Bogle on future returns

[Lsbcal]

Nice short 5 minute interview with Bogle where he discusses future guesses at stock/bond returns: Bogle's Outlook for the Market

Short summary: nominal returns for stocks = 7%, bonds = 2% ... maybe

I liked the way he mentioned "speculative returns". Might we see a little of this as bonds end their path down the rate declines and start some sort of upward rate journey? My guess is ... maybe.

[ejman]

Saint Jack sounds very reasonable as he usually does. I've been paying attention to what he says for about 20 years now and so far he's at the top of my list as far as forecasting and common sense financial advice is concerned. As for speculative returns who knows - if people feel optimistic the PE ratio may well double it has before. The converse, it may be cut by half.

[NW-Bound]

Yes, I watched that and this video clip that follows it.

Bogle: Most Difficult Investment Conditions I've Ever Seen

In the 2nd clip, Bogle said investors could cope with the meager future returns by either cutting back their standard of living, or spending more of their capital.

Ugh! There go my FIRECalc runs that move up and to the right.

[samclem]

Quote:

Originally Posted by Lsbcal Short summary: nominal returns for stocks = 7%, bonds = 2% ... maybe

And, for the next decade, he's projecting about 2.5% inflation, so real returns on stocks would be about 4.5%, with slightly negative returns for bonds (unless greater risk is taken).

Those equity returns are without an "speculative return" (i.e. changes in stock prices due to changes in PE).

[ejman]

Quote:

Originally Posted by NW-Bound Yes, I watched that and this video clip that follows it. Bogle: Most Difficult Investment Conditions I've Ever Seen In the 2nd clip, Bogle said investors could cope with the meager future returns by either cutting back their standard of living, or spending more of their capital. Ugh! There go my FIRECalc runs that move up and to the right.

I'm afraid so. I've pretty much given up on dreaming about those Firecalc runs that take off like a rocket. I just hope to avoid the kamikaze dives to zero...

[NW-Bound]

I have played a bit with the WR, and have been tweaking it so that the lowest run kind of skimmed the zero line.

It's like, you know, the flight of a sea-skimming missile like a Harpoon or an Exocet: just above the surface, and barely avoid hitting the water.

[ejman]

Quote:

Originally Posted by NW-Bound I have played a bit with the WR, and have been tweaking it so that the lowest run kind of skimmed the zero line. It's like, you know, the flight of a sea-skimming missile like a Harpoon or an Exocet: just above the surface, and barely avoid hitting the water.

Yup, I do have a couple of scenarios in my back pocket where I really squeeze to where it hurts, but really there is so much fat in all of our budgets - hell just cable + internet + phone at our manor is $300 a month. Sometimes I think the WR constant rate premise is really silly. If things get really rough nobody in their right mind would blindly continue an unsustainable WR.

[NW-Bound]

Sure. It's just like ballooners who keep cutting off sand ballast bags to stay afloat. The worst case is me taking off in my motorhome and driving off into the New Mexico mountains.

Me worry? Heh heh heh...

[Todd-O]

Quote:

Originally Posted by ejman Yup, I do have a couple of scenarios in my back pocket where I really squeeze to where it hurts, but really there is so much fat in all of our budgets - hell just cable + internet + phone at our manor is $300 a month. Sometimes I think the WR constant rate premise is really silly. If things get really rough nobody in their right mind would blindly continue an unsustainable WR.

That is f'ing insane. I hope you get to watch every single NFL game on Sunday man.

[urn2bfree]

Quote:

Originally Posted by Todd-O That is f'ing insane. I hope you get to watch every single NFL game on Sunday man.

That is my monthly for phone, internet and cable as well. And no NFL Package either.

[Ken11]

I'm feeling validated.
My deterministic plan assumes 5.5% nominal returns from a balanced portfolio with inflation at 3%.
Bogle has it almost exactly the same.

Interesting how loose he was about re-balancing.

[NW-Bound]

Quote:

Originally Posted by ejman ...just cable + internet + phone at our manor is $300 a month. Sometimes I think the WR constant rate premise is really silly. If things get really rough nobody in their right mind would blindly continue an unsustainable WR.

Thanks to Quicken with its autodownload feature, I could call up my corresponding expenses with a few mouse clicks, compared to having to ask my wife to look them up (she takes care of bills).

My cable + internet + phone for main home is $3184.75 for the last 12 months. No bills in boonies home. My electric+water bills in boonies home are also much lower than at city home due to no A/C cooling, no gardening, no sewer and garbage fees, etc...

I could lower my expenses by getting rid of city home and to become a hermit. That could be one step before becoming an RV hermit up in the New Mexico mountains, where an annual camping permit is just a few hundred a year.

Me worry?

[Lsbcal]

Quote:

Originally Posted by samclem And, for the next decade, he's projecting about 2.5% inflation, so real returns on stocks would be about 4.5%, with slightly negative returns for bonds (unless greater risk is taken). Those equity returns are without an "speculative return" (i.e. changes in stock prices due to changes in PE).

The bond market agrees with that inflation number: 10 yr Treasury - 10 yr TIPS = 1.77 - (-0.71) = 2.5%. Probably that's where Bogle gets the number.

On speculative returns, I'm hoping for a modest amount of this:
1) market drives up on higher P/E's and/or unsustainable earnings increase
2) Fed tightens causing inverted yield curve
3) Equities start gentle slide while news stories ask if we can have a soft landing
4) Lsbcal makes his exit, stashing cash until the next upturn

Sweat dreams.

[NW-Bound]

Quote:

Originally Posted by Lsbcal Sweat Sweet dreams...

... are made of this.
Who am I to disagree?

Eurythmics - Sweet Dreams (Are Made Of This) - YouTube

[Lsbcal]

Quote:

Originally Posted by NW-Bound ... are made of this. Who am I to disagree?

I love that song, thanks! DW liked the cows (she's an artist) too:

[ejman]

Quote:

Originally Posted by NW-Bound Thanks to Quicken with its autodownload feature, I could call up my corresponding expenses with a few mouse clicks, compared to having to ask my wife to look them up (she takes care of bills). My cable + internet + phone for main home is $3184.75 for the last 12 months. No bills in boonies home. My electric+water bills in boonies home are also much lower than at city home due to no A/C cooling, no gardening, no sewer and garbage fees, etc... I could lower my expenses by getting rid of city home and to become a hermit. That could be one step before becoming an RV hermit up in the New Mexico mountains, where an annual camping permit is just a few hundred a year. Me worry?

I'm already sort of a hermit in the SW Oregon forest. My camping permit (real estate tax) for my forested 7 acres is $1100 a year. Just paid it so I'm good for another year. No RV though regular stick house. The wood stove is cranking at the moment, cup of hot coffee at hand, wonderful!

[NW-Bound]

My boonies home is also very comfy, where the only disturbance is an occasional woodpecker. If I live there full-time, all I would need is to add an internet connection.

Will have to add the cost for making grocery runs (40 mi one way), but other than that, everything is cheaper (because it's non-existent ). Except for RE taxes that is. They charge by property value, whether they plow the road for you or not!

PS. I was tempted to make up the adjective "Hermitian" to describe a dwelling, but then realized that it would cause a mathematician to have a fit.

[JoeWras]

Quote:

Originally Posted by NW-Bound My cable + internet + phone for main home is $3184.75 for the last 12 months.

Are you guys including mobile phone plans in the mix? If not, man that is a really harsh bill.

I have Uverse with unlimited phone, 10+Meg internet, and 300+ channels for $177/mo including tax. And that's too darn much!

Our cable provider is in the same ballpark for similar services.

[Lsbcal]

A bit of thread drift ... future returns is the OT.

[pb4uski]

Quote:

Originally Posted by Ken11 I'm feeling validated. My deterministic plan assumes 5.5% nominal returns from a balanced portfolio with inflation at 3%. Bogle has it almost exactly the same....

+1 Those are my return and inflation assumptions as well. Conservative compared to Bogle's views. Guess I can sleep well at night.