Jun

10

I use a slightly modified version, I think is apt to use a rolling vol adjustment. Using VFINX (stocks) Long, VUSTX (long bonds) short. The stock bond ratio is higher than it was in 2000. the chart will show whatever you want; however, if you make the assumption that stocks and bonds have similar RISK ADJUSTED returns, mean reversion should be expected….at some point, but I don't think there's an actionable point here other than stay diversified. Here's a visual:

Stefan Jovanovich writes:

In the 40 years between the return of the dollar to the Constitutional standard (i.e. all paper issued by the Treasury had to be redeemable in coin) and the creation of a central bank that guaranteed that call money would always be available, the returns on the stock and bond markets had similar risk adjusted returns. For investors it was a choice whether to buy the common stocks of railroads with their wonderful but variable dividends or the secured bonds of the same companies.

A reversion to the mean could be a return to a period when cash, bonds and stocks all competed with one another in a connected equilibrium. That world saw creations of extraordinary fortunes; but against the one successful oil trust one had to measure the losses of all the enterprises that were unable to compete with Rockefeller's price-cutting for kerosene. What if AI means that sourcing for semiconductors only needs a few large relentlessly successful companies?

Vic asks:

how about no roll, no averaging on the bonds stock ratio?


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