Have We Hit The Top?

[fareastwarriors]

1 hour ago, Parsad said:

 

What do you do with all those eggs?  Do you freeze them...doesn't that change the texture?  Generally, the best before is about a month out.  Cheers!

 

No, we won't freeze them. It's more than usual amount I like to have on hand but the deal was too good to pass up. We're a family of 3 and the grandparents visit 1/week. 

 

Cantonese/Chinese dishes:

3-4 eggs for Tomatoes Eggs 

4-5 for silky soft Steamed eggs 

1-2 eggs in egg noodles/ramen

3-4 eggs for bitter melon with eggs

https://thewoksoflife.com/ - I don't follow their exact recipes but more for a source of inspiration. 

 

When we have many, the wife likes to make ramen eggs or more rarely tea eggs. 

 

I personally eat more non-Asian food than my family so I do a breakfast taco/burrito or scrambled eggs every couple of days. Some weekends I make a frittata and that takes up 6-8 eggs. 

 

We eat what's in season and what's on sale. The menu changes accordingly to that, unless it's a special occasion. 

 

 

[james22]

1 hour ago, TwoCitiesCapital said:

They're investing for 20+ years if they're 20-40. But a 50-year old?

 

Can't really afford to be wrong 15 years straight unless if they're ok delaying retirement. A 60-year old? Can't be wrong for 15+ years while living off of those funds in retirement. So what you're saying - blindly but equities because they've always been better with 20+ years - only works until you hit about 45-50 and then it starts to matter a helluvalot. 

 

A 50-year old has to plan to live to 90. That's 40 years. He'd better allocate a significant fraction to equities.

 

See any of the withdrawal rate studies. They all show bonds riskier than stocks over a 30-year period.

 

 

https://www.whitecoatinvestor.com/the-4-rule-safe-withdrawal-rates/

 

First of all, you need stocks! You need a significant allocation to stocks to sustain your lifestyle. Unless you plan a withdrawal rate of less than 3%, you will need at least 50% stocks in your portfolio.

 

https://thepoorswiss.com/trinity-study/

 

And that's with sequence-of-return risk. In accumulation, that's not an issue.

[thepupil]

Doesn’t the above chart show 75/25 as having highest chance of success at 3-5% wr’s? (Though 100% stocks looks grea too)

 

and even looking at 100/0 vs 50/50 for 30 years is 96% vs 98%; if that’s actually the case, I’d take the MUCH lower vol of 50/50 in exchange for 2% lower actual statistical chance given the huge behavioral advantages of 50/50. To me that chart makes the case for like 20-40% bonds (perhaps not coincidentally kind of the standard boring retirement portfolio hawked by folks everywhere)
 

am I misreading it?

Edited September 21, 2023 by thepupil

[james22]

Just now, thepupil said:

am I misreading it?

 

No, you're right.

 

The take-away is that at the recommended 4% SWR, up to 50% bonds make little difference when it comes to ensuring survival, and over 50% hurts.

 

Why you'd prefer the 100/0 over 50/50, knowing the survival risk the same, lies in the terminal value (multiples difference). 

 

 

 

 

[Parsad]

5 hours ago, fareastwarriors said:

 

No, we won't freeze them. It's more than usual amount I like to have on hand but the deal was too good to pass up. We're a family of 3 and the grandparents visit 1/week. 

 

Cantonese/Chinese dishes:

3-4 eggs for Tomatoes Eggs 

4-5 for silky soft Steamed eggs 

1-2 eggs in egg noodles/ramen

3-4 eggs for bitter melon with eggs

https://thewoksoflife.com/ - I don't follow their exact recipes but more for a source of inspiration. 

 

When we have many, the wife likes to make ramen eggs or more rarely tea eggs. 

 

I personally eat more non-Asian food than my family so I do a breakfast taco/burrito or scrambled eggs every couple of days. Some weekends I make a frittata and that takes up 6-8 eggs. 

 

We eat what's in season and what's on sale. The menu changes accordingly to that, unless it's a special occasion. 

 

 

 

Nice!  Cheers!

[Paarslaars]

8 hours ago, thepupil said:

Doesn’t the above chart show 75/25 as having highest chance of success at 3-5% wr’s? (Though 100% stocks looks grea too)

 

and even looking at 100/0 vs 50/50 for 30 years is 96% vs 98%; if that’s actually the case, I’d take the MUCH lower vol of 50/50 in exchange for 2% lower actual statistical chance given the huge behavioral advantages of 50/50. To me that chart makes the case for like 20-40% bonds (perhaps not coincidentally kind of the standard boring retirement portfolio hawked by folks everywhere)
 

am I misreading it?

 

Well the only criteria here is survival... not lifestyle.

The 100/0 will typically result in higher returns, making your % withdrawal rate drop or increase your standard of living.

[thepupil]

4 minutes ago, Paarslaars said:

 

Well the only criteria here is survival... not lifestyle.

The 100/0 will typically result in higher returns, making your % withdrawal rate drop or increase your standard of living.

yes, in reality, I probably wouldn’t go 50/50, but faced with the binary choice b/w 100/0 and 50/50, I’d probably choose 50/50 given the above statistics.

 

I mean i’m 35 and approaching >20% bonds right now. Right now my self imposed limit is I’m not going to allow myself to have more bonds than my mortgage lol.

 

 

[UK]

12 hours ago, fareastwarriors said:

 

No, we won't freeze them. It's more than usual amount I like to have on hand but the deal was too good to pass up. We're a family of 3 and the grandparents visit 1/week. 

 

Cantonese/Chinese dishes:

3-4 eggs for Tomatoes Eggs 

4-5 for silky soft Steamed eggs 

1-2 eggs in egg noodles/ramen

3-4 eggs for bitter melon with eggs

https://thewoksoflife.com/ - I don't follow their exact recipes but more for a source of inspiration. 

 

When we have many, the wife likes to make ramen eggs or more rarely tea eggs. 

 

I personally eat more non-Asian food than my family so I do a breakfast taco/burrito or scrambled eggs every couple of days. Some weekends I make a frittata and that takes up 6-8 eggs. 

 

We eat what's in season and what's on sale. The menu changes accordingly to that, unless it's a special occasion. 

 

 

 

Was reading attentively this very good discusion on equities vs bonds, but it seems will end up desiring to eat something from eggs, thanks:)

[changegonnacome]

Forget bonds & equites….get 24ct gold bars this week at Costco…i shit you not just got the notification on my phone and had to look…...takes the treasure hunt aspect of Costco to the next level - $1,979…no idea if that’s good….Costco 14% margin is there for sure…then the Suisse Lady needs to get paid too!!!!

 

[gfp]

Doesn't look like they are taking a 14% margin on that to me.  I would be wary of being charged sales tax if buying something like this from Costco.  Where I live sales tax is 10%.

[Spekulatius]

1 hour ago, gfp said:

Doesn't look like they are taking a 14% margin on that to me.  I would be wary of being charged sales tax if buying something like this from Costco.  Where I live sales tax is 10%.

My Costco in NH would work, I think. Current Gold price is $1940 so $1980 is just a ~2%markup. Pay this on a Costco CC and with the cashback credit you are buying this below FMV of the Gold essentially. Item cannot be returned unfortunately - otherwise you would have a short term out option with it for free as well.

https://slickdeals.net/f/16931002-costco-members-1-troy-ounce-gold-bar-rand-refinery-new-in-assay-1969-99?page=7#comments

 

Not available for me at my warehouse unfortunately.

 

Edited September 21, 2023 by Spekulatius

[sleepydragon]

Feel like today is the top. 

[TwoCitiesCapital]

20 minutes ago, sleepydragon said:

Feel like today is the top. 

 

In? 

[brobro777]

Too much US Debt? Maybe!

 

https://divestor.com/?p=11849

[sleepydragon]

20 minutes ago, TwoCitiesCapital said:

 

In? 

Stock market 

[Cigarbutt]

On 9/20/2023 at 12:37 PM, TwoCitiesCapital said:

Interesting discussion on equities versus bonds (at least some aspects).

It seems that some of what @TwoCitiesCapital describes is simply factual ie bonds, during some periods, sometimes quite long periods, have outperformed equities with less volatility. Now, the emotional inability to face volatility (fear) may be surmountable (or not?) but there is a mathematical part to lower volatility in terms of the option value over time of being able to deploy money from assets that tend to go down less (or even gain) to other assets that have gone down more.

The 1970s period is such an example:

The graph could be criticized for the quasi cherry-pick for beginning and end dates but does not show returns of shorter term bonds which would have been superior to all other options depicted (cash is meant 3-mo Treasury Bills).

Now, the controversial part is not the retrospective capacity to define those periods but the capacity to define actual circumstances which would lead prospectively to such periods. As mentioned above thread, in 1969, Mr. Buffett described such circumstances for the next ten years and opportunistically decreased the bond exposure over time to take advantage of stock values going down.

One could argue that now is also such a time. Bonds are easier to "predict" because the return driver going forward is the starting yield. For equities, the discussion can get really messy but, with reasonable assumptions about general growth, gross margins, interest on corporate debt, corporate taxes etc (even the multiple paid on net earnings?), one can envisage scenarios where the after-tax return on stocks within the next ten years may be below the after-tax return on a reasonably diversified portfolio of bonds with a bond portfolio containing an unreported option value in the interim.

On 9/20/2023 at 12:37 PM, TwoCitiesCapital said:

...

Equities are way riskier than bonds for anyone that doesn't have a 20-30 year time horizon and way riskier in any given year once considering the likely impact of human emotion and response to even paper losses. 

...

In a way, that's what Mr. Graham was saying in 1955. Dollar cost averaging makes some sense from a math point of view (not always) but it's primary a psychological tool and who knows what happens when it matters most?

dollar cost averaging benjamin graham - Google Search

Edited September 22, 2023 by Cigarbutt

[Cigarbutt]

On 9/20/2023 at 9:46 AM, james22 said:

The addition of retirement accounts and automated contributions was a game-changer for financial markets.

https://awealthofcommonsense.com/2023/09/how-individual-retirement-accounts-changed-the-stock-market-forever/

That's interesting and the topic (household equity allocation) has been discussed before here (some years ago..).

Here's a graph you included above:

So there was this person from Philosophical Economics who produced this correlation graph (with some potential forward looking value) up to 2013:

Since the GFC, the correlation seems to have broken down? Why?

It's hard to suggest that the democratization of investing is responsible since it's hard to see why there would have been such a delay between the onset of this demographic feature and the advent of a permanent plateau in multiples?

Maybe it's one of those unknown unknowns that is different when this time is different?

Let's try a tentative explanation for the (temporary or transitory?) disconnect.

First, a conceptual issue. When people mention that 'money' flowed from bonds to equities, in general, it does not correspond to the reality of money movements. When people sell bonds, others are buying bonds and the 'money' stays with the previous bond holders. When the household allocation % to equities rises, it's not from money moving from bonds to equities, it's (it has been essentially at least before the GFC) from revaluation (higher multiple) of the underlying equity earning power. As such, when markets go down, money is not leaving equities, it's just that new owners come to equity and pay less for the same underlying assets.

Anyways.

i wonder if this 'money' aspect is not related to the breakdown of the above mentioned correlation because, since the GFC, money creation has been no longer tied to the growth of loans and leases at commercial banks (which held quite constant versus underlying economic activity) but has been mostly driven by quantitative easing and commercial banks' expansion of their balance sheets with government debt (their asset a government debt security matched with a private deposit liability) effectively financing directly the federal government and in reality creating money (for investments and the related effect on multiples and valuation and for consumption and the related effect on inflation).

Anyways.

From a basic down-to-earth perspective, it always struck me that household equity allocation was one of the ultimate counter-cyclical indicators and well done surveys have showed that household investors at cyclical peaks have (before) always felt that equities were to continue to deliver higher returns (with lower volatility?) but with the government so 'involved' in counter-cycle resistance is this time different for real?

[james22]

Only ~30% invested in the market in 1980, double that since late 1990s.

 

 

https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx

[changegonnacome]

7 hours ago, james22 said:

Only ~30% invested in the market in 1980, double that since late 1990s.

 

 

https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx

 

Interesting graph - the rise of indexing & automatic buying via ETFs is very interesting during this period. Its a great achievement to get so many participating in the market.

 

Perversely I've always thought how if your running a effectively a stock promote.....the best thing that ever happened to you in your life is the day your so called 'company' gets added to the Russell 2000 or similar......you've just achieved the promised land of stock promoters & fraudsters.........at the end of every month a bunch of disengaged price agnostic capital is flowing into your paper. It must be like winning gold in the olympics for these folks.

 

Big picture however getting to 61% participation in the market is a great outcome....and its being done via vehicles (401k's + ETF's) where the worst behaviour of folks is minimized.

[Santayana]

On 9/20/2023 at 3:32 PM, Dinar said:

 Bonds did not return 10.31% per annum from 12/31/1972 to 12/31/2022 like stocks did, and you know it.  So when you asserted that bonds have beaten stocks over the last 50 years, you were not accurate.

Are you sure you looked at the performance of the 30 year over that entire time? 

[Gregmal]

5 minutes ago, Santayana said:

Are you sure you looked at the performance of the 30 year over that entire time? 

Why would you look at the 30 year over that time if the argument is that you can’t use the 30 year’s performance for the past few years as a proxy for how well bonds did? Wouldn’t the pro short duration bonds argument comp be using short duration?

Edited September 22, 2023 by Gregmal

[Santayana]

I'm not necessarily saying that's the sensible comparison to make.  But it is what Dinar and TwoCitiesCapital were talking about.

Edited September 22, 2023 by Santayana
oops

[Dinar]

37 minutes ago, Santayana said:

Are you sure you looked at the performance of the 30 year over that entire time? 

https://www.govinfo.gov/content/pkg/ERP-2011/pdf/ERP-2011-table73.pdf

 

As you can see, had you invested on 12/31/1972 and reinvested on 12/31/2002 (mind you 30 year did not exist till 77), you would not have even been close to double digits over the 50 year frame.  Meanwhile, the opposite claim was made - that bonds outperformed stocks over the past 50 years, and when asked for proof, the answer was go f..ck yourself.  That of course is the response of someone who is clearly assured of his facts, never makes mistakes and all around a gentleman and a scholar....

Mind you, the proper comparison is from September 20th 1973 to September 20th 2023 would be even more in favor of stocks.  

 

[Santayana]

One problem with trying to compare the two is the idea of just buying and holding from some arbitrary starting point without ever adding new capital.

[Santayana]

A much better comparison would be stocks with dividends reinvested and bonds with the semi-annual interest reinvested.