This article is provided by Bogleheads® forum member Steve Thorpe.
RTP, NC Chapter Meeting 9:30 AM Sat Feb 12, 2011
We had a great time this morning at our 6th RTP Bogleheads local chapter meeting! Our gorup had a wide-ranging conversation over bagels in the stunningly beautiful von der Heyden Pavilion at Duke University.
Here are some of the many topics we discussed:
My favorite takeaway was a memorable phrase courtesy of Suman that describes a key reason to hold bonds: “Shock Absorber”. Two short yet immensely important words!!
Nassim Nicholas Taleb’s “Fooled By Randomness” was one of our agenda items. Some themes of the book are “too many millionaires next door”, falsely assuming cause and effect, ignoring the failure cases and instead focusing only on the winners, not including alternate (possible but not realized) histories when evaluating success vs. failure, “monkeys on typewriters” – that is to say, there’s a lot of good luck that’s misattributed to skill. This book is quite an interesting read and I recommend it.
Ed Tower is developing a paper titled “Predicting the Returns of Vanguard Funds Using the Gordon Formula”, and he kindly shared a copy of the latest draft with the group, educating us all on the Gordon Formula, dividend growth rates, past and expected performance of various Vanguard funds, historical and present P/E ratios, etc. Thanks Ed for graciously sharing so much information with the group! We look forward to seeing the published paper after your upcoming finishing touches.
“Don’t do anything to others that you wouldn’t have done to you” was mentioned as an important takeaway from the Talmud. A very useful (and Boglehead-ish!) life lesson.
The “20-20 wine rule” . Did you ever hear of that one? With white wine, take it out of the ‘fridge 20 minutes before you drink it. With red wine (esp. on a warm day), put it into the ‘fridge 20 minutes before you drink it. What a great rule! It got me thinking – perhaps we should schedule our next meeting on a warm afternoon so we can do a formal scientific evaluation of the rule!
Luck vs. skill and following the herd were recurrent topics of conversation. Luck is at work more than many realize! At least one of us was fortunate to have moved from 100% to 0% equities in March 2000! Luck? Skill? I’ll leave it to the reader to decide!
Some of the many books sprinkled throughout our conversation include:
- “A Random Walk Down Wall Street” (updated version) by Burton G. Malkiel
- “The Bogleheads Guide to Retirement Planning”, by Taylor Larimore, Mel Lindauer, Richard Ferri, and Laura Dogu
- “The Big Short”, by Michael Lewis
- “Liar’s Poker”, by Michael Lewis
- “Outliers”, by Malcolm Gladwell
- “What the Dog Saw”, by Malcolm Gladwell
- “Wall Street Revalued: Imperfect Markets and Inept Central Bankers” by Andrew Smithers
- “Irrational Exuberance”, by Robert Shiller
- “The Only Guide to a Winning Bond Strategy You’ll Ever Need”, by Larry Swedroe and Joseph Hempen
- “The Bond Book”, by Annette Thau
- “Explore TIPS”, by The Finance Buff
- “Don’t Count on It!: Reflections on Investment Illusions, Capitalism, “Mutual” Funds, Indexing, Entrepreneurship, Idealism, and Heroes”, by Jack Bogle
Thank you my RTP Boglehead friends – you’re the best!
RTP, NC Chapter Meeting Sat May 7, 2011
Yesterday morning five of us met for the 7th RTP Bogleheads local chapter meeting. As usual, it was a stimulating discussion covering many investment-related topics, including:
Michael Lewis’ “The Big Short: Inside the Doomsday Machine”. This fascinating read chronicles many shenanigans of the recent financial meltdown: high-risk sub-prime mortgages, packaged into bonds, packaged into CDOs and synthetic derivative instruments, artificially inflated from junk- to AAA-rated status and blessed by the ratings agencies, insurance with credit default swaps – these topics are difficult and can make your head hurt!
Several in the group agreed that not having “skin in the game” allowed way too much risk to be taken. If the risks were borne by the decision-makers, it would have naturally caused less risky decisions to be made. There was some debate in the group as to whether increased regulation would help or hurt.
Was there fraud in the bond ratings agencies? Or simply incompetence?
One member described a 529 college-savings fund that was invested in a vehicle with a 1 year time frame from the target. It declined – get this – by 25%(!) The question is, why? It turns out the “low risk” part of the fund was invested in credit default swaps!
We discussed various commodities: oil, gas, coal, precious metals, rare elements, etc. It seems the world could get uglier over time, given potential impending scarcity of these resources.
We watched a 3.5 minute interview with Jack Bogle, recorded during last October’s Bogleheads 9 reunion. In those short minutes, Jack packed in most of the key Boglehead principals – saving diligently, keeping costs low, don’t peek too often, and perhaps the most fun one – “Don’t do something, just stand there!”. Jack was certainly an inspiration to everyone at our RTP Bogleheads meeting.
Ed Tower, Duke University professor of Economics, shared the latest draft of his paper “Tobin’s q versus CAPE versus CAPER: Predicting Stock Market Returns Using Fundamentals and Momentum”. He presented two models – one that incorporates momentum predicts real wealth falling in the next few years, and one without momentum predicts real wealth rising but at a very slow rate. Ed, thanks very much for sharing your paper with the group!
Other topics included:
- Malkiel’s latest Random Walk book
- Behavioral economics research
- Tulip-mania and other historical bubbles
- Different ways of estimating risk
- Cash – is it no longer “king”?
- Cash vs. short term bonds
- Benjamin Graham’s Intelligent Investor
- Paul Krugman’s Blog
- Bill Bernstein’s Investor’s Manifesto and 4 Pillars
We decided to hold our next meeting in early September. Since the first Saturday in September is over Labor Day weekend, I propose we hold it on Saturday September 10th. For one of the topics, Redwing has suggested we can discuss George Friedman’s book “The Next 100 Years: A Forecast for the 21st Century” which sounds fun to me! Please check this topic for further information on the next meeting.
Thank you my RTP Boglehead friends – you’re the best!
RTP, NC Chapter Meeting Sat Sept 10, 2011
Today was the eighth RTP Bogleheads chapter meeting and as usual, it was delightful. In addition to kinship with other Bogle-inspired investors, the eight attendees had easy access to Full Steam beers – including Southern Lager, a Basil brew and other delicious varieties. This aspect of the meeting was very well received .
I’ll briefly touch on a few of our discussion topics below, though I can’t do it justice in these few words.
Several of us had read George Friedman’s “The Next 100 Years: A Forecast for the 21st Century“, which led to much conversation. How will China fare in coming years – will it fall apart as Friedman contends, with conflict between the prosperous coastal cities and the interior regions? Overall, according to sunspotzsz, the economy has definitely improved within China for everyone – to a point. Though perhaps 5-6 years ago the “trickle down” part seems to have stopped, and the disparity between rich and poor has widened recently.
Was Friedman’s outlook shaped by his growing up during the cold-war era, thus he’s especially oriented towards predicting wars and conflicts? Is Friedman perhaps a bit sensationalist, in order to sell books?
Will the fast information exchange enabled by the internet speed up the international changes we can expect in the next century? Perhaps, instead of radical changes every 20 years, it will be every 5 or 10 years!
On balance, it seems Bogleheads enjoyed the book, yet there really wasn’t anything actionable as an investor. Perhaps a takeaway is there’s always a need for wide diversification.
Events of Summer 2011
At least one Boglehead drew a parallel between politics and business cultures – both are way too focused on the short-term (next election, next quarter) and not the long-term. This seemed very evident recently in both spheres.
Other topics / Open Q&A
We touched on many other topics, including:
- Investors as “grasshoppers” (constantly fidgets) vs. “ants” (diligent saver types). Many seem to fall into one camp or the other.
- Family dynamics: how extended family members can behave so differently with regards to personal finances, and the potential perils/challenges of Bogleheads advising their siblings and parents.
- Two of us had attended a recent presentation by North Carolina’s State Treasurer Janet Cowell. We’re fortunate that NC is one of a small number of states with a AAA bond rating. Among other activities, the NC Treasurer oversees a $75B state retirement plan. Could it all simply be sent to Vanguard? Or would a more Swensen-esque approach with more direct involvement be best?
- Most of use are classic indexers, though some dabble in individual stocks – including Berkshire Hathaway.
- HSA accounts: treat them separately or as part of your whole portfolio? The general consensus was that it depends on your ultimate goals/time frames for the money.
- Accessing Wall Street Journal articles through Google is likely to give you better access to the entire article’s content.
Thanks my RTP Boglehead friends!
RTP, NC Chapter Meeting Sat Dec 3, 2011
This morning the Research Triangle Park, North Carolina area chapter held our 9th quarterly meeting. We had a very fun conversation over bagels and apple juice. (Special thanks to Ed Tower for the juice!) Here is a short summary.
Several of us had read Jason Zweig’s “Your Money and Your Brain“. A few quotes from the book that engendered feedback were:
“The road to investing hell is paved with overconfidence”
“Making money feels good, all right; it just doesn’t feel as good as expecting to make money.”
“Try to prove yourself wrong…. Refusal to second-guess yourself can lead to huge losses and a crippling sense of regret”
“At Harvard Medical School, neuroscientist Hans Breiter has compared activity in the brains of cocaine addicts who are expecting to get a fix and people who are expecting to make a profitable financial gamble. The similarity isn’t just striking; it’s chilling.”
“You can also make what Seligman calls a gratitude visit: Think of someone who has had a great positive influence on your life. Write a 300-word letter of gratitude spelling out, in concrete detail, what the person did, what it has meant to the course of your life, and why you feel grateful. Then find where the person is today and ask to come for a visit. If the person asks why you want to visit, say it’s a surprise. After you arrive, read you testimonial aloud’ if you find that too emotional, just sit with the person while he or she reads it. That will give you both an enduring warm glow.”
FYI to the interested reader, back in 2007 Taylor Larimore posted his “Investment Gems” from the book at this link. There are a bunch of goodies there! I would definitely recommend the book.
Highlights from the National Bogleheads Meeting in Philadelphia
Ed share a few highlights from the October reunion, including:
- Jack Bogle is a great speaker, also very funny.
- Ed believes Jack Bogle has made a huge contribution to our economic growth over the years … not just to individual investors, but also to the overall economy due to more money being available to be invested. I hadn’t thought of that angle before (mostly I was thinking of Bogle’s benefits to the individual investors), but it makes perfect sense. Thank you Ed, and a huge thank you to Jack Bogle for that!!!
- European equities may be looking good now, due to their relative valuations.
- Ed and others have concluded through their research that “you get a multiple of what you don’t pay for” (a high expense ratio is a likely indicator that you’re being ripped off in other ways not included in the expense ratio).
- A few highlights from the paper Ed presented at the meeting, “Reflections on Jack Bogle’s First Mutual Fund
- There’s some interesting stuff out there by Bill Bernstein and also Russ Roberts. FYI check out William Bernstein Podcast Episodes and Extras
It sounded like a wonderful national meeting. FYI, thanks to much volunteer effort from the Boglehead community, there’s a meeting report that I encourage you to check it out! Bogleheads 10 report
We had a short discussion about portfolio management, covering such topics as: What do our investment allocations look like? How do you manage it – with Morningstar, other online tools, Excel? If you have opaque trusts without ticker symbols in your retirement plan, how do you handle that?
I shared my own asset allocation strategy with the group. We also talked about using “substitute” ticker symbols in spreadsheets, for when you have positions in opaque 401k plan options.
Other topics / Open Q&A
- Paul Merriman’s new “Financial Fitness Forever” book, and his PBS Roadshow visit to the Triangle
- Jack Bogle’s “Enough”
- “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko
- I learned a new phrase: “Daily Boglehead Dose”. Have you gotten yours today? Personally, I try to limit my visits to once per week, though I certainly understand the temptation to read the forums daily!!
I asked the group for their thoughts on recommended Boglehead-like gifts for recent college graduates. Suggestions included:
- Burton Malkiel’s “A Random Walk Down Wall Street”
- The Boglehead Wiki, in particular the investment videos posted there (thank you Travis for this tip!): Video:Bogleheads® investment philosophy
Thank you Bogleheads for another fun meeting – it is a joy to know you all!