Callan Table of Periodic Investments - Monthly Update

[target2019]

Just discovered there are monthly updates available for the Callan table.

https://www.callan.com/library/

Note that free registration is required to access the research.

 

[jazz4cash]

Thanks. Needs to be a sticky.

 

[donheff]

How about explaining what it is for those of us who never heard of this.

 

[target2019]

How about explaining what it is for those of us who never heard of this.

Powerful search engine to the rescue! Here is a recent discussion on the forum about the Callan Periodic Table of Investments.

https://www.early-retirement.org/forums/f44/callan-periodic-table-of-investment-returns-97084.html

Callan is a financial resource company.
"We're a private, employee-owned company, which means you get access to a more stable consulting team supported by tools, data, and resources that could only be built by an organization with an exclusive focus on your needs."

And here is a Bogleheads page from their wiki:
https://www.bogleheads.org/wiki/Callan_periodic_table_of_investment_returns

I think anyone needing explanations of finance topics should go to the Bogleheads wiki first. There is peer review of the pages, which improves the reliability of the page.

 

[audreyh1]

How about explaining what it is for those of us who never heard of this.

It shows how asset classes perform relatively to each other over time, and how dramatically and unexpectedly they can change positions. For those rebalancing, it shows how one year’s laggards can easily become next year’s leaders and vice versa.

 

[donheff]

It shows how asset classes perform relatively to each other over time, and how dramatically and unexpectedly they can change positions. For those rebalancing, it shows how one year’s laggards can easily become next year’s leaders and vice versa.

Thanks. That’s all I was asking for.

 

[audreyh1]

It's very informative. For people who hesitate to rebalance because they fear selling winners and buying losers, it graphically illustrates how winning streaks usually come to an end after a couple of years or three, and how unpredictable relative performance between asset classes is.

I just look at the annual version though. It's a long term phenomenon.

 

[OldShooter]

It's very informative. For people who hesitate to rebalance because they fear selling winners and buying losers, it graphically illustrates how winning streaks usually come to an end after a couple of years or three, and how unpredictable relative performance between asset classes is.

I just look at the annual version though. It's a long term phenomenon.

Yes. For many years I told people that I hated the quilt charts because they were a unique combination of incomprehensibility and ugliness.

Then I figured out that was exactly the point.

 

[target2019]

I've thought a few times that the results would make for a nifty prediction/game/poll.

 

[audreyh1]

Yes. For many years I told people that I hated the quilt charts because they were a unique combination of incomprehensibility and ugliness.

Then I figured out that was exactly the point.

Yes, that is indeed the point.

For someone convinced that recent performance consistently predicts near future performance, hopefully it’s an eye opener.

 

[target2019]

Edwin C. Callan founded the company. I find it interesting how a founder (Callan, Schwab, Bogle, etc.) still influences a company when they've given up the CEO role. Here is Ed Callan's obituary:
https://www.sfgate.com/bayarea/article/Ed-Callan-founder-of-Callan-Associates-dies-3246064.php

From what I've been able to discover, Callan is an advisor to large pension funds. They measure performance and provide independent analysis to those who manage...

The periodic table is such a simple concept, and seems to be a visual milestone among the Bogleheads and others who buy the entire market and hold. Simultaneously it reinforces the sales talk of paid advisors who know how to follow the flow and discover nuggets of wealth.

One of the interesting patterns in the year end chart (https://www.callan.com/wp-content/uploads/2020/02/Periodic-Table-Collection.pdf) is/was the extreme movement of Emerging Markets from top of the chart to bottom. Of course there are exceptions to this ranking pattern for EM in the past 20 years.

I sit on an AA of 50/50 and just ponder the bouncing tiles on the chart. YMMV.

 

[Midpack]

An outstanding illustration of sector/asset class rotation - and the importance of diversification/futility of timing (asset classes). That said, I'm not sure what value annual updates provide except to show it's still wise to diversify/avoid timing?

 

[audreyh1]

I find it interesting to look at what lagged and lead in recent years, so I always take a look. Just a big picture look. Not actionable other than perhaps to encourage/reinforce occasional rebalancing.

 

[Koolau]

Sorry, I don't register for much these days. Besides, it doesn't sound like the Periodic Table I recall but YMMV.

 

[target2019]

Sorry, I don't register for much these days. Besides, it doesn't sound like the Periodic Table I recall but YMMV.

Here is the link to the 2019 year end table. Should be able to get there without an account...
https://www.callan.com/wp-content/uploads/2020/02/Periodic-Table-Collection.pdf

The yearly table with just year-end performance rankings has certainly grown in size from 1-2 to almost 20 pages! And the original chart is still there, on page 2.

Apparently one does not need a free account to look, as I suggested in opening post. Sorry about that.

 

[Dtail]

I find the chart especially interesting in down market years.

 

[Koolau]

Here is the link to the 2019 year end table. Should be able to get there without an account...
https://www.callan.com/wp-content/uploads/2020/02/Periodic-Table-Collection.pdf

The yearly table with just year-end performance rankings has certainly grown in size from 1-2 to almost 20 pages! And the original chart is still there, on page 2.

Apparently one does not need a free account to look, as I suggested in opening post. Sorry about that.

Thanks! Got it.

 

[Markola]

I sit on an AA of 50/50 and just ponder the bouncing tiles on the chart. YMMV.

Me too. “Don’t gamble- buy the casino.”

 

[big-papa]

I've been fascinated by their quilt for years. It's a nice graphical representation to show how random the ordering of "winners" is each year. For those initially pondering their AA, especially those who care about short-term volatility, it's a powerful visual. For those who believe " nobody knows nuthin' " and therefore hold something like the Total Market, it provides some confirmation.

For some, however, the ordering isn't as important as the magnitude. That data is there in the quilt, but the visual picture painted is more about the ordering than it is about the magnitudes of returns. For those who can tolerate more short term volatility but who want to try and do more to maximize their long term returns, you'll get more information by using something like Portfoliovisualizer or Simba's spreadsheet.

Still, others have created alternatives to the Callan Quilt, such as this one on seeking-alpha which also graphically shows the magnitudes as well as the ordering. Scroll down a bit on the page and it's there. Definitely not as easy to read as the ordering-only Callan version, but the information is there.
https://seekingalpha.com/article/4057532-alternative-callan-periodic-table-of-investment-returns

Here's another one that tries to do the same thing:
https://www.investmentaccountmanager.com/products/a-new-periodic-table-of-performance/

There are many roads to Dublin and there is no one-size-fits-all asset allocation. I'm a big backtester, but there are limits to its usefulness. There will never be enough data to ever find the "best" portfolio by looking backwards. So you're left with what is likely a decent range of choices, but with a heavy dose of philosophy on top of it to choose your path. For some, that philosophy leads them to a Jack Bogle style buy the whole market portfolio. For others, it could be any combination of US or International Stock, factors, non-traditional assets such as Gold and/or commodities, factors, real estate, etc. In the end, the only thing that matters is whether you're meeting your goals, not whether you've optimized with limited data and not whether you're following somebody else's idea of a great portfolio.

 

[frank2009]

It shows the wisdom of John Bogle's "Buy the haystack".

 

[OldShooter]

... I'm a big backtester, but there are limits to its usefulness. There will never be enough data to ever find the "best" portfolio by looking backwards. ...

I use backtesting to compare portfolios. For example a few months ago I loaded up the equity portion of an FA's portfolio and compared it to a few different market benchmarks. I knew it was a lousy portfolio just by looking at the funds, but the backtest made it clear that the guy had been costing his nonprofit customer around $60K/year (compared to a passive portfolio) on his $4M piece.

Re never enough data, the way I would say it is that there can never be enough data to forecast the behavior of a random process. What we can observe with enough data, though, is any off-center nature of the random distribution. Hence, we can see that buy and hold works. There is still the problem of Taleb's turkey, of course.

 

[big-papa]

I use backtesting to compare portfolios. For example a few months ago I loaded up the equity portion of an FA's portfolio and compared it to a few different market benchmarks. I knew it was a lousy portfolio just by looking at the funds, but the backtest made it clear that the guy had been costing his nonprofit customer around $60K/year (compared to a passive portfolio) on his $4M piece.

Re never enough data, the way I would say it is that there can never be enough data to forecast the behavior of a random process. What we can observe with enough data, though, is any off-center nature of the random distribution. Hence, we can see that buy and hold works. There is still the problem of Taleb's turkey, of course.

Yep, the stock market has been a random walk around a mean for a long time. That's the same with most good investment choices for which we have long term historical data. And any investor is going to heavily depend on that sort of trend continuing, even if we don't know what the mean is going to be going forward.

Re Taleb's Thanksgiving Turkey, yeah, black swans will happen. Emerging Markets didn't do so well during WW2, for example, for obvious reasons.
https://topforeignstocks.com/2018/0...utm_campaign=Feed:+tfs+(TopForeignStocks.com)

All we can do is diversify as much as we're comfortable with to try and reduce the impact of future black swans, the nature of which we can never know in advance.

 

[OldShooter]

... All we can do is diversify as much as we're comfortable with to try and reduce the impact of future black swans, the nature of which we can never know in advance.

I agree. We necessarily rely on inductive reasoning to live our lives, just like the turkey. Thankfully, it almost always works out for us. If it didn't, the human race would not have survived this long.

Re impact of future black swans, you might enjoy reading some of Taleb's thoughts on being "antifragile." He argues that an antifragile strategy mitigates the effects of negative black swans and takes advantage of the positive ones. Easier said than done, I think. (https://www.amazon.com/Antifragile-Things-That-Disorder-Incerto/dp/0812979680)

 

[big-papa]

I agree. We necessarily rely on inductive reasoning to live our lives, just like the turkey. Thankfully, it almost always works out for us. If it didn't, the human race would not have survived this long.

Re impact of future black swans, you might enjoy reading some of Taleb's thoughts on being "antifragile." He argues that an antifragile strategy mitigates the effects of negative black swans and takes advantage of the positive ones. Easier said than done, I think. (https://www.amazon.com/Antifragile-Things-That-Disorder-Incerto/dp/0812979680)

I've read it. In my opinion, the whole thing could have been summarized in about 3 pages but you won't make money on book sales that way.

Otherwise, it's a slog by Taleb through themes that repeat themselves throughout the book.
1. Me, me, me, me, me...
2. Anecdotal story that isn't quite relevant to my life.
3. Goto #1

Or from the Scientific American review (they recommend it, by the way)
"Like Taleb's 2007 bestseller The Black Swan, Antifragile brims with bluster, mean-spirited diatribes and chest-thumping self-congratulation"

As you say, the idea is interesting and has lots of merit, but is clearly easier said than done.

Cheers.

 

[OldShooter]

You forgot the theme "I'm so smart; here's yet another reference to a philosopher that you've never heard of."

My copy of "Skin In The Game" has a back cover Twitter blurb from "Dan in Prague:" "The problem with Taleb is not that he's an *******. He is an *******. The problem with Taleb is that he is right."