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PE switching studies - proceed with caution!
Old 04-23-2004, 10:30 AM   #1
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PE switching studies - proceed with caution!

An interesting look at PE10 valuations and their historical impact on returns over on the nofeeboards. I know a lot of Bernstein worshippers talk about these things.

By the way, I've broken down an checked out Bernstein's books from the library. In a few days I should have a better idea of what all the fuss is about.
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Re: PE switching studies - proceed with caution!
Old 04-23-2004, 10:30 AM   #2
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Re: PE switching studies - proceed with caution!

I forgot to give you the link:

PE switching studies - proceed with caution!

http://nofeeboards.com/boards/viewtopic.php?t=2399
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Re: PE switching studies - proceed with caution!
Old 04-23-2004, 12:27 PM   #3
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Re: PE switching studies - proceed with caution!

Here's a link to a recent SWR board thread in which JWR1945 posts some of his findings on how switching strategies would have fared historically. The term "Historical Data Base Rate" is the term that JWR1945 and I use to refer to the number that is referred to in conventional SWR studies as the "safe withdrawal rate."

http://nofeeboards.com/boards/viewtopic.php?t=2203

As a public service, I have set forth below a brief but juicy excerpt for those among us (like me!) who would prefer to avoid having to look at the big scary numbers.

Mike: Switching certainly would have taken much of the sting out of the two terrible periods last century (1929, 1966). I may be wrong, but increasing the HDR seems to depend to a degree upon mitigating losses during the riskiest periods, which in the past were high P/E years.
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Re: PE switching studies - proceed with caution!
Old 04-23-2004, 12:32 PM   #4
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Re: PE switching studies - proceed with caution!

Similar ideas here:

http://www.yesyoucantimethemarket.com/
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Re: PE switching studies - proceed with caution!
Old 04-23-2004, 01:01 PM   #5
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Re: PE switching studies - proceed with caution!

A link as good as that one deserves two in return, wabmaster.

Here’s one to an interview with Peter Bernstein in which he describes why he believes that informed timing of the market is the wave of the future. The Bernstein interview is the first article in the 2-28-03 issue (you need to scroll down a bit).

http://www.weedenco.com/welling/biframe.htm

Juicy Excerpt: “What we’ve had is a graphic demonstration of boom and bust. That’s a familiar pattern. So what’s expected is that after the bust, you pick up the pieces and go forward. That this is different, I think is hard to recognize. And people are reluctant to recognize it. In particular, the difference pulls them away from traditional ways of managing their affairs. I mean, it doesn’t occur to people to say, “Now, I have to do things differently.” Yes, they think, “I won’t get caught in the next bubble, I’ll get out sooner.” But that’s different from saying, “The basic investment structure that I’ve been using, which served me pretty well, is no longer appropriate.” That’s a big step.”

And here’s one to a research paper that appeared in the February 2002 issue of the Journal of Financial Planning.

http://www.fpanet.org/journal/articl...0202-art10.cfm

Juicy Excerpt: “Our results indicate that the best estimate of future average returns is no longer the long-term average returns on stocks found, for instance, in the Ibbotson’s series of 10 to 12 percent a year. An investment advisor can obtain a more accurate measure of expected returns by making expected returns conditional on the current P/E ratio.


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Re: PE switching studies - proceed with caution!
Old 04-23-2004, 03:58 PM   #6
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Re: PE switching studies - proceed with caution!

Peter Bernstein is a nice kid - but I'll stick with DeGaul and the Norwegian widow. My balanced index funds were mildly tested during the recent unpleasentness but nothing like a 73-74 bump. BTY - I tend to accept the Buffett and Bogle view that overall returns going forward will be muted (below 10-12) until valuation measures begin to fall more in their historical range - I tend to watch price to dividends and payout ratios.
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Re: PE switching studies - proceed with caution!
Old 04-26-2004, 06:35 PM   #7
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Re: PE switching studies - proceed with caution!

Sheesh, I hate to sound like a new kid who doesn't know what a dryer sheet is. But he keeps talking about DeGaul and the Norwegian Widow, and I don't know what he's referring to! Anybody?

Any why is DeGaul spelled that way??

Anne
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Re: PE switching studies - proceed with caution!
Old 04-27-2004, 12:37 AM   #8
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Re: PE switching studies - proceed with caution!

Quote:
Sheesh, I hate to sound like a new kid who doesn't know what a dryer sheet is. *But he keeps talking about DeGaul and the Norwegian Widow, and I don't know what he's referring to!
UncleMick is a former ace cryptographer who at times thinks he is still on the job creating unbreakable cyphers.

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Re: PE switching studies - proceed with caution!
Old 04-27-2004, 05:38 AM   #9
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Re: PE switching studies - proceed with caution!

trumpeting angel

I'm afraid it's even worse than mikey's kind words - INTJ, left handed and a career in R&D - in short, out there! I even attempted to contribute to the engineer humor thread when first signing up.

To unclarify: DeGaul as in Charles De Gaul - "God looks after drunkards, fools, and The United States of America". In John Bogle(Vanguard) terms - buy the total stock market index at the lowest possible cost. Hold the stock/bond ratio that fits your situation.

Further: An obscure local Pacific NW myth - Norwegians are even more thrifty and astute than a Scotsman. So since woman outlive men - the widow collects the dividends from well selected stocks - moral dividends are very, very important.

Big players have bet on different aspects of Peter Bernstein's thoughts at the start of this thread - versions of this debate occur every generation.

Bogle's counterpoint(long winded) can be found at:

The Bogle Financial Markets Research Center. 'The Policy Portfolio in an Era of Subdued Returns.' June 5, 2003. speech archive.

So there, heh, heh, even lab rats make their escape to ER and I'm learning to spoke rite and not post to the en-ga-neer humor thread anymore.
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Re: PE switching studies - proceed with caution!
Old 04-27-2004, 08:42 AM   #10
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Re: PE switching studies - proceed with caution!

INTJ = I Need The Job

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Re: PE switching studies - proceed with caution!
Old 04-27-2004, 11:03 AM   #11
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Re: PE switching studies - proceed with caution!

INTJ = I Nixed The Job
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Re: PE switching studies - proceed with caution!
Old 04-27-2004, 07:56 PM   #12
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Re: PE switching studies - proceed with caution!

Thanks for clearing it up, UncleMick.

I'm pretty well sold on Bogle, Vanguard, and the Road to Tranquility of investing, myself. Within a month, the rest of my inheritance will be in my hands, and I'm planning to follow the slow and steady road, with its hills and valleys.

I tried to think up some other funny interpretation of INTJ for this post, but I'm Not That Joker.

Anne
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Re: PE switching studies - proceed with caution!
Old 04-28-2004, 07:39 AM   #13
 
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Re: PE switching studies - proceed with caution!

Hello Anne! How about I Need To Just quit??

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Re: PE switching studies - proceed with caution!
Old 04-29-2004, 04:46 AM   #14
 
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Re: PE switching studies - proceed with caution!

Re. Bogle, "Four Pillars", "Millionaire next Door",
Berstein, et al. I never read any of this stuff
(rather be boiled in my own juices). Instead,
I watch interest rates and what the Dow/Nasdaq is doing, and occasionally look at MONEY or KIPLINGER
PERSONAL FINANCE. That's it. The other stuff bores me to tears. Why, I've never even read YMOYL. It's
partly arrogance, and partly not owning any common stock.

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Re: PE switching studies - proceed with caution!
Old 04-29-2004, 12:36 PM   #15
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Re: PE switching studies - proceed with caution!

Idiots Need The Job.
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Re: PE switching studies - proceed with caution!
Old 04-29-2004, 07:09 PM   #16
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Re: PE switching studies - proceed with caution!

Investor Nitwits Toke Joints
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