Maurice hasa point but is clearly wrong THe dow is weighted by price and unless Amazon splits at least ten for one it won't join the Dow.Remember Apple was not addeded until it split 7 for 1based on t

Now it occurs to me that if they are dropped, a company must be added to the index. My best guess would be Amazon, given that they passed Walmart as the nation's largest retailer.

Mainstay's PR holdings, last I read their commentary, were all insured debt, in contrast to Opp'heimer. The 1m total returns reflect the difference: MMHAX -0.59%, OPTAX -2.65%, ORNAX -2.88%. M* shows the HY muni fund category with a -0.60% return for the same period.

FYI: (This is a follow-up article)
Investors would be wise to keep an eye on funds that have the most exposure to Puerto Rico debt as the island faces unprecedented devastation from Hurricane Maria.
Investors would be wise to keep an eye on funds that have the most exposure to Puerto Rico debt as the island faces unprecedented devastation from Hurricane Maria.
Puerto Rico had already racked up more than $70 billion in debt before the storm. And with a new request for $1.4 billion in federal aid from Gov. Ricardo Rossello, the island's shortfall doesn't look like it will end any time soon.
Regards,
Ted
https://www.cnbc.com/2017/10/10/these-funds-have-the-most-exposure-to-puerto-rico-debt.html

@MFO Members: For your information.
Regards,
Ted
Why "Sell In May And Go Away" Is Not Quite So Simple:
https://www.cnbc.com/2017/04/28/trader-talk-why-sell-in-may-and-go-away-is-not-quite-so-simple.html

The SIM philosophy was very popular on the board several years ago. I never practiced it. But I think it was to some extent a self-fulfilling prophecy. For a few years, anyway, the market appeared to sell off around that time of year.
What I observed happening over several years, however, was that those who practiced the belief began to sell a bit earlier every year to get “out in front of the crowd”. Instead of waiting for the market to tank on May 1, why not play it safe and sell on April 15? Than, some thought they could gain an even better edge by selling on April 1, etc. etc.
Is there seasonality to markets? Probably yes. Tax deadlines may play a part. How to profit from the seasonality? That’s where it gets dicey.
We all have different approaches. To each his own. If doing something a certain way has worked for you over time (per Ol’Skeet) I’d be the last to say change it. Whatever floats your boat!

FYI: After watching investors flee to index funds, assets are flowing back to American Funds.
Regards,
Ted
https://www.wsj.com/articles/an-active-fund-giant-wins-back-some-investors-1507514940?tesla=y

FYI: The latest target-date funds focus on the task of managing a nest egg once retirement has started, including RMDs. Will they catch on?
Regards,
Ted
https://www.wsj.com/articles/new-target-date-funds-are-geared-for-withdrawal-time-1507515120?tesla=y

FYI: Influential bond investor Bill Gross of Janus Henderson Investors said on Monday that financial markets are artificially compressed and capitalism distorted because of the U.S. Federal Reserve’s loose monetary policy.
Regards,
Ted
http://www.reuters.com/article/us-funds-janushenderson/bill-gross-of-janus-blames-fed-for-fake-markets-idUSKBN1CE2FG

Here's a chunk of the conclusion section of the column:
"Our [Vanguard's] research shows that long-term, active outperformance is possible. But choosing recent high performers in inefficient markets isn’t the answer. Instead, we found that low-cost funds run by talented managers can achieve long-term outperformance for patient investors. Patience is key, because returns will be inconsistent even for successful managers."
One can increase one's chance for success by keeping a close eye on costs. Or as stated in that cited Vanguard research: "we [Vanguard] find that investors’ odds can be improved through the use of low-cost mutual funds."
I would have found the column more interesting had it given return data gross of expenses (i.e. before subtracting out ERs), and had it done a regression analysis against turnover. (I recently cited some source saying that at least half the cost of owning the typical fund is due to turnover.)
I agree with Lewis that this is old news. But more than that, regarding the column itself, I'm left asking where's the beef? At best 11 paragraphs of substance that come across as reheated excerpts of Vanguard papers, loosely assembled and not well understood.
For example, the column misused Sharpe's observation that the market is a zero sum game. Here's how Vanguard correctly explained that in a whitepaper: "in any market, the holdings of all participants aggregate to form that market. Therefore, every dollar of outperformance achieved by one investor in the market is offset by a dollar of underperformance from the others."
But according to this column: "Every time an investor makes a profitable trade, another investor must take the opposite side and incur an equal loss."
So when I sold you my GOOG two months ago (at 920 for an 18% gain over my purchase price of 780 a year ago) to get cash for living expenses, you must have incurred an equal 18% loss? Perhaps you incurred that 18% loss by holding the stock until now (it's currently trading at 977, not bad for two months)?
A column that makes one's head hurt if one reads it carefully.

Hi Guys,
Winning in the investment universe can be a daunting task. Yesterday's superior active fund managers often fail to repeat their successes in today's marketplace. The data is overwhelming in the negative direction. Only a little over 10% of these super-pickers retain their outstanding performance in the next measurement period. Persistent outperformance is a challenge and identifying that small, elite group in advance is an even more formidable challenge.
These are not new findings. Vanguard has been making that point for a long time now. Here is a Link to yet another Vanguard study that demonstrates the futility of various candidate signal parameters to reliably project future performance:
https://personal.vanguard.com/pdf/s338.pdf
This report is relatively recent and is well documented. Please give it a read. Here is a nice summary paragraph that I lifted from the reference:
"The current level of a blend of valuation metrics contributes to Vanguard’s generally positive outlook for the stock market over the next ten years (2012–2022). But the fact that even P/Es—the strongest of the indicators we examined—leave a large portion of returns unexplained underscores our belief that expected stock returns are best stated in a probabilistic framework, not as a “point forecast,” and should not be forecast over short horizons."
In an uncertain world, probability based analyses are useful when projecting the range of likely investment outcomes. Keeping an accessible reserve that permits you to survive a two or three year equity market downturn is a prudent strategy. Note that Vanguard trusts long term projections more than short horizon guesstimates. So do I.
Best Wishes

FYI: When I tell people about the seven-day race I ran in the Sahara last year, they ask questions. The most common one is, “Why?”1 A close second is, “How did you get all the water you needed?”
Regards,
Ted
http://www.etf.com/sections/etf-industry-perspective/vanguard-think-actively-managed-funds-always-outperform-think

Hi Guys,
Being an "aimer" is very common. We all have goals. The challenge is how realistic those goals are. What are the odds of achieving those goals? Given market uncertainties, a 100% success goal is very bushy-tailed. But it is achievable if an investor is flexible to changing circumstances.
An early step in that process is to identify the likely odds of success. Monte Carlo simulators provide one useful tool to make those estimates. That tool not only yields the odds for success, but also makes estimates of end wealth, and a timeline for the portfolio failures. If those failure times are well beyond likely life expectancy, the failures are far less significant for planning purposes.
I well understand why only a 95% portfolio survival projection would be troublesome for some folks. It was for me. However, once that estimate is known, an investor could think about adjusting his withdrawal plan to alleviate that possibility.
When planning my retirement, I programmed my own version of a Monte Carlo code. I frequently calculated portfolio survival likelihoods in the mid-90% ranges. What to do? To improve that survival rate, I modified the code to reduce drawdowns by an input value (like 10%) if annual market returns were negative for some specified years. Withdrawals were increased once the markets turned positive in the simulations.
I explored many such portfolio survival issues by using my easily modified Monte Carlo code. Portfolio survival rates of very near 100% could be projected when very modest withdrawal rate flexibility was allowed. Like in so many other life situations, flexibility is a winning strategy.
My Monte Carlo calculations identified the frequency of shortfalls, the magnitudes of any shortfalls, and the timeframe of those shortfalls. These were all useful inputs for my retirement decision. The very modest adjustments needed to alleviate that unacceptable outcome gave great comfort. These additional Monte Carlo simulations cemented my retirement decision.
I believe (alternately, IMHO if you dislike "I believe") that Monte Carlo simulations would help many MFOers when considering their retirement decision.
Thanks for the Kitces reference. Be aware that he has a vested interest in the subject matter of that referenced article. He closes his piece with the following declaration:
"Michael Kitces has a financial interest in the US distribution of the Timeline app."
I have no such vested interest in Monte Carlo codes. I merely advocate that they be included as one tool to support investment decisions. They permit easy multiple sensitivity analyses. Of course, they depend on good input data ranges. They do not stand alone.
Best Wishes

FYI: Institutional investors have been flexing their muscles on corporate governance issues this year. So why do individual investors continue to be so disengaged on these matters?
Regards,
Ted
https://www.nytimes.com/2017/10/06/business/small-investors.html?ref=dealbook

It's also often not the reliability, it's what to do with the reliable mammogram or change in PSA.
I always wonder what the practical effect is.
One thing that is helpful is hearing oneself have the conversation, and having further on the way home, with oneself or w/ whomever one is with. Letting it sink in, sleeping on it.
So you're a 100%-success 'aimer'?
Assume humility (in advice-giving) on part of expert.

I always wonder what the practical effect of such fine distinction-making is.
'For the particular kind of [prostate, breast] cancer you have, the new data show that watchful waiting outcomes are as good in terms of mortality and life quality as treatment, often better, and the number needed to treat is yada yada. Discuss with your doctor whether treatment or monitoring is right for you.'
'Return-sequence risk is always significant and badly down years at the start of your retirement can be deleterious to all of your planning. Discuss with your adviser the consequences of not planning yada yada ...'
And then what? What is the discussion? What can it change besides (dis)comfort level and moves toward drastic preventive actions? How wise is it to have 'just get rid of it' surgery or go to all laddered CDs? In the worst case, plenty wise. So is the discussion necessarily education in likelihood of worst cases?

Some of it certainly is education about worst case probabilities. There's a general belief that outcomes are better if treatment is more aggressive. Sometimes that's true, often it's not, especially given possibilities of false positives (not ill when tests say otherwise).
For example, mammograms are not too reliable with dense breast tissue. Here's a page from the American Cancer Society suggesting in that case you talk with your doctor, because on the one hand you might want to also have an MRI. But it also says that MRIs produce false positives leading to more tests and biopsies (which have their own risks).
https://www.cancer.org/cancer/breast-cancer/screening-tests-and-early-detection/mammograms/breast-density-and-your-mammogram-report.html
Similarly, PSA tests are not especially reliable and can lead to biopsies with risks.
A good part of the conversation can simply be an exploration of what's really important to you. In some other thread was a link to an article on how the usual financial planning questions are not helpful, e.g. "would you risk a 20% loss if 2/3 of the time you'd gain 15%?" People don't know what they want or how they'd react if actually (not hypothetically) faced with a 20% loss.
So IMHO talking with a planner at length about what really concerns you and discussing the cost/benefits of different risk mitigators (e.g. immediate annuities, long term care insurance, greater cash allocations, etc.) is a good use of time.
Different people place different values on a given outcome. Worse, most people don't even have a clear idea of how they value each possible outcome.
At one end of the spectrum you have women who will have radical mastectomies because they have a genetic risk of cancer. They choose life, regardless of its quality, over all else. At the other end of the spectrum, you have men who will decline prostate cancer treatment even when faced with certain death, rather than assume any risk of impotence due to treatment.
There are real people like that. I think I can appreciate their perspectives even if I don't agree with them.
Personally, I don't want to go broke, period. In that financial sense, I take an extreme position. A magic number of, say 95% chance of success tells me nothing. I need to know what the 5% of paths look like. Then I can explore possible followup actions that would increase success to 100%.
Likewise with that doctor talk. It's difficult to follow radiation therapy with surgery if the radiation is unsuccessful, while the reverse is much easier. That's a consideration in selecting choice of treatment, if one is willing to live with the much higher likelihood of a degraded quality of life due to multiple therapies.
Knowing not only the odds but the paths of outcomes enables you to plan for dealing with possible failures. And for not doing something just because the expert, whether physician or advisor, felt it was best in his not so humble opinion.

"We have morphed from an agricultural dominated economy to an industrial powerhouse. ... For most of the limited analyses that I do, I favor data from after WW II. I recognize the shortfall in numbers that that decision introduces, but I believe these data are more relevant."
There you have it - faith-based investing. You acknowledge that that times change (so that just perhaps the "mean" in mean reversion also changes), but you're stuck in a post WW II industrial past. Maybe that's because that's roughly the period spanning your lifetime, or at least that part of your lifetime when you were aware of your surroundings.
Daniel Bell coined the term post-industrial society all the way back in 1973. The US has moved well beyond the industrial age. It's a service economy now, where fewer people work in industry (even as output increases), just as fewer people work in your agrarian sector even as output increases.
https://www.washingtonpost.com/opinions/robert-jsamuelson-myths-of-post-industrial-america/2013/04/07/775d1062-9fb2-11e2-82bc-511538ae90a4_story.htm
See ag commodity by commodity production graphs (1960 - present) here:
https://www.indexmundi.com/agriculture/?country=us&commodity=milled-rice&graph=production
For earlier data (1900 to 1950), one can wade through this doc:Changes in Agriculture 1900-1950
The decade after WW II was economically unique, as the US was essentially the last economy left standing. Rather than helping to inform investment decisions in today's economy, an argument can be made that that period is no more relevant than the Roaring Twenties.
Geopolitics is another matter. There, WW II is an important starting point. That's when Pax Americana began. But for "the limited analyses that [you] do", this doesn't come into play.

FYI: Studies have consistently shown that dividend-paying stocks tend to outperform their non-dividend paying counterparts over time. From 1930 to 2015, roughly 43% of the S&P 500’s total return came from dividends.
Companies with long histories of paying and growing their dividends demonstrate a financial strength and consistency that makes them ideal investments for most portfolios. Investors who choose funds that target these dividend growth stocks can generate strong risk-adjusted returns over the long term.
If you’re an investor looking to generate income or take advantage of a strategy with a long-term track record of success, consider adding one of these funds to your portfolio. In case you are wondering whether mutual funds are right for you, you should read why mutual funds, in general, should be part of your portfolio
Regards,
Ted
http://mutualfunds.com/news/2015/12/10/the-top-mutual-funds-for-dividend-growth/?utm_source=MutualFunds.com&utm_campaign=bd2cebe35d-Dispatch_Weekend_Engage_09_30_2017&utm_medium=email&utm_term=0_83e106a88d-bd2cebe35d-290921629

There are now nine equity funds at least 10 years old through September that have never incurred a negative return over any 3-year rolling period. There were only five last month. The four new funds just turned 10! They are Boston Trust Midcap Fund (BTMFX), Delaware Healthcare Fund Inst (DLHIX), Prospector Capital Appreciation Fund (PCAFX), and Prospector Opportunity Fund (POPFX).
Four of the nine are MFO Great Owls, and David profiled PCAFX in 2011. He gave it a thumbs-up.
Here's an update of the complete list published in this month's commentary (click image to enlarge):

With respect to tools that use real data as opposed to hypothetical random data (that downplay the possibility of multiyear bears found in historical data) being somehow inferior or limited to merely hundreds of sequences, here's some what what Kitces writes:

There’s never been any way to illustrate those alternative assumptions [e.g. "spending changes based on varying goals or changing needs"], as even the best financial planning software is still built around straight-line assumptions and Monte Carlo analysis.
Until now, as in the past year, two new software solutions for advisors have come forth ...

While those two tools are designed for advisors, what I want to highlight is that they are both based on historical data spanning a century (one using montly CRSP data back to 1920) or more (the other using DMS global data of a score of countries going back to 1900). Not small data sets, and as I read Kitces, better than any existing probability-based tools.
He goes on to note that even these tools are best used for educational purposes, not planning:

[They] are better viewed as a mechanism to teach and illustrate safe withdrawal rates, the sustainability of (steady) retirement withdrawals in the face of various market return sequences, and the impact of asset allocation ... on the sustainability of portfolio distributions. In other words, they can set the groundwork for initial client education about sequence of return risk and its consequences

Thanks Ted,
Additional articles written by Kimberly Lankford:
kiplinger.com/fronts/archive/bios/index.html?bylineID=10