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Old 02-16-2017, 11:19 PM   #41
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Old 02-17-2017, 07:59 PM   #42
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Originally Posted by NW-Bound View Post
Cash, my lady, cash. There's that 3rd choice outside of stocks and bonds.
Oh I have that outside of retirement accounts, over a year of our needs not met by pension/SS.

I do abide by "buckets".
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Old 02-17-2017, 08:15 PM   #43
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I also miss Otto's, Ray's, and Burn's Original BBQ in downtown Houston.
There is one decent place in Reno.

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Great point. Got me thinkin' and searchin'; even worse, seeing your avatar has me wishing I was in Houston as I could really use a visit to Rudy's BBQ. Nothing like a half-pound of brisket to cure what ails you. But, I digress.

None other than Dr. Jeremy Siegel published a paper last year about improving the forecasting efficacy of CAPE by avoiding GAAP reported earnings altogether and using NIPA earnings. Doing so avoids the currently popular accounting practice of "kitchen-sinking" (taking every write-off possible when a company has a bad quarterly report a la 2008-09) as well as non-comparable historical earnings comparisons due to the slowly evolving GAAP rules.

Lots of interesting observations to read. This got my attention...
In this article, I offer an alternative explanation of the elevated CAPE ratio. ... Changes in accounting practices since 1990 have depressed reported earnings during economic downturns to a much greater degree than in the earlier years of Shiller’s sample. Because the CAPE ratio takes into account the last 10 years of earnings, any stock return forecast issued before 2018 will include the extraordinarily low earnings of 2008–2009 and may be biased downward.
Interestingly the write-downs of just AIG, Citigroup, and BofA caused the majority of the negative $23.25 S&P earnings in 2008. Had the 2008 GAAP earnings been calculated with the GAAP rules in place prior to 1992, $80 billion in write-downs from these three firms would not be included in the GAAP earnings calculations.

Further,
... it is puzzling that the decline in S&P reported earnings in the 2008–09 recession—when the maximum decline in GDP was just over 5%—was much greater than the decline in S&P reported earnings in the Great Depression, when GDP declined five times as much. ... These disparities also suggest that there has been a change in the S&P methodology from likely understating declines in earnings during economic downturns to significantly overstating them.
Another area in the article that stood out to me was how well CAPE actually does at predicting future 10-year real equity returns. As originally published by Dr. Shiller, CAPE has a coefficient of determination (R^2) of 0.35 which means the CAPE model "explains" about 1/3 of the future 10-year real equity returns which means the remaining 2/3 of variation in future returns is not accounted for in the CAPE model. A good result no doubt, but clearly not deterministic.

The full article is entitled "The Shiller CAPE Ratio: A New Look" if you want to google it and read the full-meal deal. Having problems with posting links.
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Old 02-17-2017, 08:32 PM   #44
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Oh I have that outside of retirement accounts, over a year of our needs not met by pension/SS.

I do abide by "buckets".
No, I mean real cash, as an AA substitute for bonds when I think bond's prospect is not commensurate with its risk.

I have 32% cash, because I do not like bonds now. But if I like to think of it as a buffer for spending, that's 10 years even if we still delay SS. However, if things get that bad for stocks for that long, we will draw SS earlier than planned.
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Old 02-26-2017, 03:46 PM   #45
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Keep in mind we're 8 years into an expansion, we've never gone past 10 without a recession. Different this time?
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Old 02-26-2017, 03:56 PM   #46
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Debt Ceiling due March 15.
$20 Trillion

Just sayin'

http://www.marketwatch.com/story/us-...ncy-2016-09-13
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Old 02-26-2017, 04:43 PM   #47
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Keep in mind we're 8 years into an expansion, we've never gone past 10 without a recession. Different this time?
If something happens before 10 years, you will be blamed.
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Old 02-26-2017, 04:45 PM   #48
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I think sooner than later, it will toll 20 trillion times.
U.S. National Debt Clock : Real Time
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Old 02-26-2017, 04:49 PM   #49
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If something happens before 10 years, you will be blamed.
You'll have to find me in my bunker....LOL. Don't shoot the messenger. I'm just pointing out the obvious.
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Old 02-26-2017, 04:51 PM   #50
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You'll have to find me in my bunker....LOL. Don't shoot the messenger. I'm just pointing out the obvious.
We can defeat your bunker and tin foil when we want.
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Old 02-26-2017, 04:58 PM   #51
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We can defeat your bunker and tin foil when we want.
The scary thought is how you knew I was wearing my tinfoil hat.
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Old 02-26-2017, 05:29 PM   #52
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The scary thought is how you knew I was wearing my tinfoil hat.
Because we all have matching headgear. (well, some of us do)

Seriously, I'm not that worried although maybe I should be. In 2008 a lot of people were saying "this time it's different". Looking back at it, gee, it seems like it was just another rotten recession and not all that different.
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Old 02-26-2017, 07:08 PM   #53
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I think sooner than later, it will toll 20 trillion times.
U.S. National Debt Clock : Real Time
We will just default and reset the clock. Easy peasy. Any objection?
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Old 02-26-2017, 09:34 PM   #54
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Maybe more frequent trading is a good way to deal with this so you have more cash more of the time. Each time you sell, you'll wait for a drop, then one day as you're waiting for the decline to slow, it will keep going. Even if it's normally not the best way to invest, maybe in times like this the extra work and smaller gains will pay off. I might try calculating how much I'd loose doing that when the market is strong and how much I'd gain if there's a recession in, say, 2 years.

Ironically, there are people who claim they get good results using a system like this all the time, but I might feel safer following a system that underperformed an index by an amount that I could live with considering a nearing recession. I'd trust someone who says they underperformed an index more than I'd trust a little used system that someone claims out-performed an index.
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