you have any studies there showing this relative to lump sum or controlling for investment risk? i can see how dca(high vol) > dca(low vol) in terms of terminal value but that can simply be a proxy for investment risk and thus simply be the result of higher returns for holding a riskier portfolio. the study would have to show the same portfolio over a variety of mkt conditions and having those mkt conditions occur over different points in the investment horizon.

and by bonds i certainly don't mean US bonds alone. global bonds obv, which would, just by themselves, certainly improve the sr by a decent margin.

So I know a guy who has foreign tax credits. He's in Australia.

I am going to suggest he open a trading account in America, and buy some Vanguard ETFs. Once he is out of tax credits, cash out

The ETF VPL makes sense to me, it tracks the MSCI Pacific index. This should make the investment more dependent on the strength of the AUD instead of the USD

Does this logic seem correct to you guys?

No studies, just my trust in dollar cost averaging, my distrust of future bond returns at this time, and my belief in the markets reversion to mean over long periods. Of course if an investor is the type who'll try to time the market, or freak out and dump everything during big pullbacks, etc, it's bad advice. But if you are truly going to hold until retirement, and are at least 10 years away, I don't see much reason to diversify outside of equities.

Of course I"m assuming the use of low cost indexes/etfs & balanced internationally. And if the market starts trading at a high PE any time 20 years before retirement I'd move to balance with fixed income right then. But right now I think the market is priced to offer good long term returns.

I think most U.S. bonds are doomed to negative returns for the next decade or so, because of my belief that inflation will kick in and interest rates will rise. Don't know anything about global bonds.

and

are pretty much mutually exclusive. the second is an example of market timing (though less exaggerated than the first). i don't think you should give allocation advice that also includes moving money in and out of markets based on PE ratios (especially b/c PE ratios have been shown to be poor predictors of future returns).

US bonds includes: a) munis, b) treasuries, and c) corporates. i doubt they are all likely to yield negative returns when counting both coupons and price changes for the next decade or so.

int'l bonds aren't squeezed in terms of risk premia for the most part (as US bonds would likely be atm).

market timing includes both allocation to a given asset class moving in and out over time and choosing disproportional allocations to various asset classes. for the purposes of virtually all investors, i'd highly recommend against both of those.

Thoughts on investment plays that might benefit disproportionately if Reid bill passes?

since the bill is a payoff to Reid's big casino campaign contributors, it should be obvious that the big casino companies will benefit. of course, the only place in this world that thinks the bill is likely to pass is TwoPlusTwo.

It's been awhile since I posted on 2p2 as I quit poker and went into rock climbing/investing. But I'm looking for a place to bounce ideas off people, ask stupid questions and chat about the market. So here I am!

I'm heavily invested in ChineseHybrid stocks and more specifically those that IPO'd in the last 3 or so months. I've got a lot of reasons but it ultimately boils down to me being very bullish on China and bearish on the US.

I've got about 35% of my net worth in ChineseHybrid's and the rest in a mix of everything- US tech stocks, dividend growth stocks and some other random gambles. Does anybody else follow these ChineseHybrid stocks? Some examples are MCOX, KNDI, XUE, XRS, GEDU, GAGA, NOAH, HSFT

I've started a rudimentary website mostly to force myself to do my homework. It'll hopefully improve over the coming weeks with more and better content. Although, I'm pretty busy buying a house right now so it's slow going.

If anybody would like to take a look, the URL is:

http://chineseipo.squarespace.com/

There is a lot more to market valuations than PE ratio, but in the long run the market will correllate with owner earnings. Sometimes trailing PEs can be misleading, sometimes the value of earnings changes with tax laws, and interest rates, and raw PE correlations don't pick those factors up.

And that wasnt specifically a recommendation, i.e. I wouldnt tell someone to get out of the market if the PE is mildly inflated. But it was pretty obvious that a 30+ PE wasn't sustainable for the market a decade ago, but that didn't mean it reverted immediately. If you understand how interest and tax rates change how you value earnings, I'd definitely factor that into my allocations.

I think any of the longer maturities will be at risk, when the yield on 5 year treasuries hits 8-10% I wouldn't want to have been holding long term bonds in any category.

And I think you are under estimating the value of market swings in building portfolio value for the consistent saver.

anyone know a source for historical data of PE ratios? I'd like to look into what you guys are talking about

http://pages.stern.nyu.edu/~adamodar...ile/spearn.htm

Gives you annual snapshots. Questions you should ask include do you believe the reported earnings for 2000, 2007, and 2009. I.e. what are the true earnings power of the companies in the index?

http://www.ycharts.com

is there a way to download the data they use to make these charts?

well imo according to this data, I would side with DesertCat. I would recomend to the hypothetical investor to pull out when the P/E ratio goes above 20

I think there is definately a correlation, only question being is it strong enough to warrent moving money into and out of the markets because of it. I would say yes

Was expecting to say no before looking at the data. Interesting

so i'm sure this has been asked and answered before, but indulge a total noob.

just curious how much of one's liquid net worth should be invested?

for instance if one had like 200K just sitting in a savings/checkings and your monthly nut was ~5K, how much should you keep sitting in something easily accessed like checking/savings, and how much should you invest?

i know this is vague, and its not so much a question of when do i want to retire etc, just kind of looking for i guess BR advice for life.

i know how much money to keep online for w/e stakes i want to play, but no idea how much of a life BR i should keep liquid vs invest with.

and fwiw my investing strategy atm is just buying ETF's (mostly just the total market fund).

depends on the rate of earning. if you earn, say, 5k/mo with 0 variance then an emergency fund of say, 2-6mo of that monthly nut is fine is you are very sure you won't lose this variance free income stream. the more variance there is and the less certain you are you'll keep that income stream, the more you'd want to keep liquid/available. obviously, this is countered by the amt you earn each month. the higher that is, the lower the total amt of liquid cash you'd need.

i'm not sure if this is helpful though. seems pretty straightforward.

seems so easy...so when would you put your money back into the mkt?

Your liquid money should be anywhere from 3-12 months living expenses, which is completely up to what you are comfortable with. This is considered your emergency fund. The rest should just be invested based on your risk tolerance, how long you want to leave it invested, and what you ultimately want to do with the money.

You should also take into account your poker playing when spreading the risk in your investments, because poker can be considered "very aggressive" and your other investments should reflect that.

thanks for the responses guys.

well, now, as P/E < 20

sim:

a) buy + hold
b) buy, if p/e>20 set allocation to 0%. when p/e<20 set allocation to 100%.

the main issue would be determining timing. you don't know p/e of the mkt until about a month after the end of each quarter. so you can lose lots of exposure time and dividends. i'd bet a) outperforms b) though after all is said and done over typical investment horizons. i can think of a few reasons why but won't say in case anybody wants to take a crack at the logic behind why a) should outperform b) in expectation.

Quick Question on Tenet Health Care

They received a buyout offer of $6 a share or 7.4B

Link

According to Google Finance, there are 485M shares outstanding. $6 a share * 485M shares is 3.12B Market cap. So how is $6 a share a 7.4B offer?
I feel like there is something basic I'm missing here...

i forget goog finance's (or the general) definition of "shares outstanding"

i think though that it is "shares available to the public to purchase"

as a result, shares held by insiders/not issued to the public would make up the difference.

Having not looked at it a whit, my guess is besides options they are adding up the value of Tenet's debt, which I occasionally see and understand not. Or Google Finance is wrong and they just did some dilutive issuance, never trust Google or Yahoo, read the SEC filings when you really want to know.

I normally have a policy of not arguing with a guy who has a supercomputer at his disposal, but I think you should be able to estimate the general earnings level of the market at any time, and not use the "market PE" as calculated post-quarter. You should discount earnings sometimes and not others. I wouldn't discount earnings this year, I should have in 2007.

I believe you and your computer if you say that historically raw end of quarter PEs doesn't work in favor of market timing.

Either way it's not something the average investor could be trusted to succeed at.

do shares outstanding include insider held shares not avail to the public? could that be the reason or am i just wrong there?