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Efficient Frontier

Postby kcowan » 29 Dec 2006 13:22

Efficient Frontier is only US-oriented, but for the period from 1960-2004, the lowest/return risk is with 30% equities versus 100% bonds:
Image
The only periods when this relationship did not hold were 1970-79 and 2000-2004.
Last edited by kcowan on 30 Dec 2006 12:19, edited 1 time in total.
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Postby Taggart » 29 Dec 2006 15:18

One source I was reading said the equity premium was negative in Canada in the 1980's and 90's. Take the resource stocks out of the index for that time period and I wonder if the equity premium would still be negative.
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Postby kcowan » 29 Dec 2006 19:27

For sure the NEP in October 1981 and the interest rates peaking around 20% the next year would have made the early 80s unlike any other time in my memory.
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Re: Efficient Frontier

Postby DanH » 29 Dec 2006 19:34

kcowan wrote:Efficient Frontier is only US-oriented, but for the period from 1960-2004, the lowest/return risk is with 30% equities versus 100% bonds:
Image
The only periods when this relationship did not hold were 1970-79 and 2000-2004.


Keith, where is this chart from? Just curious because I saved it and thought it might be useful in future for either an article or presentation.
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Re: Efficient Frontier

Postby kcowan » 30 Dec 2006 12:00

DanH wrote:Keith, where is this chart from? Just curious because I saved it and thought it might be useful in future for either an article or presentation.

http://www.efficientfrontier.com/ef/

Unfortunately most of the archives are in PDF so the chart had to be saved separately. I was introduced to it here:
http://early-retirement.org/forums/inde ... on=search2

Unfortunately I cannot locate the specific PDF, although this chart has started to become known as the definitive reference for low risk asset allocation in the US.

I will try to locate the specific article too.
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Re: Efficient Frontier

Postby yielder » 30 Dec 2006 12:10

DanH wrote:Keith, where is this chart from?


http://www.google.ca/search?hl=en&clien ... arch&meta=
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Efficient Frontier by Decade

Postby kcowan » 30 Dec 2006 12:13

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Re: Efficient Frontier

Postby George$ » 30 Dec 2006 12:54

kcowan wrote:Efficient Frontier is only US-oriented, but for the period from 1960-2004, the lowest/return risk is with 30% equities versus 100% bonds:
Image
The only periods when this relationship did not hold were 1970-79 and 2000-2004.
Very interesting Keith, thanks.

I assume the % returns are nominal. It would be even more informative if the y axis was % real return, not nominal. :roll:

Two points Added later:
(1) Note the comment in the article that
In the efficient frontier for 2000-2005, the fishhook is actually inverted—indicating more risk for no additional returns, or for
negative returns.

(2) To see the US inflation numbers by decade see this chart
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Postby adrian2 » 30 Dec 2006 16:27

I assume the % returns are nominal. It would be even more informative if the y axis was % real return, not nominal.

My guess is that they are real returns.

Also interesting to note that for two consecutive decades (60's and 70's), the returns were negative, for any combination of US stocks and bonds.

The 90's was even worse for Japanese equity investors.

When will be the turn for Canadian investors? As one of the regulars here used to sign: Praemonitus, praemunitus.
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Postby Taggart » 30 Dec 2006 22:47

Free webcast with Elroy Dimson on Irrational Optimism

Recorded on May 8, 2005

Time: 54 minutes
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Re: Efficient Frontier

Postby kcowan » 31 Dec 2006 10:22

George$ wrote:
kcowan wrote:...
The only periods when this relationship did not hold were 1970-79 and 2000-2004.
...Two points Added later:
(1) Note the comment in the article that
In the efficient frontier for 2000-2005, the fishhook is actually inverted—indicating more risk for no additional returns, or for negative returns.
Flat in the 70s i.e. more equity equals more risk, and inverted in 2000-2004/5 owing to the meltdown at the start.
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Postby Kasper » 02 Jan 2007 17:17

The Financial Web Ring fits into this quite nicely, in my opinion


Part 1: Peer Pioneers
A new world: Get your mass collaboration road map set
DON TAPSCOTT AND ANTHONY D. WILLIAMS

Globe and Mail Update

Forget everything you know about the way we do business. Mass collaboration is revolutionizing the corporation, the economy, and nearly every aspect of management. In this seven-part series, co-authors of Wikinomics: How Mass Collaboration Changes Everything, due out Jan. 2, explain new business models that will empower the prepared firm and destroy those that fail to adjust


Throughout most of human history, hierarchies of one form or another have served as the primary engines of wealth creation and provided a model for institutions such as the church, the military and government.

So pervasive and enduring has the hierarchical mode of organization been that most people assume that there are no viable alternatives. That is, until a new generation of user-friendly collaboration tools unleashed a new force on the world.

It's like someone uncorked the bottle of human ingenuity. Empowered by the growing accessibility of information technologies, millions of people already join forces in self-organized collaborations that produce dynamic new goods and services that rival those of the world's largest and best-financed enterprises.

The quintessential example of mass collaboration is Wikipedia -- a collaboratively created encyclopedia, owned by no one and authored by tens of thousands of enthusiasts. With five full-time employees, it is ten times bigger than Encyclopedia Britannica and roughly the same in accuracy.

It runs on a wiki -- software that enables multiple users to edit the content of Web pages. Despite the risks inherent in an open encyclopedia in which everyone can add their views, and constant battles with detractors and saboteurs, Wikipedia continues to grow rapidly in scope, quality and traffic. The English-language version has more than a million entries and there are ninety-two sister sites in languages ranging from Polish and Japanese to Hebrew and Catalan.

While Wikipedia's mission is to make the sum of human knowledge accessible, not all examples of mass collaboration are guided by altruism. Take Linux, an open source operating system that emerged from the hacker-fringes of the Internet in 1991. At first, many doubted the efficacy of an operating system developed by a Web-enabled community of anarchist programmers. Oh how the critics were wrong.

Today, more than a hundred million users of set-top cable boxes, TiVos, Motorola Razrs, and other home appliances use Linux, and more than a billion people use it indirectly whenever they access Google, Yahoo, or myriad other websites. If you drive a BMW, chances are its running Linux. All considered, Linux-related hardware and services produce billions of dollars of revenue annually and now IBM, HP, Motorola, Nokia, Philips, Sony, and dozens of other companies are dedicating serious resources to its development.

What should today's business manager make of this? First, if you can make an operating system and encyclopedia through mass collaboration, consider what might come next? How about a mutual fund (http://www.marketocracy.com), a peer-to-peer lending system (http://www.zopa.com), designer t-shirts (http://www.threadless.com), or just about any physical good one can imagine (http://www.cambrianhouse.com)?

Second, don't assume that the new collective action represents only a threat to established businesses. While some fear mass collaboration will reduce the proportion of our economy that is available for profitable activity, smart firms are proving otherwise. Networked models of innovation and value creation can bring the prepared manager rich new possibilities to unlock innovative potential in a wide range of resources that thrive inside and outside the firm. For example, IBM estimates that working with the open source community saves it nearly a billion dollars per year over what it would cost to develop a Linux-like operating system on its own.

Finally, get your mass collaboration road map ready. Barriers to entry are vanishing and the trade-offs that individuals make when deciding to contribute voluntarily to projects and organizations are changing, creating opportunities to dramatically reconfigure the way we produce and exchange information, knowledge, and culture. Companies that recognize, address, and learn to tap mass collaboration will benefit, while those that ignore and resist will miss important opportunities for innovation and cost reduction, and may even go out of business. Now that the genie's been unleashed, there's no putting it back in the bottle.

Don Tapscott is CEO of New Paradigm, a technology and business think tank, and the author of 10 books about information technology in business and society, including Paradigm Shift, Growing Up Digital.

Anthony D. Williams is an author and researcher with experience in the impact of new technologies on social and economic life.He is vice- president and executive editor at New Paradigm.

Related to this article

Articles
Suffer the children
Part 1: Peer Pionneers
Part 2: Ideagoras
Part 3: Prosumers
Part 4: The New Alexandrians
Part 5: Platforms for Innovation
Part 6: The Global Plant Floor
Part 7: 'Us' power
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Postby Taggart » 08 Jan 2007 06:56

Interview with Burton Malkiel:

By Kim Clark

Posted Sunday, January 7, 2007


An Index for Investing

"The best way to index is market-capitalization weighted [the traditional method, in which stocks are held in proportion to the total dollar value of their shares]. If you use fundamental indexing or use dividends, you are taking active bets. Those active bets worked brilliantly over the first six years of the 2000s because we were coming off a huge bubble. But I am convinced you will be much better off with capitalization weighting."

Note: I'm one of the ones taking a "lifetime" active bet.
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Postby Taggart » 13 Jan 2007 09:45

The Independent - UK

Long odds do not mean no chance

By Jonathan Davis
Published: 13 January 2007
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Postby Norbert Schlenker » 13 Jan 2007 20:30

Income Tax Act gone!

If you're looking for exact wording, you're out of luck for the time being.
Nothing can protect people who want to buy the Brooklyn Bridge.
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Postby DenisD » 13 Jan 2007 23:17

Speaking of Bubbles

Barron's annual Roundtable is free. The question is, is that what it's worth? :wink:
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Postby 83_gemini » 17 Jan 2007 20:50

Good ol' Jim Stanford.

I wasn't that impressed, but hey, to each their own bad advice:


Forget RRSPs

You can check out a comment on it at Canadian Capitalist.
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Postby brucecohen » 18 Jan 2007 00:13

83_gemini wrote:Good ol' Jim Stanford.

I wasn't that impressed, but hey, to each their own bad advice:


Forget RRSPs

You can check out a comment on it at Canadian Capitalist.


It would have been nice if Stanford had mentioned that members of his employer -- the Canadian Auto Workers -- and presumably union staff have a defined benefit pension plan that pays full pension after 30 years of service.
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Postby Bylo Selhi » 18 Jan 2007 10:39

BruceCohen wrote:and presumably union staff have a defined benefit pension plan that pays full pension after 30 years of service.

You now what they say about "assuming" ;) Some at CAW HQ are less equal than others. Canadian Auto Workers office staff on strike [my bold]
The 92 administrative workers at the offices of the Canadian Auto Workers (CAW) went on strike last week [in 2000] for pension benefits closer to those of their bosses, the CAW staff representatives. The support staff workers are members of the Office and Professional Employees International Union.

Bob Dury, spokesman for the mostly female workforce, has said that pensions are the only issue in the dispute, while pointing to the fact that senior union officials earn nearly twice as much as the strikers. The support staff, who do administrative and secretarial work, earn about $42,000 a year as compared to $75,000 to $80,000 by CAW representatives. The CAW has offered the strikers the same pension benefits as CAW members. However, the CAW has refused to give them the same plan as union officials or even the reduced benefits recently given to union staff at the Big Three automakers.

Talks broke down over a week ago and Dury says that the CAW have refused to resume talks. "When you have an organization like the CAW that believes they are better than everybody else and whatever they say we have to accept, it's not right." CAW President Buzz Hargrove has said, "We can't budge.... This is just about more."
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Postby Taggart » 21 Jan 2007 10:38

Portfolio Building With Forward Looking Asset Allocation

Posted on Jan 19th, 2007

"I recently received comments to an article that I wrote asking if my statements about a specific portfolio allocation and its performance were in violation of the efficient market hypothesis. These questions suggested to me that it would be worthwhile to clarify the best current thinking about equity markets and the performance that investors can realistically expect. If you read an article about a portfolio that seems to provide market-beating performance, what questions should you ask? Is matching the S&P500 index the best that investors can hope for? If not, then what is the benchmark?"
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Postby ghariton » 22 Jan 2007 14:43

I hope Taggart doesn't mind if I use his thread as a miscellaneous thread. :wink:

From the current issue of The Economist:

Something called “mobile number portability” was introduced in October, making Japan the last of the developed nations to let its citizens keep their mobile-phone numbers when they switch from one operator to another.


FWIW, Canada has not introduced mobile number portability yet. (It is scheduled for this spring, over the loud protests of our mobile service providers who say (1) it's too expensive (2) they need lots more time to implement something so complicated.)

Does this mean that Canada is not a developed country, by the Economist's criterion?

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Postby Taggart » 22 Jan 2007 15:13

ghariton wrote:I hope Taggart doesn't mind if I use his thread as a miscellaneous thread. :wink:



Don't look at me. Not my thread. 8)
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Postby Bylo Selhi » 22 Jan 2007 15:27

ghariton wrote:It is scheduled for this spring

Not quite. March 14th is still technically winter, but moreover
God wrote:By March 14, 2007 Bell Mobility, Rogers Wireless and the mobility division of TELUS Communications Inc. will be required to provide WNP [wireless number portability] to their customers in British Columbia, Alberta, Ontario and Québec. This means that customers in any of these provinces will be able to switch to any service provider in that province (wireline or wireless) and keep their phone number.

Throughout Canada, all wireless carriers will, by the same date, be required to release a phone number to another carrier (port-out customers) and by no later than September 12, 2007, to accept a phone number from another carrier (port-in customers).

So as I read it, customers in the other 6 provinces and 3 territories will be able to bail from their current wireless provider but may then have to wait up to 6 months before they can join a new provider's network with their original number. Talk about dragging heels. Only in Canada ;)

Economist wrote:Japan's low churn rate has several causes. For one thing, subscribers who switch can take their phone numbers with them, but not their associated e-mail addresses.

Interesting. Betchya God forgot to require Canadian providers to forward incoming text messages and e-mails to ex-subscribers' new addresses for some reasonable period.

Do you happen to know if there will be any additional charge to take it [your phone number] with you [when you switch]?
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Postby ghariton » 22 Jan 2007 16:48

Bylo Selhi wrote: March 14th is still technically winter


I was deliberately vague 'cause I expect last-minute delays. (Is this a good spot to remind people about the wonderful billing systems these service providers use?)


Betchya God forgot to require Canadian providers to forward incoming text messages and e-mails to ex-subscribers' new addresses for some reasonable period.


It never even crossed their mind.

Do you happen to know if there will be any additional charge to take it [your phone number] with you [when you switch]?


There will be an extra cost to the service provider acquiring the customer. Whether it passes that cost on, in the form of a higher price, is up to each. My bet is no -- they are already [s]gouging[/s] setting "rational prices" as high as they think the market will stand. In this industry, costs seem to have very little to do with prices.

But new competitive pressures may lead to price decreases. At least that is my hope. And that is why I am waiting another couple of months before entering a new contract.

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Postby millergd » 25 Jan 2007 17:55

ghariton wrote:There will be an extra cost to the service provider acquiring the customer. Whether it passes that cost on, in the form of a higher price, is up to each. My bet is no -- they are already [s]gouging[/s] setting "rational prices" as high as they think the market will stand. In this industry, costs seem to have very little to do with prices.

But new competitive pressures may lead to price decreases. At least that is my hope. And that is why I am waiting another couple of months before entering a new contract.


In speaking with some local wireless telco business marketing employees at a recent OCRI function, the general expectation is that number portability will cause a pricing bloodbath. But that's not so bad: I compared my current cellphone rate plan to our corporate equivalent in the U.S.. For the same $118 monthly rate, I could get 10x the minutes (4000 instead of 400) had I been on the American plan. And with unused minutes rollover, and roaming in Canada included. I do hope this element of deregulation (or extra regulation, depending on how you view forced number portability) ends better than long distance de-regulation did in the United States:

Stephen Colbert on the Cingular - AT&T merger
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