10-year future return for S&P500 lower than TIPS?

Rob's vision of "honest and informed debate" doesn't include answering simple and straightforward questions put to him. The unanswered questions cataloged here are an important part of Rob Bennett's Passion Saving, Hocomania.

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10-year future return for S&P500 lower than TIPS?

Postby Schroeder » 07/07/06 at 14:46:21

Schroeder wrote:OK. This question is destined to have an honored place as one that hocus will not provide an honest and informed answer.

In post #69 in Diehards conversation 51714, hocus writes . . .

**LINK**
The most likely return for stocks over the next 10 years is 1.3 percent real. TIPS offer a higher real return.

And yesterday, I asked the following question . . .

Schroeder wrote:In the July 6 blog, hocus talks about the comments made at Diehards. Here's an excerpt . . .

**LINK**
An odd note I hear in a number of comments on the calculator is a stress on the possible risk in taking the numbers generated by the calculator too seriously. There is such a risk, of course. But is it not more than a little curious that most of the posters who refer to the risk of taking what the historical data says too seriously rarely raise concerns about the risks that follow from not taking note at all of what the historical data says about how valuations affect long-term returns?

It's obvious that hocus misses the point people are making when they caution not to take the numbers generated by the hoco-calculator seriously.

As an example, the "Most Likely" 10-year real return for the S&P 500 according to the calculator is 1.31%. [highlight]Why should the 10-year return on the S&P 500 be lower than the 10-year real return on TIPS (currently at 2.4%)?[/highlight] That makes no sense.

Schroeder

Do you have an answer hocus?

Schroeder

As expected, hocus provides nonresponsive answers . . .

hocus wrote:Here's Van Morrison's take:

"It's not why, why, why, why, why, why, why --
It just is."

I believe that that one is from "And the Healing Has Begun."

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Re: 10-year future return for S&P500 lower than TI

Postby hocus » 07/07/06 at 14:52:40

As expected, hocus provides nonresponsive answers . . .

Oh sure. But with an outstanding beats-per-minute score. You always neglect to focus on that aspect of the question, for some crazy, mixed-up, only-makes-sense-to-a-Greaney-defender reason.

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Re: 10-year future return for S&P500 lower than TI

Postby intercst » 07/07/06 at 19:56:10

hocus wrote:As expected, hocus provides nonresponsive answers . . .

Oh sure. But with an outstanding beats-per-minute score. You always neglect to focus on that aspect of the question, for some crazy, mixed-up, only-makes-sense-to-a-Greaney-defender reason.

Rob


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Re: 10-year future return for S&P500 lower than TI

Postby Schroeder » 07/10/06 at 14:31:37

Recall, that I wrote this . . .

Schroeder wrote:
Schroeder wrote:In post #69 in Diehards conversation 51714, hocus writes . . .

**LINK**
The most likely return for stocks over the next 10 years is 1.3 percent real. TIPS offer a higher real return.


I see hocus responded somewhat to my question in post #101 at Diehards conversation 51714 . . .

**LINK**
<snip>

There's a guy named "Schroeder" who has asked me a question on another discussion board several times in the past week or two. His question is (I'm paraphrasing here): "Your Stock-Return Predictor says that it is likely that stocks will provide a real annualized return of 1.3 percent or less over the next 10 years. That's lower than the return available from TIPS. It can't be."

The reality is that is can be. Schroeder and many others have come to believe that stocks are always the best investment choice. Why? That's what the dominant investing paradigm of today (I called it the Stocks-for-the-Long-Run Paradigm) teaches.

Under the now-dominant paradigm, investors are paid for the risk they are willing to take on. Stocks are a risker asset class than TIPS. So stocks should be expected to pay a higher return.

Right?

Not right. Stock investors are not paid for taking on real risk. They are paid for taking on perceived risk. At times of low valuation, the perceived risks of stock investing are sky-high. So the long-term return is sky-high. Today, the common perception is that stocks are virtually risk-free for investors willing to chant the magic "I'm a buy-and-hold investor" incantation and sprinkle some pixie dust over their account statements. So it is TIPS that pay the higher expected return.

<snip>

That last part is an unusual opinion . . .

Today, the common perception is that stocks are virtually risk-free for investors willing to chant the magic "I'm a buy-and-hold investor" incantation and sprinkle some pixie dust over their account statements. So it is TIPS that pay the higher expected return.

Hocus, I don't know where you got the idea that the "common perception is that stocks are virtually risk-free". This is not what I meant. Let me try to explain it another way.

You may or may not know this. But the stock market is dominated by several dozen large institutions who employ the smartest money managers each controlling billions of dollars of stocks. Collectively, they control trillions of dollars of stocks.

What you are suggesting with your 10-year stock forecast of 1.3% real return is that these very smart and highly motivated money managers are holding stocks which are currently mis-priced. I know that it is obvious to you because your P/E10-based prediction tool tells you that stocks are mis-priced. However, I find it incredible to believe that so many smart money managers could all be wrong and that you are right. :o

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Re: 10-year future return for S&P500 lower than TI

Postby gw » 07/10/06 at 15:06:24

Shroeder,

You're correct, of course.  

JWR thinks that his very simplistic, unsophisticated models are a work of unrecognized genius rather than internet quackery.

On the other hand, the "predictor" has been a wild success for hocus.  It got him all he has ever wanted: attention.   He doesn't care if it is negative, or that he cannot defend or explain it, or that the overwhelming opinion it is that it's useless and trivial.   People are talking to and about Bennett...the highest achievement in trolldom.

People at Morningstar are too kind to Bennett.  They should starve the troll.
Bennett's May '02 post: "I am deeply sorry for falsely criticizing the study"
http://boards.fool.com/the-differences-between-how-dory36s-online-17225279.aspx
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Re: 10-year future return for S&P500 lower than TI

Postby hocus » 07/10/06 at 15:17:46

We've got a tiger by the tale with this one. I think that much is certainly fair to say.

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Re: 10-year future return for S&P500 lower than TI

Postby intercst » 07/10/06 at 15:32:00

gw wrote:Shroeder,

You're correct, of course. ?

JWR thinks that his very simplistic, unsophisticated models are a work of unrecognized genius rather than internet quackery.

On the other hand, the "predictor" has been a wild success for hocus. ?It got him all he has ever wanted: attention. ? He doesn't care if it is negative, or that he cannot defend or explain it, or that the overwhelming opinion it is that it's useless and trivial. ? People are talking to and about Bennett...the highest achievement in trolldom.

People at Morningstar are too kind to Bennett. ?They should starve the troll.


I'm really impressed with the level of Hocomania in that Morningstar thread. I'm sure the Diehards are thrilled to be able to observe the full spectrum of Hocus's mental infirmaties first hand. <LOL>

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Re: 10-year future return for S&P500 lower than TI

Postby gw » 07/10/06 at 21:55:57

I'm sure the Diehards are thrilled to be able to observe the full spectrum of Hocus's mental infirmaties first hand. <LOL>


I wonder how long their tolerance of him will last.  I've always been amazed at how tolerant people are of him,  how much better others treat Bennett than he treats them...and that goes for this board, also.
Bennett's May '02 post: "I am deeply sorry for falsely criticizing the study"
http://boards.fool.com/the-differences-between-how-dory36s-online-17225279.aspx
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Re: 10-year future return for S&P500 lower than TI

Postby sgeeeee » 07/10/06 at 22:37:54

gw wrote: . . . ?I've always been amazed at how tolerant people are of him, ?how much better others treat Bennett than he treats them...and that goes for this board, also.


I do my best to try to make up for my fellow poster's excessive tolerance.  But it is difficult to match the passive agressive rudeness of el hoco loco.   ;)
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Re: 10-year future return for S&P500 lower than TI

Postby arrete » 07/11/06 at 08:09:50

But it is difficult to match the passive agressive rudeness of el hoco loco.

That's really the truth because we, unlike hocus, have lines we won't step over. ?hocus is perfectly happy saying putrid things about anybody, even the nicest person should they happen to say the "wrong" thing. ?I've never heard anyone else speak of women in the demeaning and harassing way hocus does. ?He would have been fired at the company I worked for. ?And he likes nothing better than demolishing a non-aggressive person or setting people at odds with each other. ?If I acted the way hocus does, I would be very ashamed of myself. ?hocus doesn't know what shame means.

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Re: 10-year future return for S&P500 lower than TI

Postby Schroeder » 07/11/06 at 11:48:30

Hocus, I must say that I am somewhat flattered that you devoted your July 11 blog to my ideas . . .

**LINK**
Schroeder vs. Shiller

A community member named "Schroeder" argues that the most likely 10-year return for stocks reported by The Stock-Return Predictor cannot be right.

The new calculator says that stocks are not likely to earn more than a 1.3 percent annualized real return over the next decade, according to the historical stock-return data. Investors can obtain a higher return from risk-free Treasury Inflation-Protected Securities (TIPS), notes Schroeder. So the historical data must be confused.

Right?

Not right.

<snip>

However, I also find it somewhat amusing that you chose to present your argument on your blog instead of here on this thread. Are you afraid of a little friendly debate? ;)

Here is the next part you wrote . . .

Schroeder is properly describing what the Stocks-for-the-Long-Run Investing Paradigm tells us about how stock investing works. According to the now-dominant paradigm, investors are rewarded for taking on risk. Stocks are obviously riskier than TIPS. So stocks must always provide a higher expected return than TIPS.

The historical data refutes the old paradigm.

Starting with that last sentence and the rest of your article, you are getting a bit confused. Yes, stocks provide a higher expected return. Otherwise, what would motivate an investor to allocate any money to stocks? If I knew that TIPS would would provide a greater 10-year return, I surely would not put any money into stocks.

Now whether or not stocks actually perform bettern TIPS in the next 10 years is dependent on many factors. Current valuation, as represented by P/E10, might be one of many factors. Where we differ is that you and JWR think that today's P/E10 is THE dominant factor. And not only that, you and JWR seem to think that every smart money manager has been ignoring P/E10 ever since Robert Shiller informed the world of his research back in 1996. Otherwise, stock prices would still not be at "historically high" valuations (i.e. P/E10 of 26). Nevertheless, you and JWR predict that valuations will come down to "moderate" levels in 2016 (10 years from now) which will cause the S&P 500 to produce real returns of only 1.3%.

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Re: 10-year future return for S&P500 lower than TI

Postby hocus » 07/11/06 at 11:57:22

Are you afraid of a little friendly debate?

No. It's the little stinkies.

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Re: 10-year future return for S&P500 lower than TI

Postby hocus » 07/11/06 at 12:03:52

Otherwise, what would motivate an investor to allocate any money to stocks?

A desire to attain MasterMind status among his fellow goons?

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Re: 10-year future return for S&P500 lower than TI

Postby Orion. » 07/11/06 at 12:20:34

hocus wrote:Otherwise, what would motivate an investor to allocate any money to stocks?

A desire to attain MasterMind status among his fellow goons?

Rob


This implies that Rob either thinks the world is very tiny or that goons number in the hundreds of millions, or perhaps even the billions.
Seriously, hocus, I don't know if you're really insane or you just believe that acting that way is a good way to get attention.

My closest friends say that it appears to them that's a little bit of both.. -- hocus 2007.
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Re: 10-year future return for S&P500 lower than TI

Postby Fred333 » 10/22/07 at 11:52:11

Wow :lol: He keeps surprising me more and more everyday.
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