Full Circle’s Mutterings on Money
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02-02-2016, 04:13 PM
RE: Full Circle’s Mutterings on Money
On with the show.

ASSET CLASSES continued...

You would think that if you looked at a roster of available ETFs and Mutual Funds you would find perhaps 1 ETF representing each of the individual 9 quadrants of the Morningstar Style Box and maybe 1 additional representing the whole shebang (technical term for “everything”). Laughat

If only.

No, the powers that be have sliced and diced till their heart’s content.
Here are hyperlinks to several of the major issuers:

Vanguard has dozens
https://personal.vanguard.com/us/funds/etf/all

Blackrock has hundreds
https://www.ishares.com/us/products/etf-product-list

State Street has hundreds as well
https://www.spdrs.com/product/index.seam

Deutsche Bank has hundreds too
https://etf.deutscheam.com/GLOBAL/ENG/Entry

Here is a great website for comparing ETFs http://etfdb.com/tools/
And one for backtesting ETFs http://www.etfreplay.com/combine.aspx
And one that only talks about ETFs http://www.etf.com
(I’m going to leave out my favorite for now Evil_monster )

How to make sense of it all is the trick especially when there are so many to choose from. I cannot begin to quantify how much time I have spent looking and comparing all these options. Weeping

That’s it for the moment, heading out to eat. Let me know what you think of all these ETFs if anything.

Tip #8 - Just because someone turned it into an ETF or Mutual Fund doesn’t mean it’s a good thing.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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03-02-2016, 07:56 AM (This post was last modified: 03-02-2016 08:15 AM by Full Circle.)
RE: Full Circle’s Mutterings on Money
THE WORLD IN YOUR HAND

Investors as a rule are very country-centric when it comes to allocating assets. By this I mean that a US investor will mostly buy US stocks, a European investor mostly European stocks and an Asian investor mostly Asian stocks and so on.

Over the years each of the three regions has led in returns with no discernable pattern. Sometimes US stocks gain the most, sometimes it’s the European indexes and other times it’s the Pacific Rim indexes. From 1985 till 2009 the US led 9 times, the European 5 times and the Pacific Rim 11 times. All About Asset Allocation 2nd Edition

ps Looking up the last 6 years after this book was published I find that the US led 4x, Europe 1X and Pacific Rim 1X

[Image: 2jeejvr.jpg]

So what you ask? Well, this bit of information shows that to more efficiently diversify your stock holdings an investor needs to include global assets. OK then, how much?

Good question. By the end of 2014 if you compared the market capitalization of all companies you would find the following:

US 52.0%
Japan 7.8%
UK 7.2%
Canada 3.3%
Switzerland 3.1%
France 3.1%
Germany 3.0%
Australia 2.6%
China 2.2% (this figure was an eye-opener for me, I expected much more)
Balance of the world the rest %
from Triumph of Optimists, Princeton University Press

Just based on these figures the takeaway should be that (and here I’m talking as an American) only half of your stock holdings should be in US companies, the rest in global companies.

Q: And what is the world’s largest financial Asset Class?
A:
Global bonds ex-US

All this is just one more piece of information when considering how to build your portfolio of investments.

Tip #9 - Think outside your shores

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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03-02-2016, 11:55 AM
RE: Full Circle’s Mutterings on Money
Yet another Rant.

So after the financial meltdown of 2008-2009 today another insignificant fine has been levied on another bank, this time Wells Fargo.

http://www.marketwatch.com/story/wells-f...2016-02-03

While 1.2 billion may sound big, consider this

Last year alone they made 23.1 billion so about a 5% fine of last year’s profits, however since the lending fiasco they have made:

2014 - 23.0B
2013 - 21.9B
2012 - 18.9B
2011 - 15.9B
2010 - 12.4B

In the end the Justice Department, unable or unwilling to penalize and correct the systematic problems in our banking system, basically made the remaining “Too Big to Fail Banks” bigger.

Meanwhile in the Markets, HFT (High Frequency Traders) are fighting tooth and nail not to allow a new Exchange called IEX https://www.iextrading.com to be approved by the SEC. Why you might ask? Well, IEX’s system hinders the ability of HFT players to front run orders and skim profits in the milliseconds it takes for an order to be matched. In other words they know before hand who is buying and selling at what price then stick themselves in the middle of the transaction and pocket a bit off the top. The amounts are minuscule per share but when billions of shares are being traded everyday this money is really coming out of pensions, 401(k)s and the everyday bloke like you and me. Fuck them.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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04-02-2016, 09:51 AM (This post was last modified: 04-02-2016 02:19 PM by Full Circle.)
RE: Full Circle’s Mutterings on Money
BACKTESTING ASSET ALLOCATIONS

Hindsight is 20/20 and investors need to be aware of the issues with looking at the past as a guide for the future. Having said that this is really all we have to go by. The challenge is to keep it simple and not datamine. Datamining is when you look for patterns that don’t really exist. The less you “massage” the data the more robust and reliable the information you pull from said data.

Disraeli’s quote applies here, “There are three kinds of lies; lies, damned lies, and statistics”.

Also Samuel Johnson’s quote, “Round numbers are always false”.

I mentioned earlier that I have a favorite site I use to test historical combinations of Asset Classes and how they performed in the past. This is the free site https://www.portfoliovisualizer.com.

You could spend the rest of your life playing with combinations, unless you know how to write a program to do this (and I don’t), to come up with the best combination of a portfolio that meets your needs with regards to risk and reward.

On the upper left under Backtest Portfolio are two options, the one entitled “Backtest asset allocation” is tremendously useful. It allows you to pick and choose from 36 different assets and input different percent allocations to each then run a backtest to see how this combination performed since 1972.

You can run three different portfolios simultaneously. I started my comparisons with the obvious, 100% US Stock Market, 100% Total Bond and a 50%/50% of the two.
Many iterations later I arrived at a combination that meets my personal style and have implemented in real life.

An example of the information calculated for any combination is:

Portfolio performance statistics (rebalanced annually = once a year the percentages are reset to what they were at the start, this is done by selling the winners and buying more of the losers)

Initial Balance $10,000 (default amount, this you can change)
Final Balance $533,950
CAGR 9.46% (Compounded Annual Growth Rate)
Std.Dev. 7.87% (measurement of risk)
Best Year 28.48% (self explanatory)
Worst Year -3.00% (self explanatory)
Max Drawdown -3.00% (worst losses during any year)
Sharpe Ratio 0.59 (measure for calculating risk-adjusted return, higher is better http://www.investopedia.com/terms/s/sharperatio.asp)
Sortino Ratio 1.47 (differentiates harmful volatility from general volatility, higher is better http://www.investopedia.com/terms/s/sortinoratio.asp)
US Mkt Correlation 0.65 (how closely the portfolio mimics the US market, 1=exactly, the lower the ratio the less correlated)
Intl Mkt Correlation 0.53 (how closely the portfolio mimics the International market, 1=exactly, the lower the ratio the less correlated)

ps A CHALLENGE: Can anyone create a portfolion on this site that matches both my CAGR and the Worst Year? In other words can you find a portfolio that has a higher CAGR and a lower Wort Year loss than what I posted above?

One last quote that applies when comparing paper portfolios to real ones, "In theory there is no difference between theory and practice. In practice there is.” ~ Yogi Berra

There are a great many other tools on this site and I’m happy to further discuss how they can be used to your advantage if anyone is interested.

Well, I think I might wrap this thread up soon, not seeing much in the way of interest. My intent, as I said at the outset, was share some hard-won knowledge on the topic of investing. I can talk about this till the cows come home as you have seen but I don’t want to be talking to an empty room. If anyone is still interested send me a PM to tell me to keep going, thanks.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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22-02-2016, 10:48 AM
RE: Full Circle’s Mutterings on Money
I’ll continue posting here for my own entertainment Weeping

http://www.psyfitec.com/2016/02/7-invest...rmedbroker

"7. No One Knows Anything

Given the vast amount of information that flies about the investing world you’d be forgiven for assuming that there are a lot of people who know what’s going on. The truth is exactly the opposite – no one knows anything. Everyone is speculating because that’s what humans do when faced with uncertainty – we try to make sense of it.

But investment experts pontificating on the latest or next market moves are simply the modern day equivalent of prehistory shamans, high on drugs and low on effective prophesy. They have as much chance of predicting the next market earthquake as their ancient counterparts did, and at least the shamans had the consolation of getting high.

Diversification is the one free lunch in the market, and that’s not very exciting. But if you can’t control your spending habits, ignore the experts, avoid trading and take alternative views into account then you probably should stick your money in a few index trackers and go spend a bit more of your time with the kids.”

And I don’t even have kids. Ohmy

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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28-02-2016, 07:00 PM (This post was last modified: 28-02-2016 08:56 PM by Full Circle.)
RE: Full Circle’s Mutterings on Money
If this is the kind of lowdown shit your bank pulls on you it’s time to change banks.

http://www.nytimes.com/2016/02/29/busine...pe=article

“The nation’s big consumer banks collected about $11 billion in overdraft fees last year, which accounted for 8 percent of their profits, according to a report by the Consumer Financial Protection Bureau."

"In a series of class-action lawsuits beginning in 2009 against more than a dozen big banks, customers accused banks of hiding a practice known as reordering. The practice, the lawsuits revealed, involved deliberately processing large transactions like mortgage payments first before taking out smaller charges, like a purchase of coffee — even if customers bought the coffee first. By arranging the order of transactions, the banks could maximize the number of overdrafts they charged. At the time, some banks defended the practice, arguing it ensured that large, important bills were covered.”

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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28-02-2016, 07:16 PM
RE: Full Circle’s Mutterings on Money
Oh no! I missed your post earlier, do keep writing, I want to see the cows come home, XD. I'd like to add that if they have illegal inside knowledge of what stocks are about to do, traders can be prophetic. I'm also writing paper about causes and effects of financial literacy in the US. Fun fun fun...

A man should not believe in an ism, he should believe in himself. -Ferris Bueller

That's what a ship is, you know. It's not just a keel and a hull and a deck and sails, that's what a ship needs but what a ship is... what the Black Pearl really is... is freedom. -Jack Sparrow
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28-02-2016, 08:15 PM
RE: Full Circle’s Mutterings on Money
(28-02-2016 07:16 PM)Imathinker Wrote:  Oh no! I missed your post earlier, do keep writing, I want to see the cows come home, XD. I'd like to add that if they have illegal inside knowledge of what stocks are about to do, traders can be prophetic. I'm also writing paper about causes and effects of financial literacy in the US. Fun fun fun...

I’d love to read it!

I just penned a letter to the SEC in support of IEX beeing approved as an exchange, see below.

Mr. Brent J. Fields
Secretary U.S. Securities and Exchange Commission 100 F Street, N.E.
Washington, D.C. 20549-1090

February 28, 2016

Re: Investors Exchange LLC Form 1 Application (Release No. 34-75925 File No. 10-222)

Dear Mr. Fields:

I fully support the approval of the IEX application by the SEC.

The investing public looks to the SEC to monitor and then promote a fair and equitable playing field for all investors, most especially long-term investors, who provide the capital to the nations economy.

I believe it is imperative that at least one exchange be championed by the SEC that eliminates the inequities currently enjoyed by HFT firms at the cost of the majority of the investing public, myself included.

To a great degree I feel that proper oversight in the markets to insure fair practices has been abrogated to those who would take advantage of it and profit unfairly. In my estimation no greater threat exists for markets than to lose the trust of the investors it serves.

We, the public, look to you to protect our interests as so stated within the Regulation National Market System, and approved by the SEC, specifically that the NMS must meet the needs of longer-term investors, and that any other outcome would be contrary to the Exchange Act and its objectives of promoting fair and efficient markets that serve the public interest.

In light of this I strongly urge you to approve the IEX application as it stands in the most expeditious manner possible.

Most sincerely,
Full Circle Big Grin
Private Investor

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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28-02-2016, 11:00 PM
RE: Full Circle’s Mutterings on Money
Damn that sounded official. They look like a pretty good organization, I've never heard of them before. It won't be that exciting of a paper, but I'll certainly share if you want to see it. On that topic, to what degree do you think consumers could have lessened the impact of the financial crisis? It would be crazy to blame it all on uninformed people, but at the core of the housing bubble is people using more credit than they can afford, right? I'm just not clear on how much an impact that made. There's research to be done here.....

A man should not believe in an ism, he should believe in himself. -Ferris Bueller

That's what a ship is, you know. It's not just a keel and a hull and a deck and sails, that's what a ship needs but what a ship is... what the Black Pearl really is... is freedom. -Jack Sparrow
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28-02-2016, 11:05 PM
RE: Full Circle’s Mutterings on Money
Oh I see now your post about IEX that's interesting. And somewhat disturbing.

A man should not believe in an ism, he should believe in himself. -Ferris Bueller

That's what a ship is, you know. It's not just a keel and a hull and a deck and sails, that's what a ship needs but what a ship is... what the Black Pearl really is... is freedom. -Jack Sparrow
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