Posting here.
Join Date: Dec 2013
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Quote:
Originally Posted by Nightcap
With all respect to Mr. Bogle, his crystal ball is no better than mine. He said the same thing last year, and in 2015, and 2014, and 2013 ...
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+1
As I have mentioned before, I think we often expect too much from our heroes. Jack Bogle has done a lot for us all by driving down mutual fund fees, and promoting indexed investing, but why we would expect him to be able to predict future returns is something else again. I have a lot of admiration for Mr. Bogle, but I would not be looking to him to be oracle of the future.
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11-20-2017, 03:29 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by audreyh1
...
50/50 would be 3.5% nominal and 2% real. I would be more inclined to use 2% for inflation, so 1.5% real.
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And one assumption in this is that you invest as a buy-hold investor. The equity market returns are lumpy, not smooth. Perhaps a good reason for some sensible "tactical asset allocation" e.g. market timing?
Oops, I said it.
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11-20-2017, 03:30 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,976
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I would not have a problem if Bogles forecast is correct. Run away inflation and negative real returns are what I fear. Remember 1973 and the WIN buttons (Whip Inflation Now)?
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11-20-2017, 04:27 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by Lsbcal
And one assumption in this is that you invest as a buy-hold investor. The equity market returns are lumpy, not smooth. Perhaps a good reason for some sensible "tactical asset allocation" e.g. market timing?
Oops, I said it.
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It's assuming you rebalance. Bogle isn't that big a fan of rebalancing. He really means buy and hold.
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11-20-2017, 06:31 PM
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#13
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Quote:
Originally Posted by audreyh1
It's assuming you rebalance. Bogle isn't that big a fan of rebalancing. He really means buy and hold.
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Thanks for the article and I'm a believer in his method. Buy and Hold.
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11-20-2017, 06:41 PM
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#14
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Full time employment: Posting here.
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Certainly you can question Bogle’s crystal ball, but I just saw an article where Perm-Bull Jeremy Siegel said the stock market is approaching a top. I’ve never heard a bearish quip out of Siegel’s mouth before.
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11-20-2017, 06:49 PM
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#15
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Quote:
Originally Posted by RenoJay
Certainly you can question Bogle’s crystal ball, but I just saw an article where Perm-Bull Jeremy Siegel said the stock market is approaching a top. I’ve never heard a bearish quip out of Siegel’s mouth before.
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Probably you are referring to this: https://www.cnbc.com/2017/11/20/long...-to-a-top.html
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11-20-2017, 07:17 PM
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#16
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Full time employment: Posting here.
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Quote:
Originally Posted by Lsbcal
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Yes, thanks. I made my post from a phone and didn't have ready access to the article. In any case, Siegel is almost always very bullish so I was shocked at his viewpoint.
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11-20-2017, 07:34 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Anyone who has been here a while knows that I am no Boglehead, and do not care to frequent their Web site.
However, I do pay attention to what Mr. Bogle has to say. I think he is talking about the longer term investment return, not what is going to happen next month or next year, or even the year after next. I think he and some other pundits are using the macroeconomic aspects to see the average market return for the next decade or two.
Does anyone here expect the S&P to keep rising 20%/yr like it has in the past 12 months? When the GDP grows only 3.5%/yr? You must also believe in the story of Jack and the beanstalk.
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11-20-2017, 07:42 PM
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#18
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Yeah, I think he's talking about the next 10 years.
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11-20-2017, 08:52 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by CaliforniaMan
+1
As I have mentioned before, I think we often expect too much from our heroes. Jack Bogle has done a lot for us all by driving down mutual fund fees, and promoting indexed investing, but why we would expect him to be able to predict future returns is something else again. I have a lot of admiration for Mr. Bogle, but I would not be looking to him to be oracle of the future.
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That's kind of my thought, though I've never really studied Bogle. I think he's a smart guy, but since his focus is low cost and indexing, is there really any proof he's an expert on future economic trends? It seems kind of like asking Sam Walton (when he was alive, of course), another really smart guy, on fashion trends for the next 5 years.
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11-20-2017, 10:12 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Jun 2014
Posts: 1,069
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Quote:
Originally Posted by NW-Bound
Anyone who has been here a while knows that I am no Boglehead, and do not care to frequent their Web site.
However, I do pay attention to what Mr. Bogle has to say. I think he is talking about the longer term investment return, not what is going to happen next month or next year, or even the year after next. I think he and some other pundits are using the macroeconomic aspects to see the average market return for the next decade or two.
Does anyone here expect the S&P to keep rising 20%/yr like it has in the past 12 months? When the GDP grows only 3.5%/yr? You must also believe in the story of Jack and the beanstalk.
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Well, almost all the SP growth the last year is explained by a falling dollar and foreign markets doing well. 50% of SP revenue is foreign, so although the US is flat, they have done well.
Consequently, if the US continues to stagnate and the rest of the world kicks economic butt, The SP will do very well while the GDP stagnates.
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