james22

I am not defensive because I believe markets predictable, but because I believe markets are too incredibly complex and unstable for central banks to manage.

http://blogs.reuters.com/great-debate/2014/05/05/elites-talk-inequality-public-talks-growth/

http://blogs.telegraph.co.uk/finance/andrewlilico/100027182/inequality-isnt-a-problem-its-a-driver-of-progress/

If you believe that value matters but valuations do not necessarily mean revert, you should move your portfolio of risky assets around pretty aggressively as valuations shift among the various risky assets. But you should keep a fairly constant allocation to risky assets over time except in the rare instances where valuations are so extreme that risky assets are actually priced to lose out to lower-risk assets. That strategy will outperform a naïve strategy over time, but if valuations do mean revert, it is substantially sub-optimal. If valuations mean revert, you can improve the risk/reward trade-offs of your portfolio substantially by adjusting how much risk you take through time, taking more risk when the return to risk is high, and less when it is low. - GMO

Saudi Aramco's value has been estimated at up to US$10 trillion in the Financial Times, making it the world's most valuable company. http://en.wikipedia.org/wiki/Saudi_Aramco#cite_note-8

For the median stock, the overvaluation is more extreme than in 2000. http://www.hussmanfunds.com/wmc/wmc140421.htm

LUK

When the SV/ISV expected returns are 15%. Edited: Just checked - expected returns currently -5.1/2.8%... http://globaleconomicanalysis.blogspot.com/2014/04/gmo-7-year-real-return-equity-forecast.html

Do you not think it fair to assume an economics professor is not making a data mining error? (If you think this time is different, reject reversion to the mean, complex and adaptive systems unknowable, etc, that is another argument.)

I think it evidence Hussman is unlikely to be data mining (or curve fitting).

Because he's demonstrated his research chops in another field? http://management.fortune.cnn.com/2011/04/26/john-hussman-cracking-the-autism-code/

Oh, I agree. And why I am fully invested in my Roth IRA and taxable accounts where I can still find opportunities (I'll be buying LUK Monday). But my 401k is essentially limited to TSM/TIM and TBM indices. At today's (or last year's) valuation, I'd think it unlikely I'd keep any TSM/TIM gains. Edited to add: “Ms. Schroeder argues that to Mr. Buffett, cash is not just an asset class that is returning next to nothing. It is a call option that can be priced. When he thinks that option is cheap, relative to the ability of cash to buy assets, he is willing to put up with super-low interest rates, said Ms. Schroeder, who followed Mr. Buffett for years before she became his biographer. “He thinks of cash differently than conventional investors,” Ms. Schroeder says. “This is one of the most important things I learned from him: the optionality of cash. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.” It is a pretty fundamental insight. Because once an investor looks at cash as an option – in essence, the price of being able to scoop up a bargain when it becomes available – it is less tempting to be bothered by the fact that in the short term, it earns almost nothing. Suddenly, an investor’s asset allocation decisions are not simply between earning nothing in cash and earning something in bonds or stocks. The key question becomes: How much can the cash earn if I have it when I need it to buy other assets that are cheap, versus the upfront cost of holding it?” http://www.businessinsider.com/cash-as-a-call-option-2012-9

A simpler model, racemize: Here's a historical fact that I don't recommend as a timing tool or investment strategy, but is true nonetheless. Had an investor sold the S&P 500 index anytime it reached a price/peak earnings ratio of 19 (i.e. 19 times the highest level of earnings achieved to-date), and then simply sat in Treasury bills, possibly for years, reinvesting in stocks only when the S&P eventually declined to 14 times earnings, that investor would have captured the entire historical return enjoyed by S&P 500, with substantially lower volatility and risk exposure. Even easier, suppose that an investor sold the S&P 500 at 19 times record earnings, and just sat out of the market until the S&P 500 eventually dropped 30% from its prior highs (say, on a weekly-closing basis). Nothing more. Just sell at the first point of overvaluation and then sit around waiting for a plunge. That strategy would have placed an investor out of the stock market nearly 30% of the time, yet would have produced total returns of 13.03% annually since 1940 (versus 11.90% for a buy-and-hold approach), and 13.67% since 1970 (versus 12.96% for a buy-and-hold). http://www.hussmanfunds.com/wmc/wmc060508.htm

If you expect US High Quality to return only 2.1%, the opportunity cost is very low. https://www.gmo.com/America/CMSAttachmentDownload.aspx?target=JUBRxi51IIDZrv0FZiZbpIB3l3m%2fhybvfBpUIeImpq8f72rdLvXx7f3CjhzC9Q%2bpmRQspgkX63FM7bVF3Dp6phYxicYC3kOpmUyxo6d05eU%3d

Could you share your experiment/model/study work as Hussman has? Or show how his work is in error? Aligning Market Exposure With the Expected Return/Risk Profile http://www.hussmanfunds.com/wmc/wmc130506.htm http://www.hussmanfunds.com/wmc/wmc131118.htm

Evaluating FRFHF not in isolation but rather how its addition impacts the overall risk and return of my portfolio as a whole, I like to think its deflation fear offsets other's inflation fears. The bear to Buffett’s bull Unlike Warren Buffett, who can sometimes be described as a cheerleader for the U.S. economy, Prem Watsa and Fairfax are the opposite. Watsa believes that the causes of the global financial crisis cannot be so easily remedied. These causes include high levels of government debt and high unemployment in the U.S. and Europe. Adding to these global issues, some housing-related Canada-specific problems that are also beginning to surface. This is why Fairfax has a large equity hedging program in place to offset what they see as a high-risk environment throughout the world. For investors looking for a bearish company to play against Buffett’s bullishness, Fairfax just might be up their alley. http://beta.fool.com/whichstockswork/2013/06/14/canadas-versions-of-berkshire-hathaway/37148/

http://www.raddr-pages.com/forums/ http://raddr-pages.com/research/

Bet the farm.

I've a significant position in PME based primarily on the gold/PME relationship, but I would expect gold to rise given inflationary printing.

3) Cash. If you have continued financial repression, you want a much higher share of equities, because they are the highest performing asset, compared to bonds and cash. If you think financial repression will go on for another 20 years, you need to have equities. For the scenario that the central banks will exit their policies, you will want to own cash, because that’s the only asset that does not get impaired when interest rates rise. So you have two extreme portfolios: One almost fully in equities, the other almost fully in cash. So that’s what we do: We have about 50% in equities, and 50% in dry powder-like assets. That means some cash, some TIPS, and some long/short equity spread trades. But as said, we are reducing the equity part over the course of the year, to build up dry powder. http://mobile.fuw.ch/article/equity-markets-are-overvalued/

Depends upon your 401k options, MG. From good to bad (and high to low cost): 1. brokerage window 2. sector indices (Small Value/Emerging Markets/Commodities, High-Yield, etc.) 3. market indices (Total Stock Market/International Stock Market/Total Bond Market) 4. actively managed funds If you've bad options (high cost, actively managed funds), I'd not contribute beyond the employer match. I'd otherwise contribute to the maximum (17,500 plus after-tax, if possible). Edited to add: Should remember the tax-advantaged options in taxable (I- and EE-bonds, MLPs, non-dividend paying individual stocks) when evaluating 401k options.

Why can you not contribute to a Roth IRA? A "backdoor" contribution allows anyone to contribute. http://online.wsj.com/news/articles/SB10001424052702304104504579375432214126664

This.

http://mashable.com/2012/01/09/bodymetrics-augmented-reality-shopping/

OPB (Other Peoples Boats)