Hi Junkster,
It is indeed possible that I missed your point. I read and responded to your post after midnight, and that’s well beyond my normal bedtime.
But I remain puzzled by the emphasis that you and others place on the fact that stock dividends fell below long term treasuries in 1957. Total annual returns are the pertinent measure of any investment’s anticipated value.
I generally don’t sweat the finer details because bottom-line outcomes matter most. As an amateur investor, I frequently don’t know the finer details. If I did know those finer points, I would likely make errors in properly assessing them.
The data from the time period that you called attention to demonstrate the unpredictable volatility of various asset class returns. In 1960, bonds outdistanced the S&P 500 return by a whooping 11.64% to 0.34%. In the next year, a more conventional return to normal occurred. In 1961, stocks returned 26.64% while the 10-year treasuries delivered 2.06%. I doubt that very many market gurus projected these sudden changes; surely far fewer projected both outcomes.
The economic environment does change. But the public’s emotional reactions to the marketplace change far more quickly and unpredictably. As Phil Tetlock’s research proves time and time again, forecasting is a truly hazardous business. Repeat winners are rare birds.
Do you remember Elaine Garzarelli? She became a hero based on her accurate Black Monday call decades ago. Her subsequent predictions, however, were much less prescient. An analysis of her market predictions between 1987 and 1996 found her to be right only five out of thirteen times, But she’s a survivor. She is currently running Garzarelli Capital. Her predictions both then and now are based on a 13 factor model. Over time that model has been revised in terms of weightings on each factor.
Nobody can predict the future with statistical accuracy trustworthy enough to make major portfolio adjustments. As John Kenneth Galbraith said: “The only function of economic forecasting is to make astrology look respectable.” In his book, “Contrarian Investment Strategies”, David Dremen concluded that forecasters are wrong 75% of the time. Trust these charlatans at your risk.
In "The Black Swan," Mr. Taleb controversially recommends a "barbell" strategy. In that strategy, investors put 90% of their portfolios in extremely safe instruments, maybe like Treasury bills. The other 10% is committed to highly speculative products with potentially outsized rewards, perhaps options. It takes a lot of investing know-how and confidence to successfully deploy that strategy. I suspect that you might use some variation of Taleb’s barbell approach.
Not many investors can follow that course (that’s not me and I am definitely not referring to you). The problem is that many folks mistake luck for competence.
Thanks for the references.
Best Wishes.

5-star ranked FMI International, which does foreign large caps and costs a below-average 98 bps. That’s a $4.2 billion fund with a rockin’ track record versus its benchmark.

EEM has done reasonably well this year and they are losing asset to actively managed funds.

FYI: Fund managers are holding cash at the highest levels in almost 15 years. That could be a bullish signal.
Regards,
Ted
http://blogs.wsj.com/moneybeat/2016/07/19/cash-is-king-and-thats-good-for-the-rally/

MJG I think you missed my point. This has nothing to do with the *performance* of stocks vs. bonds. Just the unthinkable and this time it really was different as 1958 was a watershed event in that for the first time ever bonds yielded more than stocks.
https://books.google.com/books?id=RvhGaqZ_oNUC&pg=PT143&lpg=PT143&dq=1958+bonds+yielded+more+than+stocks.&source=bl&ots=pixHXN0tvA&sig=YCDJlXuohSUBqPKwxYMT4ufgU7Y&hl=en&sa=X&ved=0ahUKEwjWosrL3IHOAhWFeSYKHU3XC5wQ6AEIMDAD#v=onepage&q=1958 bonds yielded more than stocks.&f=false
http://www.safehaven.com/article/14784/stocks-vs-bonds-5-decade-anomaly-returns
http://www.montereywealth.org/2012/06/14/stocks-yield-bonds/

Hi Junkster,
Thank you reading my post and contributing to the discussion.
I was not immediately aware of the roughly 2 decade market timeframe starting in 1958 that you referenced in your reply. At that referenced date, I had only started investing a couple of years earlier. But my information shortfall was easily rectified.
I simply went to the Internet and linked to the New York University Stern school annual returns listing. Here is the Link to that nice data summary:
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
Given the source, I presume this data package is accurate. I am not overwhelmed by the 10-year T. Bond returns over stocks even for that excellent period for the bond issues. The 10-year bonds did outperform stocks in 8 years of those 20-year annual periods. Even in that carefully selected timeframe, I doubt that the bond cumulative returns exceeded stock performance (I did not do the cumulative calculation).
But the Stern school did do both the arithmetic and geometric averages for the respectable 1966 to 2015 timeframes. From my perspective, that's a very meaningful period. For that extended time period the S&P 500 delivered 11.01% and 9.60% annual arithmetic and geometric returns, respectively. During that same period, 10-year T. Bonds produced 7.12% and 4.82% arithmetic and geometric annual returns, respectively.
Stocks win because they are risky and they generate returns both from dividends and price appreciation. It is certainly true that stock dividends have been contributing less to that total return than they did in the past. But the total return is what is most meaningful to me, and I suspect to many other investors.
This is not to say that fixed income is not a major portion of my portfolio. It is. Even at an age in excess of 80, I still have a 60/40 portfolio mix. Portfolios benefit from the diversification with low correlation coefficients between these two asset classes.
That portfolio split might be a tiny bit misleading since my wife and I both have social security and company retirement annual incomes. I count those as part of my fixed income segment since they are pretty secure with small incremental annual pluses. So the active portion of my portfolio is very heavily weighted in Equity and Balanced mutual funds.
Many thanks once again, and many good hopes for your portfolio management style. There are many ways to win at this game. Unfortunately there are many more ways to lose.
Best Wishes.

MJG You may want to go back to 1958 and what happened to stock yields vs bond yields. It was a big thing at the time. Something that had never occurred in history and remained that way for many decades. Albeit not suggesting that it is different this time just that in the past it was.
In a recent issue of his newsletter Economics & Portfolio Strategy, Bernstein recounted what it was like in 1958 when T-note yields -- for the first time in U.S. history -- jumped above the stock market's dividend yield:
"This ... was unprecedented. The two yields had come close in the past but had always backed away at the critical moment. In 1958, they reversed their historical positions and have never looked back.

FYI: If 2015 was the year that nothing worked, then 2016 is shaping up to be the year that everything worked. Bonds are up. Stocks are up. Real assets are up. Gold is up. Go ahead – pick your favorite asset -- it’s likely to be up as well.
Regards,
Ted
http://www.bloomberg.com/gadfly/articles/2016-07-18/investors-are-stuck-in-the-middle

Check out 5***** comments .
Derf

FYI: The problems kept mounting for asset managers in 2015.
Asset growth for the industry was at its slowest since 2008, up just 1% to $71.4 trillion in 2015. That comes after assets grew 8% in 2014 and at an average annualized rate of 5% from 2008 through 2014. Earnings barely budged as well, up 1% to $100 billion, according to a recent study from Boston Consulting Group, which looked at nearly 140 asset managers representing $40 trillion, or more than 55% of global assets under management
Regards,
Ted
http://blogs.wsj.com/moneybeat/2016/07/18/after-worst-year-since-crisis-asset-managers-need-to-change/

Interesting find on 50/50 of RPG/RPV out performing RPS but I suspect that they might be temporary and the next 5 or 10 years could be different. CAPE is a good find as welI, I don't own it but I do own DSEEX and am very happy with that fund. I also do like SPHD, the results so far have been excellent. I just wish it was Schwab ETF One-Source.

F and TRP have no load. The other 2 carry a hefty 5.75% Load. I'll stick with the ones I'm already holding, but thanks for the link, Ted.

Hi Guys,
Only on rare occasions does my wife read my posts. That’s too bad since her IQ is two standard deviations higher than mine, and her reviews often generate constructive suggestions. That didn’t happen in my earlier post which she has subsequently read and has identified some shortfalls. Based on her critique, here are a few additional thoughts on the topic.
I was far too circumspect in getting to an Indexing investment approach. And I only cited Warren Buffett as an Indexing convert. He is just one from a pantheon of famous, skilled financial professionals who have changed horses, and now endorse Index investing for a major portion of most individual investor’s portfolios. Charles Ellis and David Swensen are two other excellent examples.
In the Charles Ellis case, it is not a recent conversion. My wife reminded me of an article that Ellis wrote in 1975 that made the argument using mostly sports analogies. The published work is only a short 7 pages. Here is a Link to that pioneering piece:
https://www.ifa.com/pdfs/ellis_charles_the_losers_game_1975.pdf
Please give it a visit. It is a breezy piece of work with many familiar, understandable analogies – some even appropriate in today’s investment world. Enjoy.
Even at that early date, Ellis argued that investing had morphed from a Winner’s Game to a Loser’s Game because of the fact that well trained and well financed professionals were now competing against their equals rather than against much less informed amateurs. Ellis was still singing the same song when he updated his “Winning the Loser’s Game” book in 2010.
David Swensen wrote a nicely reasoned forward for that edition. He became a more recent convert while planning his “Unconventional Success” book. He changed horses when preparing the text for that volume. He realized that “The overwhelmingly large number of investors should seek membership in the passive management club”. That realization prompted him to completely reorganize his work in progress. Private investors can not practice what Yale does with its portfolio.
Investment advice comes in many colors and in as many flavors. Choosing to disregard most of it while accepting a small fraction is a difficult challenge. Getting similar advice from such financial lions as Buffett, Ellis, Swensen, and other industry superstars makes the decision a little easier.
In the end we always get to choose. To choose wisely is yet at another level. Good luck to all.
Best Wishes.

If you like broader weighting (not a dividend play per se), I am finding it interesting to track RPG and RPV and how 50-50 they generally outperform RSP. Just something to keep in mind perhaps. You might like to track CAPE as well.

Thank you for the all replies. Yes I am a fan of the Dogs of Dows concept which is one of things that attracted me to FDSAX in the first place. Paying over 1% for a fund with a rules concept just seems too much to me. I love the SCHD's ER but don't really like the market weight (100 stocks but 45% in the top 10), but I do own it in another one of my 4 Schwab accounts. I prefer the equal weight of SDOG or NOBL, albeit a higher ER. Unfortunately OUSA is not available at Schwab - commission free, and this is a 401K account so I will adding to it and would like it to be commission free. I am going to stick with SDOG for now, but may consider adding NOBL in the future as I continue to convert my active Large Caps into lower cost ETFs.

FYI: Four very different approaches to equity-heavy allocation are on display.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=759884

FYI: Bond King” Jeff Gundlach may be losing his fixed-income mojo! A recent Fortune.com article reports that the prominent bond guru, who founded DoubleLine Capital, is underperforming his peers and the benchmark Barclays Aggregate Bond Index.
The DoubleLine Total Return Bond Fund DBLTX, -0.09% is among the bottom tier of comparable funds, according to recent ranking of bond funds compiled by Morningstar
Regards,
Ted
http://www.marketwatch.com/story/gundlach-in-jeopardy-of-losing-bond-king-crown-2016-07-15/print

Why not go the traditional pension route? Not only don't I trust state pension/investment boards (or their political masters)
[and]
More pathetic, the clowns running many of these funds/programs are suckered by the allure of hedge funds, private equity, and other costly black boxes that eat up their returns after expenses and fees ...

Let's be clear here. Public, private - doesn't matter. It's not a matter of devious politicians. Private companies use the same hedge funds, private equity, and other costly black boxes, albeit in different mixes. While they tend to allocate less to alts than public pensions, they still invest significantly, and they allocate more to hedge funds than do public pensions.

Deutsche Bank’s [December 2015] survey data [] showed that ... Public pension funds had a median 29% allocation to alternatives and 7% to hedge funds; private pension funds, 17% and 10%, respectively; and sovereign wealth funds, 13% and 5%.

http://www.pionline.com/article/20160223/ONLINE/160229965/pension-funds-globally-increased-hedge-fund-allocations-in-2015-8212-survey
All of that was nevertheless peanuts compared with endowments and foundations, which allocated 48% to alts and 23% to hedge funds (ibid.)
Performance? Here too, politics doesn't seem to be what matters. From Private Pension Plans, Even at Big Companies, May Be UnderFunded Floyd Norris, NYTimes (2012):

The companies in the Standard & Poor’s 500 collectively reported that at the end of their most recent fiscal years, their pension plans had obligations of $1.68 trillion and assets of just $1.32 trillion. The difference of $355 billion was the largest ever, S.& P. said in a report.
Of the 500 companies, 338 have defined-benefit pension plans, and only 18 are fully funded. ...
The main cause of the underfunding at many companies does not appear to be a failure to make contributions to the plans. Instead, it reflects the fact that investment markets have not performed well for a sustained period.
...
Virtually all pension funds had assumed returns would be better, leaving them underfunded when their investments failed to perform as expected.

Finally, consider that companies often raided their private pension plans to inflate their profits.

in the 1990s corporations used a variety of accounting techniques, tax incentives, and other forms of manipulation to syphon money from pension plans and serve corporate purposes. [E.E. Shultz] provides an example called the “accounting effect,” where a company could reduce benefits by hundreds of millions of dollars and record the change as a profit. This practice benefited corporate executives, who were compensated by reaching certain profit targets, and shareholders, but in many cases workers and retirees, subjected to this deception and fraud, were cheated out of retirement income.

https://www.wmich.edu/hhs/newsletters_journals/jssw_institutional/individual_subscribers/39.4.Zurlo.pdf
As Norris stated, the problems now are due largely to many years of poor market performance - which affected your DC returns just as it affected DB plan (public or private) returns.
As a footnote, I gather that Vanguard would be counted among the so called "clowns". It created VASFX (alts) for pensions, endowments, foundations, and to use in its managed payout fund (VPGDX) - in some ways the closest thing Vanguard has as the retail level to a pension.

For years my husband had a Fidelity 457 plan. It was cheap if we wanted it to be. It allowed a large array of choices of Fidelity funds and had a brokerage window. We did fine with it. Now the plan is being moved to Voya with no information forthcoming on the plan and only the promise that it's better, just trust us. It appears there will no longer be cost sharing outside of a few core funds and that all fees outside this core will fall 100% on the employee. This happened out of the blue and we were notified with 2 months to decide if we will allow our money to be moved to the Voya Vacuum or we will roll it over and risk the loss of legal protection that might ensue. The employees had no choice in this and, of course, they are saying Obama made them do it with new fiduciary regulations. One current employee said that Voya might send "advisors" to roam the halls giving advice. I had that once in the University of Texas system. A type A guy seemed to think that getting people to churn their investments was a full time job. When I left the system, he seemed to think the best advice was to roll it all into a VALIC money market.

Hi Guys,
Indeed CALPERS has had a rough year. But that's not extraordinary. It's more the rule than the exception. Over the last 20 years, that agency has underperformed the equity markets in just about that entire timeframe.
As an investment agency CALPERS is a disaster. Why? They spend almost 50 million dollars each year in fees and hire about 275 "expert" consultant and advisor teams. It's certainly not that they aggressively pursue and deploy active managers. They do and have for years without outdistancing a poor man's portfolio.
There's a significant lesson embedded in those disappointing outcomes. It's not easy to even match the marketplace when attempting to add some Alpha. Even very smart guys with a deep bench are not often up to that challenge. An alternate strategy is obvious. Warren Buffett advocates it for his surviving family members.
Best Wishes.