Another new thread-- Bernstein's asset allocation

[sgeeeee]

Re: Another new thread-- Bernstein's asset allocat

Lots of good ideas and great discussion in this thread. Here's some of my simple thoughts.

1) Investing in the US economic engine is still the best investment going. The wind may be taken out of her sails by Japan or India or China for 5 or 10 years at a time, but the US economic/political/social structure has such great advantage that it's still the long term best bet. That's why the US stock market keeps going up in the long run.

2) Diversification (asset allocation) is the best way to get through the rough spots in the long term upward climb.

3) The optimum diversification (asset allocation) has been different for every rough spot in the past and it is likely to be different still for the next one. Asset allocation prescriptions are arrived at through a minipulation of some part of historical data that may or may not be ideal for the future. Although I am often convinced in the short run (right after I've read the reasoning) that some author has a good plan, I always find holes in the logic when I start looking at the prescription more closely. I don't take any of them too seriously. After points 1 and 2, and reading a few prescriptions for asset allocation, you may as well develop your own. When you read all the prescriptions used by all the successful investors on this board, it should be clear that it is points 1 and 2 that matter -- not the details of asset allocation.

The posters of this board may now begin calling me names and spitting on me.

 

[wabmester]

Re: Another new thread-- Bernstein's asset allocat

The Market is like a man walking a dog from Point A to Point B with a 100 foot leash.

Like a dog and it's shadow, I don't believe that the shadow is a limiting factor in it's growth.

A dog that always walks up hill eventually becomes tired.

 

[sgeeeee]

Re: Another new thread-- Bernstein's asset allocat

A dog that always walks up hill eventually becomes tired.

The market is like a dryer sheet in the hands of a serious ER. . . It never becomes tired.

 

[cute fuzzy bunny]

Re: Another new thread-- Bernstein's asset allocat

Lots of good ideas and great discussion in this thread. Here's some of my simple thoughts.

1) Investing in the US economic engine is still the best investment going. The wind may be taken out of her sails by Japan or India or China for 5 or 10 years at a time, but the US economic/political/social structure has such great advantage that it's still the long term best bet. That's why the US stock market keeps going up in the long run.

2) Diversification (asset allocation) is the best way to get through the rough spots in the long term upward climb.

3) The optimum diversification (asset allocation) has been different for every rough spot in the past and it is likely to be different still for the next one. Asset allocation prescriptions are arrived at through a minipulation of some part of historical data that may or may not be ideal for the future. Although I am often convinced in the short run (right after I've read the reasoning) that some author has a good plan, I always find holes in the logic when I start looking at the prescription more closely. I don't take any of them too seriously. After points 1 and 2, and reading a few prescriptions for asset allocation, you may as well develop your own. When you read all the prescriptions used by all the successful investors on this board, it should be clear that it is points 1 and 2 that matter -- not the details of asset allocation.

The posters of this board may now begin calling me names and spitting on me.

Ptui. I fart in your general direction...

What about the arguments that the first long legs of the US stock market were our maturation as an economy, followed by the second set of long legs our integration into the world economy. I know some writers claim the US stock market is nearing a point where it may peak and shoulder along for a considerable period of time. Same writers are suggesting an allocation that includes no more than 25-30% US stocks, particularly large caps. Suggestions are to look more towards europe, which may be where the US was before we hit our second long leg of upward movement, japan where their first set of legs got cut out from them, and emerging markets where the maturation is just beginning and upside is highest.

 

[unclemick]

Re: Another new thread-- Bernstein's asset allocat

Dryer Sheet King! Name calling at its best.

Now for salary guru - Points one and two. DeGaul got it right and Bernstein defers to Angus Madison and his world country data/books. Egypt and Argentina leap readily to mind - Japan is a recent rookie. I also favor Bogle's old view - USA.
Let Companies with overseas earnings work the currency and diversification issues for you - buy total stock index at the lowest cost possible for your equity.

Point three is a male hormone thing - even Bernstein a rational math/stat/data guy has to play hence the asset classes, historical data and hindsight. BTY - I did all that stuff (5-8 vg. funds/asset classes) when I first retired (93) until I slowly came around - still not pure - Lifestrategy has asset allocation and foreign holdings. Monty Python's search for the holy grail is alive and well in my 'hobby stocks'. Just finished 'The Warren Buffett Way' and will be off looking for 'a few good buys'. My dividend/DRIP stocks did the job the first ten years of ER and now with pension and SS in two years - ready to rock in hobby stocks -

?what's shaking in the dryer sheet/clothesline/clothes pin sector - any good values?

 

[sgeeeee]

Re: Another new thread-- Bernstein's asset allocat

Ptui.  I fart in your general direction...

Ha, I was wearing a raincoat and a mask.

What about the arguments that the first long legs of the US stock market were our maturation as an economy, followed by the second set of long legs our integration into the world economy.  I know some writers claim the US stock market is nearing a point where it may peak and shoulder along for a considerable period of time.  Same writers are suggesting an allocation that includes no more than 25-30% US stocks, particularly large caps.  Suggestions are to look more towards europe, which may be where the US was before we hit our second long leg of upward movement, japan where their first set of legs got cut out from them, and emerging markets where the maturation is just beginning and upside is highest.

There are lots of qualitative arguments for less than optimum news in the near future. But "less than optimum" does not need to mean doom and gloom. I've spent time in europe -- Great Brittain, Spain, France, Italy. It's a great place with lots of smart people and great potential, but they don't have an economic/political/cultural environment as promising as the US. The US has some stumbling blocks between it and another great bull market. But, geez . . ., so does europe. India and China have incredible potential to grow their economies in the near future and this will affect US growth too. But if you think we have stumbling blocks to long term success, take a look at these two. Plus . . . parts of the US economy will benefit from the growth in these places. I can believe we may see average stock return over the next 5 to 7 years (maybe even 8 to 10) that are below the norm. Bogle has suggested from his analysis that we should expect 6% to 9% over the next decade. Buffet has made statements that are consistent with this. That number seems reasonable to me and is still well above the worst case tested by FIRECalc when you run a simulation. I feel more comfortable with that kind of expectation than I do with a vague reccomendation to buy europe.

 

[John Galt]

Re: Another new thread-- Bernstein's asset allocat

Hi Cut-throat! to comment on your post of March 2
re. "unpredictability" and stocks. Even if I knew for
sure that stocks would do better than what I have (in
"the long haul"), I still would not switch. You see, I no
longer have a "long haul" to work with. That makes all the difference.

John Galt

 

[sgeeeee]

Re: Another new thread-- Bernstein's asset allocat

Dryer Sheet King! Name calling at its best.
. . .
?what's shaking in the dryer sheet/clothesline/clothes pin sector - any good values?

I hope this isn't one of those sectors that gets hit hard by outsourcing.

 

[cute fuzzy bunny]

Re: Another new thread-- Bernstein's asset allocat

Hmmm...tacos....dogs...Yo Quiro Taco Bell?

Makes me wonder about the viability of the Demolition Man portfolio where you invest everything in taco bell because its the only restaurant still existing in the future...

 

[wabmester]

Re: Another new thread-- Bernstein's asset allocat

Investing in the US economic engine is still the best investment going.

I agree with this, but all empires peak at some point. The US still has a good head of steam, but we should closely watch what happens to the economies of Japan and Germany in the coming decade. Their demographic trends are similar to ours, but the magnitude and timeframe of their problem is *much* more severe than ours. Japan may already be in decline.

I'm somewhat gun-shy of equities partly because of my almost 20-year investment in Japanese equities that has gone absolutely nowhere. I think Japan is good example of why a "disciplined" buy-and-hold strategy can be misplaced. I no longer expect RTM to the upside for Japan. I think there are fundamental economic problems there, party reflected by negative GDP growth in recent years.

Don't make the same mistake I did. Bail from US equities while you still can! (About 30 years from now.)

 

[Bob_Smith]

Re: Another new thread-- Bernstein's asset allocat

Wabmester, are you out of US equities altogether?

 

[wabmester]

Re: Another new thread-- Bernstein's asset allocat

Wabmester, are you out of US equities altogether?

No, Greenspan has turned me into a market timer (OK, he didn't have to twist my arm). With help from Japan and China (building their dollar reserves), he's determined to reflate our equity bubble, and I'm not going to fight him. I've steadily increased my US equity stake over the last year, and I may buy still more. As long as interest rates stay this low, US equities are the place to be.