Not Much of a Grand Finale. What if We Go To 0?

October 15, 2012 | klr

When I ask the question “What if the US 10 year goes to 0?", most do not know the effect, the catalyst, or if 0 has ever happened before.  The math is fairly simple to do in Excel or with an old-school calculator, but let’s use RQuantLib to do...
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Bonds Much Sharpe -r Than Buffett

August 23, 2012 | klr

Mebane Faber’s post Buffett’s Alpha points out Warren Buffett’s 0.76 Sharpe Ratio discussed in the similarly title paper Buffet’s Alpha.  I of course immediately think about the 8th Wonder of the World – the US Bond Market, whose Sharpe ...
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Skew of Bonds

May 15, 2012 | klr

As the researchpuzzler highlights in “a bad bet”, US bonds were a popular subject at the CFA Institute Annual Conference.  While US Bonds have been in an amazing 30 year run (see previous posts Lattice Explore Bonds, Bond Market as a Casino Ga...
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Efficient Frontier of Funds and Allocation Systems

April 18, 2012 | klr

I did a very basic experiment in Efficient Frontier of Buy-Hold and Tactical System where I determined the efficient frontier of the S&P 500 with itself transformed by a Mebane Faber 10-month moving average tactical allocation. The result was inter...
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Are We Japanese?

January 13, 2012 | klr

Most of the discussion trying to determine if the U.S. is Japan 20 years later focuses on the economy and the stock market.  However, one of the biggest and most persistent correlations between Japan and the U.S. are the Japanese Yen and the U.S. ...
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Stocks When Bonds are Extreme

January 12, 2012 | klr

In Extreme Bond Returns, I did not consider the context of extreme bond returns, so let’s examine annual returns for the Dow Jones Industrial Average when bonds experience extreme annual returns.  I was very surprised that stocks performed extre...
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Quick Update on the Components of Bond Returns

January 12, 2012 | klr

In Real Squeeze, -1% Guaranteed Real Real Return! Yummy??, and Historical Sources of Bond Returns, I offer some historical perspective on the only sources of bond returns: inflation, real returns, and credit.  Assuming no credit risk in US Treasur...
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Extreme Bond Returns

January 6, 2012 | klr

20 years of data is nowhere near enough to satisfy my insatiable appetite for bigger datasets.  While I showed Record Long Term Treasury Returns with Vanguard’s US Long Treasury mutual fund, its 20 year life is not sufficient to give me comfort ...
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Record Long Term Treasury Returns

December 21, 2011 | klr

I mistakenly assume everyone knows that US Treasury Returns have been extreme in 2011.  As we near the end of the year, I thought it would be beneficial to look at the world’s best performer while incorporating some new graphical techniques.&nbs...
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Lattice Explore Bonds

December 16, 2011 | klr

Since my fifth most popular post has been Bond Market as a Casino Game Part 1, I thought I would use Vanguard Total US Bond Market mutual fund (VBMFX) monthly returns to build our skills in the lattice R package and help visualize the unbelievable run ...
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A Tale of Two Frontiers

December 9, 2011 | klr

In a follow up to Evolving Domestic Frontier, I wanted to explore the efficient frontier including international indexes since 1980.  Life is great when your primary indexes (Barclays Aggregate and S&P 500) lie on the frontier as they did 1980...
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Evolving Domestic Frontier

November 1, 2011 | klr

When we learn the efficient frontier, most are misled to believe that the frontier is static and unchanging.  However, we should have all learned by recent experience that the frontier is as volatile as the assets that construct it.  If we lo...
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Mode vs Mean in Tactical Allocation

August 25, 2011 | klr

Let’s take Modest Modeest for Moving Average one step further and use it in a basic tactical allocation system using Vanguard funds.  THIS IS NOT INVESTMENT ADVICE AND VERY EASILY MIGHT CAUSE LARGE LOSSES.  VANGUARD FUNDS IMPOSE EARLY REDEM...
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Bonds Risk and Return by Rating

June 27, 2011 | klr

As an extension to the Bond Market as a Casino Game series and Historical Sources of Bond Returns-Comparison of Daily to Monthly, I thought a ggplot of risk and return by decade and Moody’s Rating might be helpful.  Anyone who has read those oth...
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REITs for Everybody Now REITs for Nobody Part 2

June 16, 2011 | klr

As a quick follow-up to my first REITs for Everybody Might Now Mean REITs for Nobody, I want to look at REITs and High Yield bonds, which also might simultaneously attract conservative yield buyers and speculative beta chasers.HYG (iShares High Yield) ...
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Utility Spread and Financial Turbulence

May 23, 2011 | klr

THIS IS NOT INVESTMENT ADVICE.  YOU ARE RESPONSIBLE FOR YOUR OWN GAINS AND LOSSES. In Long XLU Short SPY Part 2 (More History), I explored the defensive nature of the spread and its potential as a bond substitute in troublesome periods for stocks...
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