Callan Periodic Table of Investment Returns

[OldShooter]

Curious question: Would you consider Warren Buffet to just have gotten lucky? As of May 2018, BRK had a 20.9% annualized return, more than 2X the S&P 500. Or was that just concentration return/risk?

ETA: 20.9% from 1964 to 2018, a pretty long period of time.

He's an interesting case. I recommend that you read his authorized bio, "The Snowball." Basically, he made his money beginning fairly long ago by buying and very hands-on management of businesses and not as a hands-off investor. It's a fascinating story. His hand has grown cold in the past decade though; IIRC its been 8 years or more since he beat his benchmark. (To be fair, part of that is that BRK has gotten so big and diversified that it is hard for it to be anything but average.)

Another thing is that the markets have changed drastically during his tenure. He started out studying printed information on stocks, with no computer databases, no computerized screening, no Bloomberg terminals, etc. Ben Graham taught him to find and exploit "cigar butts." (GEICO was one of them.) That was a time when the markets were much less efficient than they are now and were much more dominated by individual investors. Company information that today rockets around the world in minutes was, back then, buried in Standard & Poors' printed stock manuals where Buffet could find and pick it out. In an inefficient market, he who has the most information wins. That was Buffett.

Charles Ellis writes about this evolution of the market and argues that the randomness that we now have is relatively new. Coming at it another way, he argues that all the talented managers and mathematical wizards have basically cancelled each other out and left us with randomness. With 10,000 mutual funds and multiple managers per fund but only about 3600 stocks, there can be no hidden gems. An extremely efficient market, IOW.

It would be interesting if someone could dissect BRK and separate Buffet's results strictly as a hands-off stock-picker. I would love to see that and have no idea how it would look.

He's a master at self-promotion and a wonderful source of wise quotations, but I don't think that comparing his lifetime success to today's stock-pickers' results is apples-to-apples. Nor would it be fair to look only at the past 8-10 years. I think you'll enjoy the book.

 

[target2019]

I've enjoyed these charts each year. The 2019 table is the 20th anniversary edition:

https://www.callan.com/wp-content/uploads/2019/01/Classic-Periodic-Table-2019.pdf

When it comes to Emerging Markets, you're hot, or not.

 

[sengsational]

That means EM should be a separate AA bucket to get a big rebalancing dividend.


If any of you have the opportunity to send me greetings from the future, please include a copy of this chart.

 

[yakers]

Callahan Investment Table

Always liked the visual impact of the Callahan Table of investment returns. But its not very useful (except to note unpredictibility of future performance) for me as it has too many categories. Is there a similar visual talbe that only uses Large Cap, Small Cap, foreign equities and total bond returns? Maybe emerging markets too. I do not distinguish growth Vs value or type of bond returns.

 

[audreyh1]

I think that is the whole point of the Callahan Table - to demonstrate that asset class performance is not very predictable on a year by year basis.

I mainly like to see the historical data and relative volatility of the different asset classes. For me that is interesting.

 

[38Chevy454]

Been following the discussion here and also have seen or in some sense used the Callan chart in previous years. Not for picking asset classes, but to confirm that the future is not predictable. In spite of inside my head voices that think I can predict the next high performing asset class. The logical part of me says to stick with my confidence in the long term strategy of asset allocation and diversification. I likely won't be hitting the home run, but also will not strike out or fail. Just some steady performance, although I tend to hold higher equities than many on here do. So a little more volatility, I can handle it.

 

[NW-Bound]

When it comes to Emerging Markets, you're hot, or not.

That means EM should be a separate AA bucket to get a big rebalancing dividend.

It would appear so.

Yet, when I checked out the premise using Portfolio Visualizer, EM drags down any portfolio that has it since 2007, no matter how I tweak the rebalancing period. The only period where EM shined was immediately after the Great Recession of 2008-2009, and it lasted only a couple of years. Since then, it only hurt. I know. I still have plenty of it.

If anyone has any data that proves otherwise, please share it.

 

[Dtail]

It would appear so.

Yet, when I checked out the premise using Portfolio Visualizer, EM drags down any portfolio that has it since 2007, no matter how I tweak the rebalancing period. The only period where EM shined was immediately after the Great Recession of 2008-2009, and it lasted only a couple of years. Since then, it only hurt. I know. I still have plenty of it.

If anyone has any data that proves otherwise, please share it.

Same issue with my International equity portion.

 

[NW-Bound]

I have developed world stocks too.

We should have listened to the late Bogle. He said, "you don't need no stinkin' international stocks".

But, noooo... I had to have exposure to everything.

Well, at this point, I hate to jettison them, just to see them rise. So, I am stuck.

 

[audreyh1]

Emerging markets is an asset class that seems to go through long periods of being near the top of the chart, and long periods where it is near the bottom of the chart.

Very dependent on currency changes which go through long periods of up and down. Plus global versus US economy of course.

Here is a copy I have of the chart from 2012 that includes a goodly chunk of the 1990s data.

 

[OldShooter]

Emerging markets is an asset class that seems to go through long periods of being near the top of the chart, and long periods where it is near the bottom of the chart. ...

Well, and no asset class has such a fast-changing economic composition. IIRC both Russia and China are in this class. I doubt that you will find anyone who thinks these two economies are at all similar to what they were even five years ago. Even more than for most assets classes, IMO prediction for this class is futile.

 

[LOL!]

It would appear so.

Yet, when I checked out the premise using Portfolio Visualizer, ....

I would not use Portfolio Visualizer to check on something volatile because it only uses month-end prices. For instance, it would miss the rebalancing that one could do and did do in December 2018 because the low was not at the end-of-the-month.

Furthermore, if one doesn't have 10% or even 20% devoted to one of these asset classes, then it ain't gonna do much for the overall portfolio with only partial rebalancing.

 

[mickeyd]

Cash was king in 2018. Hopefully this year will be better.

Looks like it's a first time for cash to be on the top row.

 

[steelyman]

Here is a copy I have of the chart from 2012 that includes a goodly chunk of the 1990s data.

Thanks for posting! I bet that comes from around the time that I was working with the data to get a broad (not micro) look.

I had an idea over the past couple of days that Quicken might be coerced into generating yearly performance numbers that could be massaged into a similar grid, but when you have a good amount of mutual/index funds they fall into a category “asset mix” and not specific classes/sectors.

[ADDED] After posting the above, I realized that the categorization comes from letting Quicken download asset classes for each security. This can be overridden by the user, so might be addressed. Maybe a mini-project. Next winter.

 

[audreyh1]

Looks like it's a first time for cash to be on the top row.

In the past 20 years.

 

[NW-Bound]

I would not use Portfolio Visualizer to check on something volatile because it only uses month-end prices. For instance, it would miss the rebalancing that one could do and did do in December 2018 because the low was not at the end-of-the-month.

Furthermore, if one doesn't have 10% or even 20% devoted to one of these asset classes, then it ain't gonna do much for the overall portfolio with only partial rebalancing.

I dunno.

Looking at something that goes up/down as bad as EM, you would think you could just rebalance yearly and it would be good. But if something goes down to 0.7x, then up to 1.3x, you would need to overweigh when it is down. Else, your return is still lousy after rebalancing. It's because 0.7x times 1.3x is only 0.91.

I just spent 1 hour to look at my own situation: 50% US stock and 20% international (mostly EM). I would do a lot better with a 70% US stock composition.

I used actual portfolio and expense data from 2010 till now in a spreadsheet. Had I done all US stocks, my portfolio would be 12% higher than it is now at 2019.

It's amazing I did not lose more, because for those past 9 years, $1 in the S&P became $2.7, while the ex-US market would give you $1.3.

Huge difference! And $1.3 may just barely keep up with inflation.

 

[target2019]

I have copies of Callan from 2002-2018. Just looked at 2002, which captures 1983-2002. EM was not on the chart at that time. It first appeared on Callan 2010, which shows results going back to 1991.

Cash really surprises. I would have thought more dead last results for Cash Equivalent. Over 20 years, it looks like:

5-3-3-4-9-9-6-8-6-3-9-9-5-9-6-6-3-8-9-1

So, only 6 out of 20 results were dead last.

I don't think we got those results, as our cash is not 100% at prevailing interest rates. Still, a real eye-opener.

 

[sengsational]

Game Proposal

Pick a year off of any Callan chart that you think will most closely match 2019.

Scoring will be done by going down the column of the year you pick comparing to the published Callan chart when it comes out. The top 3 asset classes in "your year" will be compared to the top 3 in 2019. If anything in the top 3 of your year matches any of the top 3 in 2019, you'll get a point. The 3 item "box" will slide down to the second through fourth highest return in your year and be compared to 2019 again, and you'll get a point for each match. The box will continue sliding down.

If we played last year and someone picked 2008 here's the scoring:
1st-3rd: Cash Equiv, US Fixed => 2 points
2nd-4th: High Yield, Non-US Fixed => 2 points
3-5: High Yield => 1 point
4-6: Large Cap => 1 point
5-7: Small Cap, Large Cap =>2 points
6-8: Non-US Equity, Real Estate => 2 points
7-9: Non-US Equity, Emerging Market => 2 points

So the score for picking 2008 back last year would have been 12, 1 tbp.

If someone had picked 2007 here's the scoring:
1-3: =>0
2-4: Non-US Fixed, US Fixed =>2
3-5: Non-US Fixed, Large Cap =>2
4-6: Large Cap => 1
5-7: Large Cap => 1
6-8: Small Cap => 1
7-9: Small Cap => 1

So the score for picking 2007 back last year would have been 8, 1 tbp.

The maximum regular score would be 7 * 3 = 21 if 2019 matches your year exactly.

For tie-breakers only, one "tbp" (tie breaker point) for each of your year's asset class being on the exact row as 2019.

How to enter: Make a post like this:
My Callan Year Picking Game Choice: 2003

 

[target2019]

Do you mean pick a year and score 2019 based on the year?

 

[target2019]

My Callan Year Picking Game Choice

 

[sengsational]

Do you mean pick a year and score 2019 based on the year?

You pick a year that you think will match the to be published 2019 result. When the 2019 results are published in 2020, you'll quote your post to brag that it matched 2019 or ignore the game if the year you picked wasn't at all like 2019 turned out.

 

[sengsational]

My Callan Year Picking Game Choice

Were you going to edit/append a year, or get a mod edit in early 2020


But that gives me an idea...semi secret guesses could be made by using a white font. 2003

 

[target2019]

Were you going to edit/append a year, or get a mod edit in early 2020


But that gives me an idea...semi secret guesses could be made by using a white font. 2003

I thought it was a link. In the mobile app easy to do.
Could we just call the final ranking, 2019?

 

[sengsational]

Could we just call the final ranking, 2019?

If you mean list nine categories, in order, you could do that, sure. But I'm not sure many would play if the burden of entry we're that high. If all that's required is typing a 4 digit year, that's about as easy as it gets.

 

[hotwired]

patterns

What I get from this is: It's possible to "time the market" in a manner of speaking by investing in any broad asset class that has had the worst performance over the past 2 years. This isn't as likely to outperform using single company stocks or managed diversified mutual funds but I think it a "not so dumb" move to take at least a portion of a portfolio, (say the portion used to create a "tilt" toward something) and divide it equally between the 2 worst performing asset classes or single country funds over the past 1-2 years. I'm wondering if it's possible to screen for something like this?

This would constitute a bit of "strategy diversification" to go along with asset class diversification.