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Wisdom-Looking like an Idiot
Old 12-09-2013, 08:29 AM   #1
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Wisdom-Looking like an Idiot

Because I don't have a dog in the fight, I shouldn't be posting on the subject of investing, but this blog puts together so many subjects relating to the future of the economy, that I think it may deserve your attention.
Am not sure that it draws any firm conclusions, but the breadth of the discussion certainly puts forward enough economic factors to stimulate thought.

Quote:
Perhaps you still remember the speed and depth of the 2008 credit crisis' arrival, and its toxic impact on asset prices, jobs, and overall trust in the financial system. Maybe you took notes during the preceding tech and housing bubbles and their aftermath. If so, you likely swore that "Never again!" would you put your wealth at risk during such obvious times of public mania.

So, if this sounds at all like you, five years after the 2008 crisis, how is the "prudent" strategy looking today?
Avoiding the Bubble in Stocks & Bonds: The Wisdom of Looking Like an Idiot Today | Peak Prosperity

Agree or not, it's an easy and fun read, even if a little long.
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Old 12-09-2013, 07:09 PM   #2
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Our stock port has a 12mo trailing PE = 15.3 and a forward PE = 16.0. Stocks overvalued? Compared to what?

With all good quality fixed income assets still SO expensive, stocks look downright cheap.
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AA = 60/35/5. Expected CAGR = 5.7%. GSD (5y) = 7.8%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.5%. Net Port Yield = 1.7%. Term = 36 yr. FI Duration = 4.9 yr. Portfolio survival probability = 86%.
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Old 12-09-2013, 08:51 PM   #3
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A lot of these people you see constantly calling for the 'inevitable crash' are people who thought they were being smarter than the hard by staying out of the market and buying up physical assets (gold, silver). They now see the market bull in full effect while their smart investment has disappointed. Out of anger and anxiety, they keep speaking of the coming crash in equities in order to alleviate the pain a bit. It helps when others in the same company agree with them...misery loves company.
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Old 12-09-2013, 09:19 PM   #4
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He missed the call on world wide apocalypse last downturn and has been sitting on the sideline with investments in gold that are declining, so the prescription is double down on precious metals and prepare for the end of the world scenarios that didn't play out after 2008, because they might in the future? What a waste of time that was.
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Old 12-09-2013, 09:31 PM   #5
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Originally Posted by growing_older View Post
He missed the call on world wide apocalypse last downturn and has been sitting on the sideline with investments in gold that are declining, so the prescription is double down on precious metals and prepare for the end of the world scenarios that didn't play out after 2008, because they might in the future? What a waste of time that was.
Agreed; I feel like my intelligence level dropped a bit after reading that garbage.
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Old 12-10-2013, 12:27 PM   #6
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In 2008 our 60/40 port lost 28% of its value. In 2009 we over balanced to 70/30 and rode it back up.

In 2012 we cut back to 65/35 and in January we will cut back again to 60/40 which is our "cruising speed".
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AA = 60/35/5. Expected CAGR = 5.7%. GSD (5y) = 7.8%. USD inflation (10 y) = 1.8%. AWR = 3.0%. TER = 0.5%. Net Port Yield = 1.7%. Term = 36 yr. FI Duration = 4.9 yr. Portfolio survival probability = 86%.
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Old 12-10-2013, 04:22 PM   #7
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Quote:
Originally Posted by growing_older View Post
He missed the call on world wide apocalypse last downturn and has been sitting on the sideline with investments in gold that are declining, so the prescription is double down on precious metals and prepare for the end of the world scenarios that didn't play out after 2008, because they might in the future? What a waste of time that was.
+1

Agreed, this guy is nothing more nor less than a woefully failed market timer, who nevertheless insists on the right to have a do-over so that his awful predictions from five years ago may still have a chance to be made good. If he had a little more humility, he might be willing to admit something like, "Gee, maybe buying and holding a diversified portfolio with periodic rebalancing is a sounder investing strategy than putting all one's eggs into the 'Apocalypse Now' camp." If he had done so, and advised the followers of his blog to do likewise, he now would be enjoying the fruits of his investing acumen and be well-positioned for whatever comes in the future, instead of looking like a nut-job hoping for the end of the world as we know it to validate his previous bad advice.

Note that I make no comment as to whether or not his current gloomy predicition is likely to come true. The point of diversification is that it works in a wide variety of investment climates, without needing to have one's own specific outlook ensue.
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