"Just Stand There" vs. incorporating new info
Re: "Just Stand There" vs. incorporating new info
Would you just stand there if a freight train is coming at you?
Anyway, the bigger concern here is a 95% stock allocation which IMO is simply not suitable for most investors.
Anyway, the bigger concern here is a 95% stock allocation which IMO is simply not suitable for most investors.
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Re: "Just Stand There" vs. incorporating new info
I pulled the source from MIT.
https://shass.mit.edu/undergraduate/majors
How about Harvard?
https://socialscience.fas.harvard.edu/d ... nd-centers
Academic Departments & Degree Committees
• African & African American Studies
• Anthropology
• Economics
• Government
• History
• History of Science
• Psychology
• Social Studies
• Sociology
• Women, Gender & Sexuality Studies
No Theater or Music in that one, but it's included with Gender Studies and Sociology.
Economics is NOT a hard science. There are no natural fixed laws to discern via the scientific method.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: "Just Stand There" vs. incorporating new info
Come on
The whole point is that there is no freight train. It's not easy to see it coming.
What was your prediction again? You can magically see the freight train right?
Last edited by HomerJ on Mon Dec 06, 2021 8:38 pm, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: "Just Stand There" vs. incorporating new info
It's hard to time markets, but that doesn't mean we are completely ignorant of the amount of risk we are taking with our allocations.
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Re: "Just Stand There" vs. incorporating new info
Agreed. That's very different than seeing a freight train and adjusting. To have the appropriate amount of risk requires no ability to see the freight train or know if one is coming.
Re: "Just Stand There" vs. incorporating new info
No, if you have 95% stocks there is definitely a freight train coming for you at some point.Triple digit golfer wrote: ↑Mon Dec 06, 2021 8:34 pm Agreed. That's very different than seeing a freight train and adjusting. To have the appropriate amount of risk requires no ability to see the freight train or know if one is coming.
If it were known to not be so there would be no equity risk premium.
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Re: "Just Stand There" vs. incorporating new info
Maybe someone has a risk tolerance for potential 50% drawdowns?000 wrote: ↑Mon Dec 06, 2021 8:36 pmNo, if you have 95% stocks there is definitely a freight train coming for you at some point.Triple digit golfer wrote: ↑Mon Dec 06, 2021 8:34 pm Agreed. That's very different than seeing a freight train and adjusting. To have the appropriate amount of risk requires no ability to see the freight train or know if one is coming.
If it were known to not be so there would be no equity risk premium.
The biggest risk of being 100% stocks is not sticking through it when times are tough
If you are 100% stock, the best way to stick through it is by holding uncorrelated assets that help allow for a reasonable recovery time
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: "Just Stand There" vs. incorporating new info
50% isn't even close to the floor. We have to stop pretending that it is. If you want to guarantee a 50% floor you will need to buy puts which at 50% OTM currently cost about 70bp / yr. Clearly the options market thinks there is a non-trivial chance of >50% drawdown because insurers are charging for it.Nathan Drake wrote: ↑Mon Dec 06, 2021 8:42 pm Maybe someone has a risk tolerance for potential 50% drawdowns?
Even excluding deep risks such as losing a war / revolution, asteroid, etc., 80% - 90% drawdown is completely plausible.
I don't think other kinds of stocks reliably function as stock diversifiers.The biggest risk of being 100% stocks is not sticking through it when times are tough
If you are 100% stock, the best way to stick through it is by holding uncorrelated assets that help allow for a reasonable recovery time
Re: "Just Stand There" vs. incorporating new info
Nope. While sometimes social sciences are grouped into humanities sometimes it’s not.HomerJ wrote: ↑Mon Dec 06, 2021 3:39 pmYou know what else is a social science?
"Social science" is just a phrase. They are not similar to the "hard" sciences just because they have "science" in the name.
- Anthropology
- Comparative Media Studies
- Economics (Economics; Mathematical Economics; Computer Science, Economics, and Data Science)
- Global Languages (French, German, Spanish)
- History
- Humanities (African & African Diaspora Studies, American Studies, Ancient and Medieval Studies, Asian and Asian Diaspora Studies, Latin American and Latino/a Studies, Russian and Eurasian Studies, Women's and Gender Studies)
- Linguistics
- Literature
- Music
- Philosophy
- Political Science
- Theater Arts
- Writing
There is a real reason Economics is in the same list as Music and Theater, and not in the list with Physics and Chemistry.
“social science” IS just a phrase. Just like “physical science” is just a phrase.
And yes, they aren’t similar to hard sciences because they have science in the name but because they use many of the same quantitative research methods.
Economics can be taken under either a humanities curriculum which means you end up with a BA or MA or a science curriculum where you end up with a BS or MS.
That this school lumps it under humanities is a choice of the school more than definitive proof that it’s not a science.
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Re: "Just Stand There" vs. incorporating new info
50% is a reasonable expectation a few times over one’s investing career.000 wrote: ↑Mon Dec 06, 2021 8:50 pm50% isn't even close to the floor. We have to stop pretending that it is. If you want to guarantee a 50% floor you will need to buy puts which at 50% OTM currently cost about 70bp / yr. Clearly the options market thinks there is a non-trivial chance of >50% drawdown because insurers are charging for it.Nathan Drake wrote: ↑Mon Dec 06, 2021 8:42 pm Maybe someone has a risk tolerance for potential 50% drawdowns?
Even excluding deep risks such as losing a war / revolution, asteroid, etc., 80% - 90% drawdown is completely plausible.
I don't think other kinds of stocks reliably function as stock diversifiers.The biggest risk of being 100% stocks is not sticking through it when times are tough
If you are 100% stock, the best way to stick through it is by holding uncorrelated assets that help allow for a reasonable recovery time
Worse than 80-90% with a recovery period longer than 10 years is unlikely, but possible. In that scenario the risk is that you didn’t enjoy the money while you had it because whatever caused the drawdown is likely a serious existential threat to all of humanity.
Most liquidity event shocks or bubble’s bursting will be nowhere near as large or drawn out, and diversification across asset class types within stocks can help ensure a reliably expedient recovery.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: "Just Stand There" vs. incorporating new info
It's a great career though. You can build complex equations and models, collect data, present results, identify changes in human behavior, modify the models, collect more data, and present more results on repeat for decades. Throwing in the unpredictability of human behavior really bumps up the job security. If only the head of the Physics department of the university that wins the NCAA National Football Championship Newton's got the privilege of changing Newton's Law of Gravity based on personal whims each year.
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Re: "Just Stand There" vs. incorporating new info
Right. So, if not, why not? What does "hard" mean?
In that word is the difference between the chemical certainty of Hydorgen + Oxygen + Spark = Water
and the macroeconomic model that predicts the next recession.
The whole point is one is actionable, genuinely predictive.
The other is an educated, thoughtful, mathematically rigorous.....opinion. At it's very core, uncertain. No way to know if it's gonna turn out to be true in advance.
FWIW, I think it is perfectly sane to think the forecasting of portfolio returns is NOT scientific
AND to think it makes sense for ME to hold 25% SCV (or whatever).
Now I don't think that for me. But I see how someone might think it for themselves.
And, in the context of this thread, I could easily see how someone who started with a 3 fund portfolio, then learned about tilting, might choose to incorporate it into their ISP. I don't find that the least bit insane (so long as one understands the pluses and minuses).
Just don't believe you have been shown the periodic table and now you finally know how it all works. It is NOT chemistry.
Re: "Just Stand There" vs. incorporating new info
No. Central banks removing liquidity would not be a serious existential threat to all of humanity, nor would complete collapse of the global financial system.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:07 pm Worse than 80-90% with a recovery period longer than 10 years is unlikely, but possible. In that scenario the risk is that you didn’t enjoy the money while you had it because whatever caused the drawdown is likely a serious existential threat to all of humanity.
This notion that we can just kind of brush off stock risk because everything else would be getting wiped out too, which I term Selective Doomism, is false.
No. SCV has not reliably reduced drawdowns or improved recoveries during great depression type megacrashes. It has worsened them.Most liquidity event shocks or bubble’s bursting will be nowhere near as large or drawn out, and diversification across asset class types within stocks can help ensure a reliably expedient recovery.
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Re: "Just Stand There" vs. incorporating new info
Why would central banks remove liquidity if the alternative is Great Depression 2.0?000 wrote: ↑Mon Dec 06, 2021 9:19 pmNo. Central banks removing liquidity would not be a serious existential threat to all of humanity, nor would complete collapse of the global financial system.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:07 pm Worse than 80-90% with a recovery period longer than 10 years is unlikely, but possible. In that scenario the risk is that you didn’t enjoy the money while you had it because whatever caused the drawdown is likely a serious existential threat to all of humanity.
This notion that we can just kind of brush off stock risk because everything else would be getting wiped out too, which I term Selective Doomism, is false.
No. SCV has not reliably reduced drawdowns or improved recoveries during great depression type megacrashes. It has worsened them.Most liquidity event shocks or bubble’s bursting will be nowhere near as large or drawn out, and diversification across asset class types within stocks can help ensure a reliably expedient recovery.
This is just fear mongering.
SCV has proved valuable in many dead-decade scenarios. Sorry, my data set doesn’t include anything but 1 Great Depression megacrash
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: "Just Stand There" vs. incorporating new info
This is a bizarre interpretation that MIT considers everything on that list is a social science when the school is specifically named the School of Humanities, Arts and Social Sciences.HomerJ wrote: ↑Mon Dec 06, 2021 8:24 pmI pulled the source from MIT.
https://shass.mit.edu/undergraduate/majors
Obviously many of those are Art and Humanities and not Social Sciences or the name of the school would just be The School of Social Sciences.
Hey look…an actual list of social sciences!How about Harvard?
https://socialscience.fas.harvard.edu/d ... nd-centers
Academic Departments & Degree Committees
• African & African American Studies
• Anthropology
• Economics
• Government
• History
• History of Science
• Psychology
• Social Studies
• Sociology
• Women, Gender & Sexuality Studies
No Theater or Music in that one, but it's included with Gender Studies and Sociology.
Amazing. See what happens when the division or school is actually named something like “Division of Social Sciences”? You actually see a list of social sciences!
As long as Harvard is considered a good source:
“In understanding what economics is, it is crucial to keep in mind that economics today is a scientific discipline. Bringing their particular perspective to the questions of social science, economists formulate theories and collect evidence to test these theories against alternative ideas. Doing economic research involves asking questions about the social world and addressing those questions with data and clear-headed logic, employing mathematical and statistical tools whenever appropriate to aid the analysis.”
https://economics.harvard.edu/files/eco ... _18-19.pdf
Re: "Just Stand There" vs. incorporating new info
No, it's not.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pm Why would central banks remove liquidity if the alternative is Great Depression 2.0?
This is just fear mongering.
The fact that there is so much belief in the 50% maximum stock drop idea and so much resistance to the opposing view suggests that the black swan theory about investors underappreciating rare events is still true.
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Re: "Just Stand There" vs. incorporating new info
Can I play? This looks like fun!nigel_ht wrote: ↑Mon Dec 06, 2021 9:28 pmThis is a bizarre interpretation that MIT considers everything on that list is a social science when the school is specifically named the School of Humanities, Arts and Social Sciences.HomerJ wrote: ↑Mon Dec 06, 2021 8:24 pmI pulled the source from MIT.
https://shass.mit.edu/undergraduate/majors
Obviously many of those are Art and Humanities and not Social Sciences or the name of the school would just be The School of Social Sciences.
Hey look…an actual list of social sciences!How about Harvard?
https://socialscience.fas.harvard.edu/d ... nd-centers
Academic Departments & Degree Committees
• African & African American Studies
• Anthropology
• Economics
• Government
• History
• History of Science
• Psychology
• Social Studies
• Sociology
• Women, Gender & Sexuality Studies
No Theater or Music in that one, but it's included with Gender Studies and Sociology.
Amazing. See what happens when the division or school is actually named something like “Division of Social Sciences”? You actually see a list of social sciences!
As long as Harvard is considered a good source:
“In understanding what economics is, it is crucial to keep in mind that economics today is a scientific discipline. Bringing their particular perspective to the questions of social science, economists formulate theories and collect evidence to test these theories against alternative ideas. Doing economic research involves asking questions about the social world and addressing those questions with data and clear-headed logic, employing mathematical and statistical tools whenever appropriate to aid the analysis.”
https://economics.harvard.edu/files/eco ... _18-19.pdf
From MIT:
School of Science
Biology
Brain and Cognitive Sciences
Chemistry
Earth, Atmospheric, and Planetary Sciences
Mathematics
Physics
IOW, those are the sciences. The rest aren't! LOL
Bet that really steams the old Poli Sci faculty.
This thread has become kind of silly.
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Re: "Just Stand There" vs. incorporating new info
Turkey has a central bank, right? Venezuela, too.000 wrote: ↑Mon Dec 06, 2021 9:46 pmNo, it's not.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pm Why would central banks remove liquidity if the alternative is Great Depression 2.0?
This is just fear mongering.
The fact that there is so much belief in the 50% maximum stock drop idea and so much resistance to the opposing view suggests that the black swan theory about investors underappreciating rare events is still true.
How is that working out?
I agree with the possibility. I just don't find the information actionable.
Re: "Just Stand There" vs. incorporating new info
Lol…I’ve been told it’s a bit of an art formvanbogle59 wrote: ↑Mon Dec 06, 2021 9:19 pmRight. So, if not, why not? What does "hard" mean?
In that word is the difference between the chemical certainty of Hydorgen + Oxygen + Spark = Water
and the macroeconomic model that predicts the next recession.
The whole point is one is actionable, genuinely predictive.
The other is an educated, thoughtful, mathematically rigorous.....opinion. At it's very core, uncertain. No way to know if it's gonna turn out to be true in advance.
FWIW, I think it is perfectly sane to think the forecasting of portfolio returns is NOT scientific
AND to think it makes sense for ME to hold 25% SCV (or whatever).
Now I don't think that for me. But I see how someone might think it for themselves.
And, in the context of this thread, I could easily see how someone who started with a 3 fund portfolio, then learned about tilting, might choose to incorporate it into their ISP. I don't find that the least bit insane (so long as one understands the pluses and minuses).
Just don't believe you have been shown the periodic table and now you finally know how it all works. It is NOT chemistry.
(aka not predictive) to create a complex chemical synthesis at industrial scale given the complexity.
And quantum physics is probabilistic…and depending on viewpoint deterministic or non.
Statistical physics is a probabilistic approach for complex stochastic domains.
If you don’t think this math and science stuff is directly applicable to finance or economics then there’s a whole bunch of folks paying a whole lot of money to quants for no good reason.
Social sciences are soft because people are generally only predictable as a mass and even then the variables are poorly understood so the predictions are often inaccurate.
But it doesn’t make it “not a science” or not useful. The fact is you run into the impact of social science every day.
Re: "Just Stand There" vs. incorporating new info
I tend to agree with you, that a portfolio of 95% equities is too risky, but that's a personal choice, the ramifications of which should be understood by the OP.000 wrote: ↑Mon Dec 06, 2021 8:36 pmNo, if you have 95% stocks there is definitely a freight train coming for you at some point.Triple digit golfer wrote: ↑Mon Dec 06, 2021 8:34 pm Agreed. That's very different than seeing a freight train and adjusting. To have the appropriate amount of risk requires no ability to see the freight train or know if one is coming.
If it were known to not be so there would be no equity risk premium.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
Re: "Just Stand There" vs. incorporating new info
This.vanbogle59 wrote: ↑Mon Dec 06, 2021 9:19 pm And, in the context of this thread, I could easily see how someone who started with a 3 fund portfolio, then learned about tilting, might choose to incorporate it into their ISP. I don't find that the least bit insane (so long as one understands the pluses and minuses).
Just don't believe you have been shown the periodic table and now you finally know how it all works.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: "Just Stand There" vs. incorporating new info
Um... that's the point.
It absolutely isn't useful. THAT'S. THE. POINT.But it doesn’t make it “not a science” or not useful.
The variables are poorly understand, and the predictions are often inaccurate. That's the definition of NOT USEFUL.
You just agreed with us. If you are dying to keep the word "science" in there somewhere, fine. You just agreed that the predictions are often inaccurate. Which means it's not useful.
Last edited by HomerJ on Mon Dec 06, 2021 10:29 pm, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: "Just Stand There" vs. incorporating new info
The vast majority of investors have NEVER experienced such an event. Is it possible? Yes. Is it likely? No.000 wrote: ↑Mon Dec 06, 2021 9:46 pmNo, it's not.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pm Why would central banks remove liquidity if the alternative is Great Depression 2.0?
This is just fear mongering.
The fact that there is so much belief in the 50% maximum stock drop idea and so much resistance to the opposing view suggests that the black swan theory about investors underappreciating rare events is still true.
How is it actionable to know that some calamitous event is a possibility? Invest we must. Invest per your risk tolerance. Such a scenario is likely to be so detrimental to society that no flight to safety will save you. Your bond allocation will be the least of your concerns.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: "Just Stand There" vs. incorporating new info
Here's an anecdote from my real life today that I think applies to this topic.
My kid had a word problem where the answer was:
100 ÷ 10 = 10
But since they're working on two-step word problems right now, the kid was determined that this was a two-step word problem, so the kid's answer that got written down was:
(100 ÷ 10) x 1 = 10
Just because you have new info, and you're excited about that new info, that doesn't mean you need to apply it. And it doesn't necessarily mean that applying it will change much of anything at all. You could just be complicating things for no reason.
My kid had a word problem where the answer was:
100 ÷ 10 = 10
But since they're working on two-step word problems right now, the kid was determined that this was a two-step word problem, so the kid's answer that got written down was:
(100 ÷ 10) x 1 = 10
Just because you have new info, and you're excited about that new info, that doesn't mean you need to apply it. And it doesn't necessarily mean that applying it will change much of anything at all. You could just be complicating things for no reason.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Re: "Just Stand There" vs. incorporating new info
It's already happened once, the world didn't end, and a bond allocation absolutely did save people.Nathan Drake wrote: ↑Mon Dec 06, 2021 10:15 pmThe vast majority of investors have NEVER experienced such an event. Is it possible? Yes. Is it likely? No.000 wrote: ↑Mon Dec 06, 2021 9:46 pmNo, it's not.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pm Why would central banks remove liquidity if the alternative is Great Depression 2.0?
This is just fear mongering.
The fact that there is so much belief in the 50% maximum stock drop idea and so much resistance to the opposing view suggests that the black swan theory about investors underappreciating rare events is still true.
How is it actionable to know that some calamitous event is a possibility? Invest we must. Invest per your risk tolerance. Such a scenario is likely to be so detrimental to society that no flight to safety will save you. Your bond allocation will be the least of your concerns.
I don't understand why people say something that has already happened once is impossible. Not likely, sure... but end-of-the-world? When it wasn't end-of the-world the last time?
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: "Just Stand There" vs. incorporating new info
How did a bond allocation save anyone? Most had no savings whatsoever and were significantly unemployed with the world at or on the verge of war. My point being, your savings during a time this will NOT be anywhere near your primary concern.HomerJ wrote: ↑Mon Dec 06, 2021 10:28 pmIt's already happened once, the world didn't end, and a bond allocation absolutely did save people.Nathan Drake wrote: ↑Mon Dec 06, 2021 10:15 pmThe vast majority of investors have NEVER experienced such an event. Is it possible? Yes. Is it likely? No.000 wrote: ↑Mon Dec 06, 2021 9:46 pmNo, it's not.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pm Why would central banks remove liquidity if the alternative is Great Depression 2.0?
This is just fear mongering.
The fact that there is so much belief in the 50% maximum stock drop idea and so much resistance to the opposing view suggests that the black swan theory about investors underappreciating rare events is still true.
How is it actionable to know that some calamitous event is a possibility? Invest we must. Invest per your risk tolerance. Such a scenario is likely to be so detrimental to society that no flight to safety will save you. Your bond allocation will be the least of your concerns.
I don't understand why people say something that has already happened once is impossible. Not likely, sure... but end-of-the-world? When it wasn't end-of the-world the last time?
You are a big believer in "PE doesn't matter! and it always goes up!" to which I reply, there's a reason why it goes up - because the world and its institutions are structured in a way that is LESS risky than in the past. With less risk, comes less return. The world we are in today is nothing like it was in 1929.
Which isn't to say it is without risk, but Central banks will do everything in their power to prevent a scenario that is being described. And in the end, they still may not be able to do anything if the world comes to nuclear war, or a plague like illness that is much more lethal than COVID, or fertility rates suddenly decline to extremely low levels as Grantham discusses.
But I'm not going to invest under the assumption that some mega depression will likely occur in my lifetime. If it does, plan B is to just survive like everyone else.
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Re: "Just Stand There" vs. incorporating new info
Their stock market is actually through the roof: https://tradingeconomics.com/turkey/stock-marketvanbogle59 wrote: ↑Mon Dec 06, 2021 9:53 pmTurkey has a central bank, right? Venezuela, too.000 wrote: ↑Mon Dec 06, 2021 9:46 pmNo, it's not.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pm Why would central banks remove liquidity if the alternative is Great Depression 2.0?
This is just fear mongering.
The fact that there is so much belief in the 50% maximum stock drop idea and so much resistance to the opposing view suggests that the black swan theory about investors underappreciating rare events is still true.
How is that working out?
I agree with the possibility. I just don't find the information actionable.
Weak lira is good for equities (in this case, anyway).
Re: "Just Stand There" vs. incorporating new info
I will tell you that human factors is useful having been part of the research and seen the results. Did we understand all of the variables? Nope. Did we correctly predict the outcomes? Nope. Did we use scientific methods and create a robust and rigorous experiment? Yep. Did we measurably reduce cognitive load and improve retention? Yep. Was the results statistically significant? Yep. Was it science? Yep.HomerJ wrote: ↑Mon Dec 06, 2021 10:11 pmUm... that's the point.
It absolutely isn't useful. THAT'S. THE. POINT.But it doesn’t make it “not a science” or not useful.
The variables are poorly understand, and the predictions are often inaccurate. That's the definition of NOT USEFUL.
You just agreed with us. If you are dying to keep the word "science" in there somewhere, fine. You just agreed that the predictions are often inaccurate. Which means it's not useful.
Do I care if you call me a scientist? Nope. But I would be annoyed if you claimed my colleagues weren’t, not that they would care.
The behavioral science used in advertising and product development…especially for food…works very very well.
Psychology has made many positive and measurable impact on peoples lives without pharmacological help.
Just because you don’t think any of this is useful just because it isn’t an exact science isn’t a mark on the value of social sciences but merely a poor reflection on you.
Re: "Just Stand There" vs. incorporating new info
WWII wouldn’t start until 1936 for Japan and China and 1939 for Europe.Nathan Drake wrote: ↑Mon Dec 06, 2021 10:37 pm
How did a bond allocation save anyone? Most had no savings whatsoever and were significantly unemployed with the world at or on the verge of war. My point being, your savings during a time this will NOT be anywhere near your primary concern.
I dunno that a decade later is considered “verge”.
Well, if you can amass a certain amount of wealth your plan B can be to retreat to an island lifeboat like the other wealthy folks safe from any ugly social disruption or food scarcity with solar and wind to power your luxury green retreat…But I'm not going to invest under the assumption that some mega depression will likely occur in my lifetime. If it does, plan B is to just survive like everyone else.
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Re: "Just Stand There" vs. incorporating new info
I said "at or on the verge", and it was very much a double dip depression...nigel_ht wrote: ↑Mon Dec 06, 2021 10:59 pmWWII wouldn’t start until 1936 for Japan and China and 1939 for Europe.Nathan Drake wrote: ↑Mon Dec 06, 2021 10:37 pm
How did a bond allocation save anyone? Most had no savings whatsoever and were significantly unemployed with the world at or on the verge of war. My point being, your savings during a time this will NOT be anywhere near your primary concern.
I dunno that a decade later is considered “verge”.
Well, if you can amass a certain amount of wealth your plan B can be to retreat to an island lifeboat like the other wealthy folks safe from any ugly social disruption or food scarcity with solar and wind to power your luxury green retreat…But I'm not going to invest under the assumption that some mega depression will likely occur in my lifetime. If it does, plan B is to just survive like everyone else.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: "Just Stand There" vs. incorporating new info
This what so here many don't seem to understand about factors. Since factors are potential return sources independent of the market having some degree of factor slant improves risk adjusted returns. During the 2000-2009 'lost decade' when the US TSM return was effectively 0%, US SCV returned about 9%.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pmSCV has proved valuable in many dead-decade scenarios. Sorry, my data set doesn’t include anything but 1 Great Depression megacrash.
A TSM index only provides the market return. Admittedly this is the most significant factor, but over-weighting the other 4 factors produces higher, more consistent long-term expected returns.
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Re: "Just Stand There" vs. incorporating new info
Didn't read the replies yet, but Bogle also said quite often. The enemy of a good plan is the dream of a perfect plan. With personal finance and investing, simple is better. You are not running a hedge fund, you are saving for the future, a basic 3 fund portfolio will get you there and you won't be constantly wondering what you are missing. Be happy the market returns and over the years you will built wealth and buy your freedom.
Good Luck.
Good Luck.
Re: "Just Stand There" vs. incorporating new info
This exchange on “is economics a science” is kind of ridiculous. Economics is a very broad discipline… it’s not about only predicting stock returns. Economists use statistical tools, data, models, experiments etc to measure many things… like impact of cheaper healthcare on public health, impact of education on earnings, impact of charter school attendance on education achievement, changes in X on Y in general.
They are often rigorous controlled experiments or when they are “natural” experiments or observational causal inference a lot of thought and discussion of assumptions and sensitivity analyses about possible weaknesses occur.
For example, is there an underlying law of nature that offering more access to healthcare makes people healthier? Who knows, but if the data show there to be a relationship and you have to decide how much to invest in healthcare, it’s better to look at the data as opposed to just guess because “nobody knows nothing, right?”
This extends to other applications
They are often rigorous controlled experiments or when they are “natural” experiments or observational causal inference a lot of thought and discussion of assumptions and sensitivity analyses about possible weaknesses occur.
For example, is there an underlying law of nature that offering more access to healthcare makes people healthier? Who knows, but if the data show there to be a relationship and you have to decide how much to invest in healthcare, it’s better to look at the data as opposed to just guess because “nobody knows nothing, right?”
This extends to other applications
Crom laughs at your Four Winds
Re: "Just Stand There" vs. incorporating new info
That a perfectly fine approach. But it's not so much a good v a hypothetical dream plan. It's TSM simplicity vs factor slant. The former is simpler while the latter has higher expected long-term returns, but is more complex, so individual investors need to determine if it's worth it or not.BalancedJCB19 wrote: ↑Mon Dec 06, 2021 11:41 pm Didn't read the replies yet, but Bogle also said quite often. The enemy of a good plan is the dream of a perfect plan. With personal finance and investing, simple is better. You are not running a hedge fund, you are saving for the future, a basic 3 fund portfolio will get you there and you won't be constantly wondering what you are missing. Be happy the market returns and over the years you will built wealth and buy your freedom.
Good Luck.
BTW, single auto re-balancing asset allocation and target date funds like VT/VTWAX, VASGX, VSMGX, provide global diversification, so you don't even need 3 fund; only one.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
Re: "Just Stand There" vs. incorporating new info
HomerJ gets it:Nathan Drake wrote: ↑Mon Dec 06, 2021 10:15 pm The vast majority of investors have NEVER experienced such an event. Is it possible? Yes. Is it likely? No.
How is it actionable to know that some calamitous event is a possibility? Invest we must. Invest per your risk tolerance. Such a scenario is likely to be so detrimental to society that no flight to safety will save you. Your bond allocation will be the least of your concerns.
How is it actionable? I think it's actionable to have some non-equities in the portfolio. Even 20% in something else provides significant preservation during such a scenario. And the return delta between long term bonds and stocks (or gold and stocks) hasn't been huge.HomerJ wrote: ↑Mon Dec 06, 2021 10:28 pm It's already happened once, the world didn't end, and a bond allocation absolutely did save people.
I don't understand why people say something that has already happened once is impossible. Not likely, sure... but end-of-the-world? When it wasn't end-of the-world the last time?
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Re: "Just Stand There" vs. incorporating new info
The return delta between long stocks and bonds is enormous.000 wrote: ↑Tue Dec 07, 2021 12:51 amHomerJ gets it:Nathan Drake wrote: ↑Mon Dec 06, 2021 10:15 pm The vast majority of investors have NEVER experienced such an event. Is it possible? Yes. Is it likely? No.
How is it actionable to know that some calamitous event is a possibility? Invest we must. Invest per your risk tolerance. Such a scenario is likely to be so detrimental to society that no flight to safety will save you. Your bond allocation will be the least of your concerns.
How is it actionable? I think it's actionable to have some non-equities in the portfolio. Even 20% in something else provides significant preservation during such a scenario. And the return delta between long term bonds and stocks (or gold and stocks) hasn't been huge.HomerJ wrote: ↑Mon Dec 06, 2021 10:28 pm It's already happened once, the world didn't end, and a bond allocation absolutely did save people.
I don't understand why people say something that has already happened once is impossible. Not likely, sure... but end-of-the-world? When it wasn't end-of the-world the last time?
I’m not saying you’re wrong and that having 20% in bonds is a safer route, but if someone wants to be 100% equity and understands the risks, including a massive black swan, that’s fine as well
I believe the likelihood of another scenario like that to be extremely low and it’s not even worth entertaining because bonds would be the least of my concerns in such a scenario
To each their own
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
- vanbogle59
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Re: "Just Stand There" vs. incorporating new info
Of course. Every science has it's limits.
And yet, when we study high energy particles, we don't have to fake them into thinking we are playing a game so we can draw conclusions about how they follow orders. And, somehow, the experiments performed by rich scientists in California can be duplicated by poor ones in Slovenia. And if they can't, they are discarded. See the difference?
I didn't say math wasn't applicable. I said it was fundamentally different in its application and in the nature of the conclusions you can draw from the math. Of course it's applicable.
I disagree. I would say, "social sciences are 'soft' because we are not studying cause and effect". What we are studying is better called influence or incentive... I would go so far as to say humans have free will (heresy, I know. I told you I was in the minority). But, even if free will is denied as a concept, the appearance of free will needs to be accounted for.
The break at the beginning of a game of pool is too complex to be described "completely" in any real engineering sense. Yet we can do it for a human? or, worse, a group of humans? Please. No we cannot.
I never said it wasn't useful. Many things that aren't scientific are still useful.
True. For good and ill.
I also run into the impact of [insert pet peeve hated social phenomenon of someone else's tribe here] every day.
They ain't science either.
Why in the world do the people who spend their entire lives studying the most complex thing imaginable (the interactions of human beings) feel the need to declare their work "the same" as chemists? If it were me, I would just celebrate that the field was more difficult, more important.... Not "solvable" like those silly chemists with their powders and solutions.
Maybe it's harder to get grants (or justify mutual fund commissions)?
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Re: "Just Stand There" vs. incorporating new info
is it truly 'news' or just 'noise'
wisdom is knowing the difference
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wisdom is knowing the difference
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Re: "Just Stand There" vs. incorporating new info
IMO “nobody knows nuthin” is an acknowledgment that most “new information” is more noise and speculation than valuable information.
And I always saw Jack’s “just stand there” as a challenge to the conventional wisdom that you should do something in reaction to noise and speculation.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
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Re: "Just Stand There" vs. incorporating new info
My thought exactly.marcopolo wrote: ↑Mon Dec 06, 2021 1:14 pmWhat is the difference between "evidence based" and "back tested well"? Aren't most of the academic studies based on back testing whatever theory is being put forth?burritoLover wrote: ↑Mon Dec 06, 2021 9:12 amI've seen that before and I'm probably a bit of a hypocrite in that I tell others the same thing when they are adopting the latest fad. But I try to think that I'm adopting evidenced-based info into these changes, not something that has back-tested well recently. But maybe I'm deluding myself.
What other "evidence" is there?
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
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Re: "Just Stand There" vs. incorporating new info
Yeah, I think you're right. I am doing it too quickly. I should let things marinate for longer - perhaps a year or more.ivgrivchuck wrote: ↑Mon Dec 06, 2021 8:07 pmMaybe you are doing changes too quickly and without careful consideration?burritoLover wrote: ↑Mon Dec 06, 2021 8:20 am I feel like I'm doing more harm than good but I can't seem to stick with one portfolio.
Adding a SCV tilt to a 3-funder is one thing. Jumping between different funds and gold is another.
I've now considered adding a small SCV tilt for around a year. I'll be considering it for at least 6 more months before making any moves. I will carefully analyze all the options (VBR, VIOV, AVUV)
I'm also considering going for a golden butterfly style of portfolio near retirement, which is around 20 years from now. Plenty of time to consider and do research.
What I'm trying to say is: It's okay to educate oneself and evaluate all the options, but any changes have to be done after very careful consideration and not by going back and forth, and especially not acting on impulses.
P.S. In this board there is a bit too much fanaticism about the 3-fund portfolio. It's a nice portfolio for sure, but there are many other very good ways to build one's portfolio...
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Re: "Just Stand There" vs. incorporating new info
There's a distinction between what is new and what is new to me. The concept of small-cap value premium is nearly 30 years old when I decided to add a tilt to it. Early on, with my only TDF portfolio, I wasn't aware of factors. I'm not reacting to market or economic conditions, valuations, or forecasts.RubyTuesday wrote: ↑Tue Dec 07, 2021 6:59 amIMO “nobody knows nuthin” is an acknowledgment that most “new information” is more noise and speculation than valuable information.
And I always saw Jack’s “just stand there” as a challenge to the conventional wisdom that you should do something in reaction to noise and speculation.
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Re: "Just Stand There" vs. incorporating new info
If 50% isn't even close to the floor, what is the floor? When did we last reach that floor? What is the probability that we will reach it again?000 wrote: ↑Mon Dec 06, 2021 8:50 pm50% isn't even close to the floor. We have to stop pretending that it is. If you want to guarantee a 50% floor you will need to buy puts which at 50% OTM currently cost about 70bp / yr. Clearly the options market thinks there is a non-trivial chance of >50% drawdown because insurers are charging for it.Nathan Drake wrote: ↑Mon Dec 06, 2021 8:42 pm Maybe someone has a risk tolerance for potential 50% drawdowns?
Even excluding deep risks such as losing a war / revolution, asteroid, etc., 80% - 90% drawdown is completely plausible.
I don't think other kinds of stocks reliably function as stock diversifiers.The biggest risk of being 100% stocks is not sticking through it when times are tough
If you are 100% stock, the best way to stick through it is by holding uncorrelated assets that help allow for a reasonable recovery time
- vanbogle59
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Re: "Just Stand There" vs. incorporating new info
Ask AIG. They are experts at insuring against these sorts of things.UpperNwGuy wrote: ↑Tue Dec 07, 2021 8:17 am If 50% isn't even close to the floor, what is the floor? When did we last reach that floor? What is the probability that we will reach it again?
Re: "Just Stand There" vs. incorporating new info
Read a history book.Nathan Drake wrote: ↑Mon Dec 06, 2021 10:37 pmHow did a bond allocation save anyone?HomerJ wrote: ↑Mon Dec 06, 2021 10:28 pmIt's already happened once, the world didn't end, and a bond allocation absolutely did save people.Nathan Drake wrote: ↑Mon Dec 06, 2021 10:15 pmThe vast majority of investors have NEVER experienced such an event. Is it possible? Yes. Is it likely? No.000 wrote: ↑Mon Dec 06, 2021 9:46 pmNo, it's not.Nathan Drake wrote: ↑Mon Dec 06, 2021 9:24 pm Why would central banks remove liquidity if the alternative is Great Depression 2.0?
This is just fear mongering.
The fact that there is so much belief in the 50% maximum stock drop idea and so much resistance to the opposing view suggests that the black swan theory about investors underappreciating rare events is still true.
How is it actionable to know that some calamitous event is a possibility? Invest we must. Invest per your risk tolerance. Such a scenario is likely to be so detrimental to society that no flight to safety will save you. Your bond allocation will be the least of your concerns.
I don't understand why people say something that has already happened once is impossible. Not likely, sure... but end-of-the-world? When it wasn't end-of the-world the last time?
U.S. bonds did just fine during the Great Depression. They went up in value, when stocks crashed.
Someone withdrawing 4% a year with a 60/40 portfolio had their money last 30 years, while those with a 100% stock portfolio would have gone broke.
I have never said that P/E always goes up. Prices, the value of the stock market, continue to go up, over the long-run, even when P/E remains the same.You are a big believer in "PE doesn't matter! and it always goes up!"
But I've never said valuations (P/E) "always go up".
I've said, so far, valuations (P/E) don't matter in the long-run. Valuations go up, valuations go down, but in the long-run, so far, the stock market still returns 9%-10% nominal annual returns.
This is undisputed. You think this could change in the future, and you may be right. But, so far, P/E and valuations absolutely HAVE NOT MATTERED, in the long-run.
They may matter in the short-run (unfortunately, they are not very predictive), which is why bonds are important. The U.S. stock market does crash, even 80%-90%. It's happened before. But, so far, it has always recovered in the long-run, and gone on to new heights, and the long-term returns, even including those crashes and bad years, have still been excellent.
Last edited by HomerJ on Tue Dec 07, 2021 8:41 am, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: "Just Stand There" vs. incorporating new info
Are you sure you're not overweighing the VSIAX results from just the past year? I agree that they look better than those of VTSAX, but, taking the long view, do the two funds represent a distinction without much of a difference? I wouldn't expect meaningfully higher results by choosing VSIAX.burritoLover wrote: ↑Tue Dec 07, 2021 7:59 amThere's a distinction between what is new and what is new to me. The concept of small-cap value premium is nearly 30 years old when I decided to add a tilt to it. Early on, with my only TDF portfolio, I wasn't aware of factors. I'm not reacting to market or economic conditions, valuations, or forecasts.RubyTuesday wrote: ↑Tue Dec 07, 2021 6:59 amIMO “nobody knows nuthin” is an acknowledgment that most “new information” is more noise and speculation than valuable information.
And I always saw Jack’s “just stand there” as a challenge to the conventional wisdom that you should do something in reaction to noise and speculation.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
Re: "Just Stand There" vs. incorporating new info
There's also sometimes the "fresh perspective" factor. You read an article or a post about something you were already aware of, but this time the way the argument or data was presented provided a fresh perspective, and something clicks.burritoLover wrote: ↑Tue Dec 07, 2021 7:59 am There's a distinction between what is new and what is new to me.
Re: "Just Stand There" vs. incorporating new info
Agree. I often find that people don't use the quote that way thoughRubyTuesday wrote: ↑Tue Dec 07, 2021 6:59 amIMO “nobody knows nuthin” is an acknowledgment that most “new information” is more noise and speculation than valuable information.
And I always saw Jack’s “just stand there” as a challenge to the conventional wisdom that you should do something in reaction to noise and speculation.