Savita Subramanian: large cap value is the place to be for the next five years Subramanian is head of US equity and quantitative strategy at Bank of America, and was the kickoff speaker for the conference. She made three sorts of arguments:
1. most market forecast models are completely useless. BoA has reviewed their performance and they have an R-squared of zero. That is, there is zero predictive validity in them. (Which models, exactly? For what time frames? Doesn't say, presumably because they would only slow things down.)
In addition, most strategists are contrarian indicators; the more they are enthused, the worse the market's forward returns. BoA has a timing model based on that: they survey strategies for their recommended equity exposure in a balanced portfolio. BoA has discovered that the best buy signal is when the average recommendation drops below 51.3% and the best sell signal is when it hits 58%. They survey 20 strategists monthly (I believe) and the current rec is about 55%, which she describes as providing a lack of guidance.
(What, you ask, is the genesis of this model? She seems not to know where it came from; she inherited it from her predecessor, Rich Bernstein, and suspects that he inherited it from his predecessor. What is that R-squared of BoA's model? No hint. And since she had a schedule conflict and had to leave right after her talk rather than do the promising Q&A with journalists.)
2. the market is in a good place just now. Traditional valuation metrics are all wrong since they're premised on an economy that no longer exists. Dynamic industries are asset-light, so book value is largely meaningless. Subscriptions have replaced sales. Inflation at 2-4% is positive for equities. Inflows are strong. The equity risk premium is historically low. US companies have been replacing people with AI which is good because "people are risky, processes are predictable." (Climate change doesn't exist, elections don't matter, we're on a permanently high plateau for ... sorry, that's an editorial aside.)
3. large cap value is the coming sweet spot. Pensions and hedge fund have become dramatically underweight publicly traded equities in favor of private equity, but the attraction of the latter is fading as correlations rise and gains are arbitraged away. In particular, she projects that boomers will need income, that fixed-income isn't attractive (we recently reached, she reports, a 5,000 year low in interest rates), and so there will be a migration to equity-income strategies centered on dividend-paying stocks. Prior to 2013, 50% of equity returns came from dividends (a troubled statement depending on the time-frame since, as she notes above, the economy has changed) and that might recur. Meta and Alphabet are both looking to initiate dividends, a sign of big tech growth stocks are maturing into more traditional corporations. Some IPOs have even played with the idea of incorporating a dividend into their initial offering (my head hurts). Sectors like energy (companies that are now rewarding their executives for decarbonizing and cash return rather than on meeting production targets), tech and financials stand to benefit.
Fidelity Rewards Signature Card? Fidelity’s card has arrived. Plenty of available credit. Haven’t gotten around to activating it yet. The paperwork that came along says no interest on purchases until around the end of December 2025. Have contracted to have a major landscape / outdoor infrastructure project done this summer. Around $20K - but could go a bit higher. I called the contractor today and they will take the card and do not charge a convenience fee. Sounds too good to be true,
Being very conservative (and taking a simplistic look), 20K invested for 12 months @ 5% = $1,000
Then there’s the 2% cash-back that will go into my CM account. That’s another $400
So it looks on the surface like an easy $1400 gain on a 20K charge. More importantly to me, it would allow time to stagger distributions from my IRAs (the ultimate funding source) over a 12 month period. Not worried about a potential near-term “hit” to credit rating, as I rarely use credit.
- What I don’t know is whether there are minimum monthly payments required starting with month #1. I would certainly expect there are. Any thoughts what that monthly payment might be on a 20K balance?
- Re the 2% “cash back” … Is that by chance considered taxable income?
- Exactly when does that 2% cash-back get deposited anyway? End of monthly billing cycle? Would it still work even along with the free credit offer?
- If you returned an item 60 days after buying it for a merchant refund back to your card, would Fidelity need to go into your CM account and withdraw the 2% cash back credit?
And thank you to all of you for all the ideas and suggestions the thread generated!
Will anyone be taking Schwad up on Transfer deal ? I did (not for $5M - I wish!). Schwab told me that the higher bonus dollar amounts were for transfers from Fidelity but not from Vanguard. Was the offer you received for transfers from anywhere (or even better, from multiple sources combined)?
Since I had just closed my Vanguard accounts, I used Schwab as a replacement for Vanguard, not as a place in lieu of Fidelity, which I still use.
If the objective is to maximize bonus dollar value, one can use Merrill and/or E*Trade as
additional receptacles for assets. With Merrill you can harvest another $
1K bonus for a $250K transfer (any combo of sources) for up to two accounts (total $2K) - one taxable, one IRA. With E*Trade, you can get $5K for just $
1.5M in assets, but this must be into a taxable account.
Holding periods are different with each promotion. Schwab requires assets to remain for a year, Merrill 90 days, and E*Trade 6 months.
https://www.merrilledge.com/offers/pr1000https://us.etrade.com/what-we-offer/how-it-works/promo
Morningstar: impressions of the experience The conference felt very odd to me. The impression that I'd share here, but not in the July issue, is of a dowager ... the woman of a certain age who's decided to show them all that the old girl still has it, so she buys a party dress, gets a new 'do, practices her Gen Z ("I've got the tea on that boujee NPC!") and heads out ... to cut a rug.
The keystone address was cued up with pounding music and a disembodied voice urging up to put our hands together for Ivanna Hampton, a Morningstar podcaster and senior multimedia editor, who was wearing a bright yellow suit and brought the energy and affect of a Ted talk to a room full of folks who look ... well, pretty much the way you'd think of roomful of financial planners would look. She promised to help us "soothe your clients" if we'd just "Evolve Ahead Together" which would happen if we "were all ready to hear Savita's bullish outlook on the markets!!"
The keynote speaker was a senior person at BoA/Merrill who ran through her slide deck (with four - six graphs per slide), didn't leave time for questions and left the conference despite the published plan to have her meet the media afterwards (which might speak to the importance of the conference to her schedule). The room was (mostly) full at least in part because Morningstar waived the registration fee for financial planners who agreed to sit through at least three sponsored meetings (which were definitely not sales pitches).
Most of the events other than the keynotes took place in a single, echo-y room the same of an airplane hanger. The Morningstar sales and service people occupied the center of the floor, with other exhibitors on three sides of them. (Fidelity reserved one five-foot folding table which was unstaffed most of the time, several others likewise with stalwarts like Ariel absent). Breakout sessions took place along one wall in a series of little corrals where the amplified speakers' voices rang out across the whole space. The sessions tended to earn CE credits and the ones I lingered near had a distinct podcast feel. Little data, lots of affirmation.
Pretty noticeably absent were, you know, portfolio managers. Messrs. Herro and Jain, in the conference's last time slot, were among the few distinguished exceptions.
I chatted with some of the Morningstar analysts, who allowed that conference attendance (and, presumably, sponsorship) had taken a hit since Covid and they were scrambling to find ways to rebuild its relevance. I like the Morningstar folks and respect their efforts to revitalize. I hope they succeed. I'd be curious to know, though, why they even bother with the conference? That is, is it primarily a way to market Morningstar's myriad services (one adviser reported being blindsided by a $13,000 price increase for exceeding the limits of his Morningstar Direct subscription) and connect with current and potential subscribers? If so, fine ... but don't be surprised if the investing community is increasingly reluctant to underwrite the enterprise. And as their enthusiasm for attending dwindles, the conference's draw might follow.
I'll share actual substance in another post or two.
Buy Sell Why: ad infinitum. Sold shares of two VG index funds yesterday and today to bring Market Portfolio stock allocation down to low end of range. Parking latest proceeds in VMRXX paying 5.29%. Swung for the fences in 1st half of 2024 and did better than projected. Simply booking gains over the past few days and reducing stock exposure and portfolio volatility. For first time since starting investing in 1980, effectively treating 2024 as an act in two parts, as I'm thinking things may start getting dicey in route to November.
Buy Sell Why: ad infinitum. Sold all of AUSF from the IRA. It has some qualities I like, like its Martin ratio since the start of "Taper 2." OTOH, I wasn't wild about the process getting it there.
One of the funds I am considering to replace it is GQHPX. I am also looking at some F1 American funds. I'm looking forward to the next data drop for MFO Premium.
My other large cap is FMILX. So far, so good.
Can someone explain PYLD’s apparent negative 90% cash position? What am I missing? Which do you prefer, FD, 100% correct or 90% correct and 10% wrong (which makes it wrong)? I personally prefer to make my statements 100% right if at all possible - Don't you? If nothing else, it reduces the occasions when I'm wrong. There are far too many of those occasions as it is! ;-)
Can someone explain PYLD’s apparent negative 90% cash position? What am I missing? I read what I said, and I found that if I added "MOST Investors who own ETFs trade" it would be better.
So, instead of being only 90% correct, I could have been 100%. I'll take that.
You start to remind me Bill Clinton...what is is?
Now, let's all check every word someone says on any post, and we are going to have a lot of unwanted consequences. :-)
Can someone explain PYLD’s apparent negative 90% cash position? What am I missing? So what you're saying mirrors my own statement. You can find people for which each approach could be 'correct' or 'incorrect'. Your original post said nothing about "the average Joe". For someone who trades, the fund is probably the inferior product. As with so many things, it depends.
I agree in principal with your statement but not in actuality, because average Joes are over 90% and great traders are less than 10%.
So,
depends is a great word, but not when 90+% are your average Joes. :-)
The point is, FD, that when you make sweeping generalizations, which allow for no exceptions, a single instance which is contrary makes the original statement incorrect. "In principle", or "in general" have nothing to do with anything
after the fact. Had you included the distinctions you now want to add at the time, then you would have been fine, but you didn't choose to do that (You call that "wiggle room"). That makes your original statement simply not true; though your subsequent ones may be.
Sweeping generalizations are seldom true; they are, in effect, predictions of the future and allow for no exceptions. That's why I avoid them in most cases (See what I did there?). When you're tempted to say something like "This results in this"; it has to be true
100% of the time, or it's incorrect!
Can someone explain PYLD’s apparent negative 90% cash position? What am I missing? So what you're saying mirrors my own statement. You can find people for which each approach could be 'correct' or 'incorrect'. Your original post said nothing about "the average Joe". For someone who trades, the fund is probably the inferior product. As with so many things, it depends.
I agree in principal with your statement but not in actuality, because average Joes are over 90% and great traders are less than
10%.
So,
depends is a great word, but not when 90+% are your average Joes. :-)
