cobafdek

I see your position, then, is university hospital/medical center-based, so your options for change would be different from what mine were. A solo private practice, as one example, is impossible for some super-sub-specialties. But like this Philly opportunity, others will pop up unexpectedly. Or, you may reach a senior enough position in your current situation to be able to call more shots. Here's another thing to consider, since you're a two-income professional couple. My wife is also a doctor, but neither of us ever worked full-time these past 20 years. We never thought the hours and stress of 2 full-time practices would be worth it. Together, our combined household income is maybe the equivalent of the median income of 1 full-time physician. It also allowed plenty of flexibility for family life. If you, or your wife with her "crazy" hours, ever get in danger of burn-out, you're fortunate that perhaps one or both of you could go part-time. The narrative I gave about my career is only just one way to connect the past dots, and the 5-10 year thing may just be an illusion. (I was certainly wrong about the Buffett Partnerships, which lasted 13 years, not 10.) Taleb might say I was just stumbling along, putting one foot in front of the other, exploiting some opportunities correctly while getting others wrong. Very little of what actually happened could have been planned. Sure, we actively tried to plan changes, but in reality, we were probably just adapting to changes thrust upon us. As long as you and your wife are confident that you can adapt to anything, you'll be fine.

I'm going to latch onto this sentence of yours from earlier in the thread. I'm guessing you've been in your current position somewhere between 5-10 years, and to make explicit what is implied, you're becoming bored. Welcome to the club. Even in a field as rich and fascinating as medicine, things get intellectually stale if you stay in one place more than 10 years. Looking at the arc of my career these past 30 years, I notice I've made some kind of major change approximately every 5-10 years. I realize now that, whatever my stated reasons for making the changes at the time, subconsciously I was fighting against becoming an intellectual vegetable. Becoming a drone was the risk of inertia, and I suspect this is true not only in the medical profession. I'll go out on a limb and hypothesize this reason was a less obvious factor for why the Buffett Partnership lasted . . . 10 years. First, I started out in academic research. The colleagues who recruited me, of whom I was awestruck initially, eventually became . . . boring. Then I left and moonlighted, but travel and irregular locum tenens positions eventually became . . . boring. Got married, had a kid, bought a private practice, which over time led to . . . tedium. A simple solution turned out to be moving the office to a new location, and it felt like a completely new job. Now I'm "retired" (I can completely quit medicine) with office hours 4 days/week seeing about 5 patient/day, so more time for the value investing pastime, not to mention spending an inordinate amount of time on CoBF. So kudos to you for trying to keep things fresh. Just don't move to Philly. The medical world in NYC is vast with a variety of career options.

My impression from reading everything Nate posts is that he's a down-home ordinary guy with preternaturally uncommon common sense who likes to shoot the breeze a lot, and that his ambition is to be true to himself. And the maxim "Know Thyself" is what will serve the OP mhdousa best in defining what ambition is for himself.

1+ (major league wisdom in oddballstocks's entire post) In addition, I don't know of any hospitals or medical centers that don't have major problems. And I don't know any that are not radically different than they were 2-3 years ago. I'm guessing you'll be part of a large group of physicians, maybe with a contract that periodically comes up for renewal. At a major local hospital I know, the surgery group that had the primary contract for > 20 years just lost their contract. I'm an MD in my 50s - you can PM if you have other important details. In the end, the most important factor may be this: It's great she'll be supportive of your decision, which is one reason to reward her by going with her preference. If your household is like mine, your wife takes the default responsibility for all the main home life issues, so she has the equivalent of 2+ full-time jobs.

Another great line from Graham (Intelligent Investor, 1st ed.): ". . . timing is of no real value to the investor unless it coincides with pricing---that is, unless it enables him to repurchase his shares at substantially under his previous selling price." This quote gives ammo to both sides in this debate. Thus, Gio could reasonably argue that he is not market timing, but rather market pricing. At a Shiller PE of near 30, he is placing a rationally priced bet that his 30% cash position is better than a 0% cash position. And there is a tantalizing hint in the latter part of racemize's essay that such a portfolio could work in the hands of gifted investors, albeit probably rarely ("holding cash appears to be most beneficial for active investors that have extreme volatility"). Moreover, he is leaving his invested funds in the hands of three stellar capital allocators. Questions for Gio: If you were not a businessman with an operating company that always prudently kept some cash on hand, and if you could invest only in an S&P500 or Total Market Index Fund--- 1. With the Shiller CAPE near 30, would you have 30% (or so) in cash and 70% in the index fund? (This question is to gauge how much weight you give to the Shiller CAPE, or similar market measures, in constructing your portfolio.) 2. Or would you be 100% invested in the index at all times? (This question will perhaps gauge how believable you find the statistical research suggesting 0% cash gives the best long-term results.)

When you get really good with statistical analysis, you end up at the university writing all kinds of theoretical papers, which are read only by your fellow ivory tower academics, and you get tenured into a full professorship. You might even get a Nobel Prize in Economics, like Scholes and Merton. Then you start a hedge fund and call it Long-Term Capital Management. End of point made. Ben Graham used statistical analysis. But his particular gift was in knowing how to use it. We can be thankful that, though he taught at Columbia University, and later at UCLA, he was not a tenured full professor. He knew theory, but never lost his common sense, and he knew how to operate in the real world. His title at Columbia was "Lecturer in Finance," which I think is like being an adjunct professor, i.e., faculty who actually know how to teach, and are also overworked and underpaid compared to the tenured. The analogy between medicine and investing can only go so far. I think the analogy begins to break down as follows. In medicine, on-going research continuously feeds into and eventually improves practice. In investing, it may be that Graham's use of statistical analysis after the 1929 crash resulted in all that ever needs to be known: margin of safety, and a few basic value metrics. Any further use of statistical analysis in the field of investing adds to Graham's discoveries only at the margins, if at all. In other words, current research on investing going on at the universities allows us to make the same mistakes, but with greater confidence! P.S. I admit your thoughts on this subject are more enjoyable reading than reading statistical analyses. Looking forward to more of your reviews of philosophicaleconomics.com, which means you'll continue to have to read them . . .

Is this phonetic french from memory, or some other language I don't know? :) Raison d'être translates literally to "reason to exist". I get no credit for knowing that since french is my native language. It's Italian. I cheated with Google Translate. Just trying to impress gio, but you blew my cover.

My *Mission Impossible* accomplished! Not sure I agree, but I think I know what you mean. Take your sister the doctor. I'm sure she would say that basic medical research and clinical trials, which depend heavily on statistical analysis, are essential to the field, even if applications are not readily apparent to daily clinical practice. (And I bet she would be more circumspect and never say she "HATES statistical analysis," let alone say so with emoticons!) But beyond a certain point, spending too much time away from the clinic, reading this stuff, may detract from being a good physician, which is more about common sense than it is about knowing all the precise fine points of the latest statistical analysis. Maybe that's why Hussman's not such a great investor?! Uh oh . . . don't let the research universities see this statement! You've just questioned their very ragion d'essere!

No lack of precision (or passion) here! As always, I enjoy reading and thinking about your incisive and opinionated posts. I really LOVE articles by both Hussman and "Jesse Livermore." I don't see them as incompatible, as "Livermore" states that Hussman is compelling and may indeed by right, but that he might be right for the wrong reasons or despite a flawed analysis. I think this particular philosophicaleconomics.com post is a tour de force, as it precisely and cogently shows how "historical reliability" may in fact fall into a kind of narrative fallacy trap. I don't see the classic Graham value metrics as ever losing their validity any time soon, if ever. But Graham himself writes in the intro to The Intelligent Investor (1st Ed.), ". . . just as the precepts crystallized out of experience before the First World War became largely obsolete in later years, so our present views, based on the experience of 1914-1948, may not stand the test of future developments. That risk cannot be avoided. But by bearing it clearly in mind we may succeed in reducing it." Sophisticated and thoughtful mathematical analyses of financial data increases my understanding of the "simple" measures like Price/AdjustedEarnings, Price/Sales, and Shiller CAPE. Reading Hussman, "Livermore," et al., keeps me thinking. And, as Buffett/Munger said, the ultimate risk reduction tool is thinking.

Thanksgiving Day is by far my favorite holiday, more so than even Christmas. Today is also the 225th anniversary of President George Washington's proclamation establishing the day in the U.S. Note these words: "Whereas it is the duty of all Nations to acknowledge the providence of Almighty God . . . Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States . . ." Although a few other countries celebrate on a different day, there's no reason all our international friends on the CoBF board should not celebrate with us, at least according to Washington. And those classy non-Americans (Parsad, Liberty, augustabound, petec, and Giofranchi), have already taken the lead! Thanks to all for contributing on this board!

I absolutely agree - this is a fabulous article critiquing the CAPE which has major issues when applied to a discontinuous boom/bust scenario as we have had over the last 10 years. The CAPE works, however, to smooth the normal business cycles over a decade. Just excellent, I recommend everyone read it - the shortcomings are clear and obvious once you read it. This is really important for international investing and deciding what country to focus on at this point - essentially the take-away is don't use it. I'm an avid reader of philosophicaleconomics.com, one of the most thoughtful blogs around. (Psst . . . Anyone know who's behind the pseudonym Jesse Livermore?) To be fair to Gio (the OP), he wasn't citing the Shiller CAPE as a rationale to diversify into lower-Shiller-CAPE countries, and his portfolio construction and cash position is arguably sensible under any market scenario. The US market is high, and the more relevant philosophicaleconomics.com blogpost was in August, in which Jesse deconstructs the Shiller CAPE for the U.S., pointing out the drivers that might account for why it is higher than TTM PE. http://www.philosophicaleconomics.com/2014/08/capehigh/ Interestingly, at that time, he ended that blogpost with this: "An investor’s best bet, in my view, would be to underweight U.S. equity markets in favor of more attractively priced alternatives in Europe, Japan, and the Emerging Markets."

Actually, that tax form (Form 5498) is what you'll receive from the HSA account trustee as a record of what they report to the IRS for tax-advantaged contributions. It's the same form used for IRA contributions. You won't need it to fill out your tax return. I usually receive my Forms 5498 several months after filing my taxes. Anyway, kudos to all on this thread who have HSAs. I don't know how I missed this thread earlier this year (actually, I do: I'm not the best at systematically reading everything on this board). My family started with the MSAs back in 1998, close to the time the IRS recognized them. We began with one of the pioneers of this idea, Golden Rule Insurance Co. in Indiana. Maximum contribution in the early years was something like $2,000 per family per year, and there was only a CD-type accounts available. I've always kept our HSA account in the most conservative and laziest portion of our household portfolio. With the passage of time and the liberalization of investment options available for HSAs, we have 40% in Vanguard funds and the rest in CD rates. I'm sure the IRR since 1998 is quite modest, but the account now has about $100,000, enough to pay for 10-15 years of deductibles should we ever need to.

Yes, and you'll receive separate IRS Forms 5498 after you make the contributions, one from the prior plan from the employer, and the other from ELFCU. The maximum allowable (totalling up all Forms 5498) is $6550 for the year. Yes, the penalty is income tax on the excess contribution amount, plus a 6% excise tax. The income tax portion (on the excess plus associated earnings on the excess) is not avoidable, but the excise tax portion is avoidable if the excess contribution (and associated earnings) are withdrawn in time. (From IRS Publication 969: Excess contributions. You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Excess contributions are not deductible. Excess contributions made by your employer are included in your gross income. If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Generally, you must pay a 6% excise tax on excess contributions. See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. The excise tax applies to each tax year the excess contribution remains in the account. You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. -You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. -You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.)

Society is better off with the choice you made. I'm with Munger on this point. Keep up the great work, professor!

You read this in high school!? If so, damn precocious when compared to my high school mentality, when I would have passed over Adam Smith's The Money Game in favor of Tony Robbins's Money: Master the Game. I concede: Boilermaker 1, Buckeye 0.

Bingo. I love the "Look Inside!" feature on amazon.com. I found 4 full pages containing 21 blurbs by prominent and influential people. Some of the early ones listed were top-notch and perhaps surprising (Bill Clinton, Paul Tudor Jones, John Bogle, Carl Icahn, Marc Faber), but then you get to the end of the list (Oprah, Serena Williams, Melissa Etheridge, Hugh Jackman, Usher), and I can't help but ROTFLMAO. It's a case study in the semi-corrupt world of blurb writing. And I really wonder how serious some of those blurbs really are, since they sounded very similar to the classic faux blurbs on Harvard Lampoon's "Bored of the Rings" spoof of the Tolkien classic. Buffett is interviewed by Robbins for a chapter in this book, but no blurb by Buffett? I don't have the hard copy, and maybe not all the blurbs are shown by amazon.com? If Robbins asked WEB for a blurb but was turned down, is that a telling point? Bingo again. Some of the solid stuff is interestingly summarized by James Altucher, who posted a very lengthy but fascinating review on amazon.com. I used to read Altucher's stockpickr blog back in the day, and his book Trade Like Warren Buffett is pretty decent. (The amazon.com review is a paste of his latest blog post: http://www.jamesaltucher.com/2014/11/10-things-i-learned-while-interviewing-tony-robbins-about-his-new-book-money/)

Nice! (except hope you didn't pay full retail price: $1.25 then is $14.95 now.) Since we're carbon-dating ourselves, I'll mention I was growing up in Ohio at the time. 1969 was a big year for Ohio: an Ohio boy walks on the moon, an event overshadowed only by Mike Phipps about to become a Brown.

I checked the index, and no reference to Bill Miller. Any insight in this book about whether Miller's 15-year streak was more skill than luck, or vice versa? I guess we can't expect his colleague to address this issue explicitly. I recall reading somewhere where Whitman pooh-poohed the achievement as being an artifact of the choice of starting month.

[amazonsearch]The Money Game[/amazonsearch] I'm making a loose connection with the nearby thread on The Intelligent Investor FIRST EDITION. While musing how Zweig might have been selected, I recalled that Graham almost selected George J. W. "Adam Smith" Goodman to edit what was to become the 4th edition updated by Buffett. I picked up a cheap paperback copy of The Money Game from one of the then dozens of secondhand bookstores in the Boston area. It was about 20 years ago, and I had just seen Jim Rogers on CNBC touting this book, so I had to read it. It was a terrific read. (A few years later, I picked up a free copy of the hardback edition in great condition, from the discard pile at a public library. I know, I'm bragging again.) It's on my pile of books to re-read. Value investing history buffs can speculate with one of those "what-might-have-beens": what if Graham had chosen Goodman?

I don't mind Zweig. Some of the commentary is interesting, and his stuff in the 4th edition and elsewhere on neuroscience and behavioral pitfalls I find moderately insightful and useful. I am currently reading the unfiltered 1st edition - slowly, and savoring it. For the updated 4th, I would have preferred a value guy rather than an EMH guy to do the updating and provide commentary. For the original 4th, Buffett was obviously a terrific choice, and Graham was still alive then so he surely made that decision. I wonder what the backstory was when Zweig was chosen. Some flack at HarperCollins who read only Money magazine?

Another suggestion to forward to merkhet's Facebook group, which will further endear him to them: http://www.amazon.com/Moral-Case-Fossil-Fuels/dp/1591847443/ref=sr_1_1?s=books&ie=UTF8&qid=1416152459&sr=1-1&keywords=the+moral+case+for+fossil+fuels

I bet Liberty is correct in what racemize means, but enoch01 is correct to examine the concluding sentence closely. To my mind, nearly all the data presented prior to the 2 short conclusion paragraphs IS FOCUSED ON and DOES SUPPORT the idea of remaining fully invested at all times. After all, the cash strategies are compared to the S&P index, and we all know this index contains a lot of non-compelling investments. So even if the portfolio contains a lot of non-value stocks, racemize does conclude that most people should hold this non-compelling index and no cash. But then he goes on with the concluding sentence, which you highlighted. As such it's a sensible opinion, but strictly speaking seems like a non sequitur to nearly all that came before. The exceptions are Portfolios 2 and 3, where it seems like racemize is bending over backwards trying to find some scenario to support the cash option. So the conclusion is actually a racemic mixture, and racemize is being true to his name! Still, an impressive paper.

BE CAREFUL WITH WHAT SUGGESTIONS YOU CASUALLY THROW OUT HERE! In no time, you'll get scores of kibitzers asking about maximum drawdowns, lengths of drawdowns, comparative beta (pardon the 4-letter word) numbers for rolling 10-, 15-, 20-year periods, etc., etc., etc. You'll never sleep . . .

Regarding the Variable CAPE Model (page 7), what was cash-level percentage-range used? From late 1950 to about 1974, and then from about 1991 to 2009, looks like nearly 100% cash? Would the flat-line appearance disappear if cash fluctuated between 0% to no higher than 50%? Also on the Positive 10 Year Spread (page 9), from about 1980 - 2004, also 100% cash? I realize these are nit-picky points, and minor adjustments likely would not change your thesis. Anyway, impressive work. Thanks for posting this.

Therein lies the irony and the larger point: it was hardly any effort, and still you get pretty good results! I admit I'm a slacker to be contented with 15% annually, but if I knew I could achieve such a result long-term, I could have retired more than 20 years ago. I guess my expectations are different, and I'm not swinging for the fences trying to achieve Buffett-like 20+% returns. So to my mind, your numbers support this lazy approach. Again, you may be inadvertently supporting west's work! That's the lovely paradox I see, that a "poorly constructed back test" can have such great results. It's the Dumb Quant approach. I was being only half-jocular earlier when I suggested leaving in the "bad data" in order to push the boundaries to see how well a Really Dumb Quant approach might perform. This field is rife with paradox and counterintuitive findings. That's why I'm glad guys like west are looking at the data independently. One unexpected result from quant research is that within the basket of net-net stocks, the group that had a net loss in the prior year performed better than those that had a positive net income. Who woulda thunk it? Nothing is obvious or cleanly predictable in economic/social science. (A lot of you guys on this board don't need to work so hard!)