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6 minutes ago, southsider2k5 said:

For my two cents, always look for an index fund first.  Those are going to be the lowest expenses, and they are going to track the market dollar for dollar.  While some funds can beat the market on an annual basis, they aren't going to do it on an ongoing basis.  It just doesn't happen.

Also don't worry too much about YTD returns as of now.  With the market correction currently going on, gains for the year have been pretty well wiped out, so that an index being slightly down on the year is to be expected.

You are doing a great job of saving for retirement, but I without knowing your financial situation, be sure that you aren't accumulating consumer debt at the same time, otherwise you are giving away future spending power anyways.  Pay down your debt by highest interest rate to lowest.  Move down your 401k contributions a bit if you need extra cash to do it.

Bill Miller and LMVTX beat the market 13 consecutive years.

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3 minutes ago, caulfield12 said:

Bill Miller and LMVTX beat the market 13 consecutive years.

And once you subtract out the nearly 2% expense ratio?

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9 minutes ago, southsider2k5 said:

And once you subtract out the nearly 2% expense ratio?

The Legg Mason Capital Management Value Trust's after-fee return beat the S&P 500 index for 15 consecutive years from 1991 through 2005 (consistently producing market-beating returns is considered to be very unlikely according to the efficient market hypothesis).

Miller once said, "As for the so-called streak, that's an accident of the calendar. If the year ended on different months it wouldn't be there and at some point the mathematics will hit us. We've been lucky. Well, maybe it's not 100% luck—maybe 95% luck."[7] Michael Mauboussin, former chief investment strategist at Legg Mason Capital Management, looked at the historical data on the percent of equity mutual funds that beat the market during Value Trust's 15-year streak.[8] Because the number of equity mutual funds beating the market fell as low as 8% in one year and 13% in another, he estimated the probability of beating the market in the 15 years ending 2005 was 1 in 2.3 million.[8]

However, Leonard Mlodinow, in The Drunkard's Walk, notes that Mauboussin's analysis misframes the question and, when framed properly, the probability of occurrence of such a streak is much higher, around 3%.[9] Additionally, Mauboussin's analysis also doesn't consider other possible 15-year windows where similar streaks could have occurred, but did not. When these periods are also included in the analysis, the odds of someone beating the market 15 years in a row at some point in the modern United States investing is around 75%—in other words, it would have been unlikely if there hadn't been such an occurrence.

 

 

 

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As someone who sits in front of 10K's and Audits all days looking at all sorts of companies and markets across a wide spectrum I'll say this .... there's a market correction coming, and it's going to come as hard and fast as banks/lenders want.  If this is the GOOD market and companies are barely within their bank covenants I'd hate to see the BAD market. At the end of the day though it's really the banks calls. Do they want to extend waivers to these companies or run them into consolidation or BK.

Not much you can do about your 401K  -- you can try and allocate to safer bets but a lot of these "gains" over the past few years will be wiped away. As long as you're not 60-65 this shouldn't be a huge problem in the long run and even if you are 60-65 you shouldn't be in the riskier stuff.

Best investment in my opinion over the next 1-5  years will be commodities. Find yourself a nice gold/silver stocks, dabble into oil, commodities. Equities are highly overvalued right now. I'd also look into stronger international economies. Lastly, I don't mind crypto. The safer plays of crypto are still highly volatile, but since they've been around we've been in the longest bull run in exisitence. So nobody really knows how they'll react in a downturn market -- do they fall as equities fall or do they act like a commodity/gold during a downturn? My personal belief, being that bitcoin was created as a direct response to the 2008 crash is that they will have more upside than downside during an economic downturn. With 2018 destroying most profits in the crypto community and the equity market prime for a correction, it may not be a bad time to allocate upwards of 5% of your portfolio there.

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The funny part is that he got ran off for underperforming the market to the tune of 98% of companies out performed him in 2016.  Basically since 2005, he has been toast.

https://www.reuters.com/article/us-legg-mason-miller/legg-masons-bill-miller-leaves-firm-amid-faded-glory-idUSKCN10M1DV

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Here is another great quote from an article about Miller's downfall.

http://time.com/money/4451841/bill-miller-fund-manager-legg-mason-fired/

If you were an investor in the 1990s, you know Bill Miller as a rock star fund manager who did something even the legendary Peter Lynch never could: He beat the stock market every year from 1991 to 2005. To put that in perspective, only about

one quarter of stock funds manage to beat the market in any given year; the odds of doing it 15 years in a row are astronomically low.

Take Caulfield's advise and chase returns across funds if you like, but the odds are WAY more in your favor by just staying in a simple index fund.  Between the chances of beating returns, combined with the much higher fee and expenses, it just isn't worth it.

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1 minute ago, southsider2k5 said:

Here is another great quote from an article about Miller's downfall.

http://time.com/money/4451841/bill-miller-fund-manager-legg-mason-fired/

 

 

Take Caulfield's advise and chase returns across funds if you like, but the odds are WAY more in your favor by just staying in a simple index fund.  Between the chances of beating returns, combined with the much higher fee and expenses, it just isn't worth it.

I don't think Caufield was advising anyone to chase returns across funds, I simply think he was pointing out an interesting fact regarding Bill Miller's fund track record during an extended span.  Probably more to that point was the fact one guy did it, but with all of the funds out there, it kind of highlights how difficult it is to do.  All that said, there isn't a one size fits all to investing and all decisions need to take into account an individuals risk tolerance and the duration they expect to have the funds invested (i.e., what sort of liquidity needs).  

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18 minutes ago, BrianAnderson said:

Best investment in my opinion over the next 1-5  years will be commodities. Find yourself a nice gold/silver stocks, dabble into oil, commodities. Equities are highly overvalued right now. I'd also look into stronger international economies. Lastly, I don't mind crypto. The safer plays of crypto are still highly volatile, but since they've been around we've been in the longest bull run in exisitence. So nobody really knows how they'll react in a downturn market -- do they fall as equities fall or do they act like a commodity/gold during a downturn? My personal belief, being that bitcoin was created as a direct response to the 2008 crash is that they will have more upside than downside during an economic downturn. With 2018 destroying most profits in the crypto community and the equity market prime for a correction, it may not be a bad time to allocate upwards of 5% of your portfolio there.

I feel like we have already seen crypto get hammered in sync with the market, it has not been inverse such as commodities.

 

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I dont like crypto and I never have. I may be old fashioned, but if someone cant sell me on a subject in a few sentences I pass. Someone who worked with me used to be into crypto, I would always ask him to explain why it made sense if we excluded black market and illegal activities as its purpose.

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I wouldn't say the market is getting hammered at all ...one year ago today the Dow was at 23,400. We're at 25,000 now. YTD is a bit down from even, but even that I wouldn't call it hammered. Even at that crypto is a dangerous crazy space right now. 98% is worthless but there are some projects if you sift through that are worth a shot. I think it starts with Bitcoin and then flows into a few other coins. ZRX, Monero, and then an Icon or Neo dependent on the Asian marketplace. I'm not recommending a huge gamble, but at the end of the day "gamble" is the right word more than any other investment. Crypto can be worthless in 2 years and think there are many issues still to come that may knock down prices even further, but still think a 1-5% allocation into the space could be worth it just based on the upside versus the upside of the real life market over the next 1-5 years.

It's not for everybody and even with owning some myself I think there's a lot that needs to be simplified if you ever want it to be an actual use case either for transactions or to act as a "digital gold". The on ramps are becoming easier, but overall purchasing and then transferring bitcoin to a wallet and then using it to spend are way too difficult for the average public. Also the tax codes are insane on it. It's really more or less an "art/novelty" object right now, but think it has the potential to spawn into something much more in the future. I'd say it's akin to like 1980's, maybe early 90's email. The next 5-10 years will be key ... does it turn into something with a use case and with actual value internationally or remain more as a "piece of art" with just intrinsic value. Studying the history of fiat money shows that it's as flawed as we are as humans. Bitcoin has its many flaws, but not hard to imagine an international digital world and figuring BTC has value in said world. I still recommend value cost averaging into it. If you're dropping X amount of money into a 401k or spending $20 eating lunch a week I just think it makes sense to instead maybe spend that $20 a week and buy bitcoin on a reoccurring basis. $1,000 over a year or .2BTC could be pretty valuable in 10 years.

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9 minutes ago, Soxbadger said:

I dont like crypto and I never have. I may be old fashioned, but if someone cant sell me on a subject in a few sentences I pass. Someone who worked with me used to be into crypto, I would always ask him to explain why it made sense if we excluded black market and illegal activities as its purpose.

In a few sentences I'd say look to the future. Look at kids nowadays. All they know is digital. What we may think is crazy, they adopt. I'm not blind to the many issues in the space and think there will be much volatility until it finds it's true identity and use case, but with the direction of the world that were seeing (increasingly international & technological) I think it's a natural progression. I do think that 98% of it is trash and that hurts the space A LOT. But I do like the monetary vision and aspect of Bitcoin specifically. Fiat has been historically flawed and really as much as I bash the Fed they have done a great job stabilizing the dollar -- however it's still just a game of non stop tweaks and printing of money and debt which has inflation running rampant. It's not just the us either, its the world. I liken it to "fiat insurance". Maybe it never really becomes worth much more. Maybe bitcoin fails. But maybe it becomes fiat insurance. I like it to round a portfolio. To balance my equities, commodities, etc.

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55 minutes ago, BrianAnderson said:

In a few sentences I'd say look to the future. Look at kids nowadays. All they know is digital. What we may think is crazy, they adopt. I'm not blind to the many issues in the space and think there will be much volatility until it finds it's true identity and use case, but with the direction of the world that were seeing (increasingly international & technological) I think it's a natural progression. I do think that 98% of it is trash and that hurts the space A LOT. But I do like the monetary vision and aspect of Bitcoin specifically. Fiat has been historically flawed and really as much as I bash the Fed they have done a great job stabilizing the dollar -- however it's still just a game of non stop tweaks and printing of money and debt which has inflation running rampant. It's not just the us either, its the world. I liken it to "fiat insurance". Maybe it never really becomes worth much more. Maybe bitcoin fails. But maybe it becomes fiat insurance. I like it to round a portfolio. To balance my equities, commodities, etc.

How does it improve on things like Venmo, Chasepay, etc? Having to exchange my money into a different currency seems like an unnecessary step for the average person.

The entire point of Bitcoin was it was supposed to be more stable than the dollar and other currencies, and it wasnt supposed to be at the mercy of the market. Bitcoin becoming a commodity defeated the whole purpose of the idea. 

Im not saying that people cant make money from it, just investing in bitcoin should be the equivalent of taking dollars and putting them under your mattress. Yes the dollar may increase value against other currencies, but its not a real investment strategy. 

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I thought bitcoin was a proof-of-concept for the idea of a blockchain that got turned into a currency once it got into the wild? 

It's inherently deflationary and has a pretty severe cap on the number of transactions it can actually handle at a time, plus it wastes huge amounts of energy. I don't see it as the future.

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9 minutes ago, StrangeSox said:

I thought bitcoin was a proof-of-concept for the idea of a blockchain that got turned into a currency once it got into the wild? 

It's inherently deflationary and has a pretty severe cap on the number of transactions it can actually handle at a time, plus it wastes huge amounts of energy. I don't see it as the future.

It was always a currency idea. Basically trying to remove a central bank who had authority to regulate the currency.

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10 minutes ago, Soxbadger said:

How does it improve on things like Venmo, Chasepay, etc? Having to exchange my money into a different currency seems like an unnecessary step for the average person.

The entire point of Bitcoin was it was supposed to be more stable than the dollar and other currencies, and it wasnt supposed to be at the mercy of the market. Bitcoin becoming a commodity defeated the whole purpose of the idea. 

Im not saying that people cant make money from it, just investing in bitcoin should be the equivalent of taking dollars and putting them under your mattress. Yes the dollar may increase value against other currencies, but its not a real investment strategy. 

I don't think it does improve upon Venmo, Chasepay, etc... yet. Maybe never either. There's a real divide amongst Bitcoin backers of if the function/true identity is supposed to be payment/transactional driven or to act more as a "digital gold" with layers built upon the network (Lightning network)  that will eventually act as Venmo, Chasepay, etc. I'm more the believer of the second line of thinking, though I think the cart is WAY in front of the horse. Yeeearrrssss in front of the horse. Which when dealing with technology is not a good place to be. Price jumped utility, became more mainstream than ever and has fizzled because there's no real need or use case at this juncture. However I do think there is value in cutting out the banks - a peer to peer society. Banks created a lot of wealth, but also inherently have created a ton of mess too. Mostly out of greed.

In regards to stable? Yes, I think that's the end goal. I also think if you look at the USD existence (or any currency) you'll note a ton of volatility before the fed got involved. This is where I am most intrigued. I actually really enjoy the history of fiat. Start with the continental dollar and then the USD and just look at the ups and downs of currency over the years. We are about 10 years in for bitcoin which is basically the equivalent of where the USD was at 1800. Fast forward through history you then have the gold standard, off the gold standard, the fed, fed issues, printing money nonstop etc. The problem as I see it is that we have HUMANS acting like HUMANS and that will never change. If we were on a timeline the world of humans utilizing credit cards, the internet, phones, technology this powerful is just  a BLIP when compared against the past. We are moving so fast and so out of control that I just think its due to swing back a little bit and correct itself.

Don't get me wrong there are smart economists in charge of all this. But just looking at the history of all fiat money I think it's likely we see many downfalls of many different currencies across the globe. It's almost certain. So if history repeats itself and now we have this brand new toy (relatively) in the world called the internet I just think the next logical step is a global currency. The system is far from broke now  but 20, 50, 100? years from now what does the world look like? I'd doubt in 1968 we'd predict this world.

The hope in my mind, and "Satoshi" is to create a currency that can't be printed or taken off the gold standard (of sorts) in the future. Meaning they'll mine 21 million bitcion and then it's done. Now its pie in the sky to think that Austrian Economics will play out perfectly because at the end of the day were all HUMAN and flawed and will screw it up in some way out of greed, but I like the idea behind it.

At the end of the day I'm pro bitcoin more than most and think it's still less than 1% it thrives how true Bitcoin Maxalmists think it will, but I do think it's a 30-40% chance it thrives in some way in the future world economy to where it's worth a small investment in a portfolio. Peg a number to it? I think $75,000 bitcoin is a very real possibility by 2025 -- and more importantly that it will be much simpler to buy, sell, and utilize via a digital wallet.

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The wild card is we haven't even gotten to the government regulation part of cryptos yet.  The SEC also hasn't set aside any regulatory capital requirements which means companies have to front 100% capital requirements to hold them.

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28 minutes ago, StrangeSox said:

I thought bitcoin was a proof-of-concept for the idea of a blockchain that got turned into a currency once it got into the wild? 

It's inherently deflationary and has a pretty severe cap on the number of transactions it can actually handle at a time, plus it wastes huge amounts of energy. I don't see it as the future.

The energy aspect doesn't really worry me. We waste energy in so many ways. Oil is a waste. Coal is a waste. If we really wanted to we could operate much differently as a society.

Also the transaction cap is one of the issues currently to where I think the price jumped the gun. There's still A TON of work to be completed. Lightning network has been a nice step forward this year, but think it's YEARS away before theres enough functionality to be useful to even a small fraction of the world. Until it's useable and understandable to most people it will continue to be pie in the sky that it works out the way Satoshi wanted

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Bitcoin is good as shadow money when you dont want regulation. The problem is that 99% of people want some sort of regulation because they want to know that their money has value. Bitcoin is great if you want to buy illegal stuff. Bitcoin is great if you want to buy from countries that are under sanctions.

But I cant see a regular company/person wanting to do business in bitcoin.

Illegal markets can be very lucrative. But they are also extreme risk. The best chance bitcoin has is the US acting stupid and people losing faith in the dollar to the point where bitcoin became the defacto world currency. The problem still is that without any oversight/regulation are you really going to trust this? 

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Not pro Miller, although I hedged when investing into LMVTX by going equal with LMOPX in 2001.  Miller was actually one of the original huge institutional holders of Amazon, but dumped most of it in one of the numerous mistakes that led to his downfall...he never grasped that value tech stocks behave quite different from traditional value finds on the market.  Putting all there with Miller would have been an absolute debacle.

Most of my money went to Oakmark, American Century (disappointing, largely), Berkshire Hathaway, Fidelity and the largest chunk by far to various classes of Vanguard stock indexes and a few bond funds.   The other 1/4th is in individual stocks and money market funds (crappy rate of return but need to keep 10% liquid).

We have some here in China, two different CD’s through my wife’s insurance company paying 8% and 3%.  The guaranteed 8% is a long story.  

All things considered, the overall rate of return wouldn’t have been much different with 3-5 Vanguard funds over the last couple of decades.

My individual stock picking has been around 9-10% during that time.  My Chinese holdings were way up until the trade war started, lol...but they will all recover over time.  Still in net positive territory, particularly in the large national insurance groups (Ping An). 

Last time I changed allocations, went to some REITs and small/midcap funds with Fidelity to rebalance/diversify.

Edited by caulfield12

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I'm not so sure the "illegal" aspect is as true anymore. But I mean, if this is your opinion I'm sure others share it. Same with energy. I personally don't believe those roadblocks, but as long as people do bitcoin will struggle to have true use case.

 

My biggest personal issue with it is not buying it - that's super easy to do. CashApp is a perfect example. Super simple. Gemini, Coinbase, etc. The hard part is getting it off the exchanges. Buying a wallet. Setting up a wallet. Maintaining your wallet keys. Accessing it easily, carrying it around, putting it on your phone. Utilizing the funds on your wallet. It scared the shit out of me and still does every time I open my wallet up. That's not a good trait to have when dealing with "money".

 

On a scale of 1 - 100 I think we're at basically a 5-10 of it's true power. 100% utility will never be accomplished, but if it can get to 30-50% of it's true functionality that it set out to be I think the price associated with it will have been a great investment. The moment where a person thinks in terms of I own 3 bitcoin and can buy a car with that instead of I own 3 bitcoin, I can exchange that for $20,000 USD - that's when it will be something. Until that point, it's just a volatile, expensive commodity/toy/art/currency/experiment.

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Im not saying illegal is a roadblock, Im saying that is one of the main things that gives bitcoin its value. If a drug dealer wants someone to wash money, they are probably going to pay 30% or more off the top. Its a lot easier to deal in bitcoin.

And the reason why its hard to buy a car in bitcoin is because its volatile (the same reason it makes an investment.) A car company wants to sell a car for a certain value. It doesnt want to sell the car for a babe ruth rookie card. That doesnt mean that the babe ruth rookie card may not one day be worth more than the original value of the car, its just that companies arent in the business of collectibles.

I think your last sentence is exactly right. 

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4 hours ago, southsider2k5 said:

You are doing a great job of saving for retirement, but I without knowing your financial situation, be sure that you aren't accumulating consumer debt at the same time, otherwise you are giving away future spending power anyways.  Pay down your debt by highest interest rate to lowest.  Move down your 401k contributions a bit if you need extra cash to do it.

I am definitely OCD type of personality where I like to check on things way too much.  No credit card debt here, but still tackling some student loans, I hope to have them payed off by this time next year. 

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https://en.wikipedia.org/wiki/History_of_the_United_States_dollar

This is like the cliff notes version of the USD, but nevertheless the quickest kind to share in a forum like this. Kind of fun to read and think of how volatile our dollar has been. Just thinking that the credit card has only been around for like 50 years is another eye opener. It's so engrained in our everyday lives that it's hard to remember its not even a generation old. It's caused such a massive change in our everyday spending habits and is just a blip on the radar of money/finance. Hard to predict its effect 10, 30, 75 years from now. What will the history of the credit card be? money, greed, fiat, etc. are all ever evolving and imperfect. Fun stuff. That's where I get the enjoyment out of a new idea like bitcoin, crypto, blockchain, etc. it's all very foreign and new right now and ultimately (and likely) that its another flash in the pan in the history of currencies and money, but interesting nevertheless.

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