My note taking at the conference was done in terms of posting to Twitter. Below is my Twitter feed with re-tweets, etc., from the past two days. As Twitter provides tweets in reverse chronological order, it will be easiest to scroll down to the bottom of the post and then work your way back up towards the top.
Tweets
Next panel: @christine_benz, Laura Dogu of @bogleheads, @WadePfau, @michaelrpiper, Bill Schultheis of @CHInvestor
@WadePfau says investors can think of Social Security as income or a capitalized asset. Others on panel say thinking income is easier.
@WadePfau glad to see LDI is part of the conversation.- Bernstein: "The only black swans are the history you haven't read"
- Alan Roth: The Myths of "This Time is Different" will kill you
- Bernstein: view TIPS as ultimate liability-matching element for a lifetime investor, but he is in no rush to buy them now
- Sauter: TIPS are currently scary because pack in more duration and will get hit hard by rate rise
- Ferri: uses TIPS as 20% of bond portfolio to hedge unanticipated inflation
- Panelists: Smart Beta is a terrible term. It implies beta is dumb.
- @ToddWenning My own past research doesn't agree with Ferri's conclusion. I'm just reporting it.
- Rick Ferri: asked Fama, Sharpe, French, & Arnott: does smart beta exist? 3/4 said no. (guess who said yes?)
- Panelists keep talking about role of bonds as volatility reducer, but should bonds just be used to match spending needs?
- Rick Ferri: when far from retirement, don't worry about valuations
- Rick Ferri: but if market valuations are low near retirement, you might want to hold on to those stocks a bit longer.
- Rick Ferri: near retirement if valuations are high, you should be closer to your goals anyway, and so it can make sense to reduce stocks
- Allan Roth: many ways to adjust allocations in response to some indicator, but better off to just leave well enough alone
- Bernstein: play the changing asset allocation if you want, but if you don't want to you can also expect to do just as well
- Bernstein: but they do find benefits across countries: overweight the countries with lower valuations
- Bernstein: recommends Dimson/Staunton/Marsh on equity valuation and stock investing... they find that no benefit within country...
- Sauter: cautions against overinvesting in equities if/when markets overvalued. Stay with long-term strategic asset allocation
- Sauter: P/E is fairly valued. Shiller PE is high, but is currently distorted because of odd past earnings trajectory. stocks = fair value
- Question at Bogleheads: Should investors shift their asset allocation in response to P/E ratios?
- Panel consensus: Don't strive for yield, focus on total returns and spend some of the capital if necessary
- Allan Roth: "Our portfolio is stored energy which allows us to do what we want to in life."
- @myersbradley Thanks. I'll have a look at that.
- Sauter: Morningstar Mutual Fund Star ratings are inversely related to the subsequent performance
- Sauter: with bond yields being lower, why would you think stocks will still perform at their historical averages? (EXACTLY!)
- Sauter: bring out the big microeconomic guns with efficient frontiers, indifference curves, and utility maximization!
Sauter: Over the next decade bonds are likely to return 2%--or, if lucky, 3 to 4%--vs. long- term average of 6%- Sauter: with "smart beta" it isn't the different weighting that gives returns. Just factor exposure. And factor exposures can be found cheap
- Sauter: "Smart Beta" is just newly packaged way to take small-cap or value bets with a higher fee tacked on
Sauter: High-dividend stocks involve “a different risk exposure” than broad market, including more sensitivity to higher interest rates.- @DamatoK We are really in sync today with our choice of tweets :)
- Sauter: the best predictor of long-term equity returns is the current P/E ratio (better than Shiller's PE?)
- Sauter: There is no correlation between economic growth and equity market returns
- Sauter: The best indicator for mutual fund performance is: The Expense Ratio
- Sauter: since 2008 the lowest cost quartile of US equity funds is the only one with positive net cash flows (low cost investing is growing)
@WadePfau Well, the caveat is that rising glidepath implies more equities when there isn't enough to cover under LDI (bad early returns).- Sauter: Because of costs, market benchmarks outperform WELL OVER half of actively managed funds
- Sauter: active and passive can co-exist, but everyone's core holdings should be passive. Play with active on the periphery
- Sauter: some investors can overcome costs to add value, as this will be taken from those falling further on the losing side
- Sauter: After costs, investor performance relative to markets is a negative sum game
- Sauter: relative investor performance before costs is a zero-sum game
- Sauter: indexing's value: diversification, low-cost beta exposure, historical outperformance, tax efficiency
- Gus Sauter of Vanguard: Indexing growth won't cause inefficiency because active managers will swoop in
- @MichaelKitces Yes, that seems like the "safety-first" explanation, which can be compared to our "probability-based" explanation
- Bernstein: Bogle in late 90s/early 00s estimated negative nominal returns on stocks due to P/E mean reversion
- Bernstein: asked Bogle in late 90s: TIPS 4% yield, stocks less, any asset allocation implication? Answer: yes, maybe 5% shift
- Bernstein: as you age, you need less liability-matching portfolio, and so your risk allocation can grow @MichaelKitces
- Bill Bernstein likes "rising equity glide paths" and asked Bogle about it... Bogle worries about behavioral issues @MichaelKitces
- William Bernstein has joined fireside chat: Shiller is brilliant & great macro analysis, but some of his financial innovation ideas: not so
The efficient markets hypothesis is “overrated,” says @Vanguard_Group founder Bogle. “All you need is the cost matters hypothesis” or CMH- Bogle: Paul Samuelson was much more of an inspiration for index funds, not Eugene Fama
- Bogle: Fama and Shiller would probably agree that markets are more efficient in long run than in short run
- Bogle: I always wish I owned the best performing asset, but the magic is never acting on those beliefs
Vanguard founder Bogle: ”I believe it’s fine to have all your money in the U.S.” without foreign stocks and bonds, even though few agree- Bogle: If you are in the bond market, don't reach for more yield than the market is willing to provide you
- Bogle: Davos (World Economic Forum) is a bunch of self-important individuals getting together to reinforce their misguided ideas
- Bogle: Vanguard's 3 Managed Payout Funds will soon be merged into a single portfolio
- Bogle: worried that Vanguard retail ETF owners are trading them more actively than with mutual funds
Bogle: Retirees should keep their eye on stock dividends & dividend growth and tune out market gyrations.- Bogle confirms: Present value of Social Security should be incorporated into asset allocation strategy... it's part of household bal sheet
- @NelsoninNewYork Christina, I heard from Am Col that you are trying to contact me about meeting at FPA. No problem. wadepfau@gmail.com
- Bogle: Mutual Fund industry evolved from fudiciary Puritans at start to a big marketing machine
- Bogle: Investing is about capturing returns provided by corporate America, not on capturing speculative returns from Wall Street expectation
- John Bogle: when two laureates disagree, how much is timing and how much is behavior? (Shiller, Fama)
- John Bogle on Robert Shiller: "Good data. But is it useful?"
- Contrary to news report that John Bogle owes a great debt to Eugene Fama, Bogle never heard of Fama when developing index fund concept
Karen Damato 
Brent Burns 
Wade Pfau 
Karen Damato 
MichaelKitces 
Wade Pfau
Wade,
ReplyDeleteThank you for posting these comments. I am grateful for the generosity of people like you who take time to share.