Guess which asset class has performed best during the past month?

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StinkyToes
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Guess which asset class has performed best during the past month?

Post by StinkyToes » Fri Jun 18, 2021 10:20 am

Gold down 5%
S&P 500 is flat
Cash flat
iShares 20+ Year Treasury Bond ETF (TLT) up 6%
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Re: Guess which asset class has performed best during the past month?

Post by buddtholomew » Fri Jun 18, 2021 11:26 am

Can you confirm a 0.25% YTD return for the 4x25PP per portfolio visualizer? Just want to make sure I’m seeing this correctly. Thanks.
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Re: Guess which asset class has performed best during the past month?

Post by pp4me » Fri Jun 18, 2021 4:04 pm

I remember one time I was reading an article on a website (I think it was Lew Rockwell) and the author said that bonds were at an all time low so yields had nowhere to go but up. Don't remember what his exact logic was but he said it was time to get out of stocks and bonds and buy gold. I had never even heard of the PP at the time and didn't have any intention of buying gold but I did sell a bunch of stock because I thought his article was very convincing.

I think that was around 20 years ago.

Helped me to understand what Jack Bogle meant when he said his best financial advice was "nobody noes nothin'".
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Re: Guess which asset class has performed best during the past month?

Post by Matthew19 » Sun Jun 20, 2021 10:49 am

pp4me wrote:
Fri Jun 18, 2021 4:04 pm
I think that was around 20 years ago
Exactly. Best Laid Investments book by Harry says the same thing. Nobody knows!
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Re: Guess which asset class has performed best during the past month?

Post by buddtholomew » Sun Jun 20, 2021 11:54 am

While it is true that “nobody knows nothing”, history suggests that equities rise 7/10 years or 70% of the time.

With this in mind, how does one rationalize distributing available funds at equal percentages to stocks, gold, bonds and cash a la the HBPP 4x25 model. I have always struggled with the agnostic approach and transitioned to a modified 35/15/0/50 s/g/b/c in retirement (taxable accounts only).
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Re: Guess which asset class has performed best during the past month?

Post by vincent_c » Sun Jun 20, 2021 11:22 pm

Known sacrifices for being always prepared but also better agnostic risk adjusted performance.

The only thing Harry missed was that the dollar is reliably expected to benefit from a rising rate environment and he didn’t factor that into the PP.
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Re: Guess which asset class has performed best during the past month?

Post by vincent_c » Sun Jun 20, 2021 11:29 pm

Oh and also instead of cash, if you use available credit that also helps. Just be damn sure that credit is bullet proof otherwise just hold cash and don’t leverage.
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Re: Guess which asset class has performed best during the past month?

Post by buddtholomew » Mon Jun 21, 2021 9:22 am

vincent_c wrote:
Sun Jun 20, 2021 11:22 pm
Known sacrifices for being always prepared but also better agnostic risk adjusted performance.

The only thing Harry missed was that the dollar is reliably expected to benefit from a rising rate environment and he didn’t factor that into the PP.
I considered UUP in the past but cash in the PP is an excellent $ hedge, no?
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Re: Guess which asset class has performed best during the past month?

Post by vincent_c » Mon Jun 21, 2021 10:41 am

buddtholomew wrote:
Mon Jun 21, 2021 9:22 am
vincent_c wrote:
Sun Jun 20, 2021 11:22 pm
Known sacrifices for being always prepared but also better agnostic risk adjusted performance.

The only thing Harry missed was that the dollar is reliably expected to benefit from a rising rate environment and he didn’t factor that into the PP.
I considered UUP in the past but cash in the PP is an excellent $ hedge, no?
I think it depends on your mindset.

If the dollar is gaining value, then it allows you to purchase more stocks, bonds, and gold and in that sense your PP would be down in $ terms but up in real terms. The issue I've seen is that even as the PP is down in $ terms, people still cry inflation when obviously the assets in the PP have deflated in price as a whole.

So what people are looking for is a portfolio that is up in $ terms under any condition as well as being able to be up in real terms. If you want that then just holding cash is not sufficient a $ hedge.

I have also considered UUP in the past, but in the end I settled on the USD against the Canadian dollar because I believe there is a special relationship there where the economies are tied together in a unique way.
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Re: Guess which asset class has performed best during the past month?

Post by pp4me » Mon Jun 21, 2021 5:08 pm

Who cares about a month (well some folks here care about a day or two).

Decided to do a mid-year checkup on the portfolio and according to my spreadsheet Bonds are down 4.9% YTD. That makes it the second worse performing asset. Gold is down 6.4%. I do the Golden Butterfly and it tells me that LCB is up 16% and SCV is up 25%. Overall gain is 6.8%. Cash is up 2.9%.

Take the gains of LCB, SCV, and CASH with a grain of salt because my wife is still working and more than half of her earnings go into those assets. So it includes a lot of new purchases of assets. I don't have the will or the energy to change my spreadsheet so that it factors that in. Doesn't really matter to me any way. I just try to be content if the whole portfolio is going up or, if it's going down, not drastically and/or for not too long (as in years). So far I haven't been disappointed.
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Re: Guess which asset class has performed best during the past month?

Post by jalanlong » Thu Jun 24, 2021 12:01 pm

buddtholomew wrote:
Mon Jun 21, 2021 9:22 am
vincent_c wrote:
Sun Jun 20, 2021 11:22 pm
Known sacrifices for being always prepared but also better agnostic risk adjusted performance.

The only thing Harry missed was that the dollar is reliably expected to benefit from a rising rate environment and he didn’t factor that into the PP.
I considered UUP in the past but cash in the PP is an excellent $ hedge, no?
Interesting that UUP itself is much more volatile than a treasury etf like SHV. However, adding it it the PP, Golden Butterfly etc. over the past 12 years, reduces the volatility of the entire portfolio and adds to the returns, if ever so slightly.
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Re: Guess which asset class has performed best during the past month?

Post by vincent_c » Thu Jun 24, 2021 12:34 pm

Well they track completely different things so that is expected.

The US dollar index represents the strength of the US dollar against a basket of currencies whereas something like SHV is just investing in t-bills so is a cash-equivalent.

The thing is when financial institutions sell short term treasuries to hold USD cash, what effectively happens is that the yield on short term treasuries go up and this drives up the strength of the USD. But if you just held USD cash then although you might get more interest at a bank, you're not really benefiting from the price movement at all.

What I am most interested in is what are the optimum strategy for holding USD exposure that produces a minimum variance PP portfolio.
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Re: Guess which asset class has performed best during the past month?

Post by tomfoolery » Mon Jun 28, 2021 1:25 am

Single family housing is up 10% month over month. Beat that.
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Re: Guess which asset class has performed best during the past month?

Post by D1984 » Mon Jun 28, 2021 11:10 am

tomfoolery wrote:
Mon Jun 28, 2021 1:25 am
Single family housing is up 10% month over month. Beat that.
Really? Where did you pull this "fact" from about it being up 10% month over month? Are you taking the 1 month change and annualizing it (i.e. multiplying it by 12)? I presume not since you said "month over month". Look, SFH in the US is NOT up 10% on a month over month basis; the Case Shiller data shows it up a bit over 1.65% for the last month-over-month reading; we'll get a more recent month's reading tomorrow (they release the data the last Tuesday of every month) but I seriously doubt it'll show a 10% increase in price from the previous month's reading.
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Re: Guess which asset class has performed best during the past month?

Post by vincent_c » Mon Jun 28, 2021 12:55 pm

D1984 wrote:
Mon Jun 28, 2021 11:10 am
tomfoolery wrote:
Mon Jun 28, 2021 1:25 am
Single family housing is up 10% month over month. Beat that.
Really? Where did you pull this "fact" from about it being up 10% month over month? Are you taking the 1 month change and annualizing it (i.e. multiplying it by 12)? I presume not since you said "month over month". Look, SFH in the US is NOT up 10% on a month over month basis; the Case Shiller data shows it up a bit over 1.65% for the last month-over-month reading; we'll get a more recent month's reading tomorrow (they release the data the last Tuesday of every month) but I seriously doubt it'll show a 10% increase in price from the previous month's reading.
Good luck trying to flip a house in a month and expect to net 10% profit after transaction costs and taxes even if the data shows that. Most sellers don't adjust their list price up if the house sits for a month too.
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Re: Guess which asset class has performed best during the past month?

Post by D1984 » Mon Jun 28, 2021 1:08 pm

vincent_c wrote:
Mon Jun 28, 2021 12:55 pm
D1984 wrote:
Mon Jun 28, 2021 11:10 am
tomfoolery wrote:
Mon Jun 28, 2021 1:25 am
Single family housing is up 10% month over month. Beat that.
Really? Where did you pull this "fact" from about it being up 10% month over month? Are you taking the 1 month change and annualizing it (i.e. multiplying it by 12)? I presume not since you said "month over month". Look, SFH in the US is NOT up 10% on a month over month basis; the Case Shiller data shows it up a bit over 1.65% for the last month-over-month reading; we'll get a more recent month's reading tomorrow (they release the data the last Tuesday of every month) but I seriously doubt it'll show a 10% increase in price from the previous month's reading.
Good luck trying to flip a house in a month and expect to net 10% profit after transaction costs and taxes even if the data shows that. Most sellers don't adjust their list price up if the house sits for a month too.
Oh, I agree with you 100%; the transaction costs alone (even if you find a realtor who will take much less than the usual percentage) will eat you alive.....and that's not considering the short-term capital gains taxes. The thing is, even if it were possible to flip a house after a month of doing nothing but sitting on it (I'm not counting people who do actual fix and flips...those can in fact net more than 10% after a month or two holding period) and make a 10% profit, the actual housing price indexes don't show anywhere near a 10% month-over-month gain. Tomfoolery is just butthurt because he never bought a house three years (or five years, or ten years) ago when he presumably had the chance (despite having a $200K+ income) and therefore he comes on here and complains with made-up numbers for how much housing prices are increasing.

This is not to say that housing price increases over the medium and long-term in many cities are not too high relative to median or average income, of course, but that has been the case in desirable high-wage, high-GDP, high-COL metro areas for at least the last 25-30 years and it isn't anything recent.....and the solution to that is simply that we as a country need to build a lot more (minimum of 12 to 12.5 million and more like 18.5 to 19 million) homes/apartments/condos in these areas just to keep up with the increased number of people who want to live there and to fill the supply backlog created by the giant surfeit of homebuilding since the 2007-08 crash.
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Re: Guess which asset class has performed best during the past month?

Post by pugchief » Mon Jun 28, 2021 7:43 pm

D1984 wrote:
Mon Jun 28, 2021 1:08 pm
the solution to that is simply that we as a country need to build a lot more (minimum of 12 to 12.5 million and more like 18.5 to 19 million) homes/apartments/condos in these areas just to keep up with the increased number of people who want to live there and to fill the supply backlog created by the giant surfeit of homebuilding since the 2007-08 crash.
Why? Isn't a better market based solution to let the people who can't afford the area to move somewhere more economical? This will then decrease demand, which will have a downward force on prices.
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Re: Guess which asset class has performed best during the past month?

Post by D1984 » Mon Jun 28, 2021 8:17 pm

pugchief wrote:
Mon Jun 28, 2021 7:43 pm
D1984 wrote:
Mon Jun 28, 2021 1:08 pm
the solution to that is simply that we as a country need to build a lot more (minimum of 12 to 12.5 million and more like 18.5 to 19 million) homes/apartments/condos in these areas just to keep up with the increased number of people who want to live there and to fill the supply backlog created by the giant surfeit of homebuilding since the 2007-08 crash.
Why? Isn't a better market based solution to let the people who can't afford the area to move somewhere more economical? This will then decrease demand, which will have a downward force on prices.
From a purely economic output/economic growth standpoint what you described is the last thing you'd want. You don't want people moving from more economically productive to less economically productive places as that is a tremendous waste/misallocation of human capital. The lower end estimates for how much GDP would increase for the whole country if enough housing was built in the highly productive/high economic output areas (mostly large cities and their immediate closest-in suburbs) would be around 2 percent of total GDP; the higher end estimates are that if this was done for just the NYC metro area, SF metro area, and San Jose/Silicon Valley metro area alone US GDP would increase by some 9 percent (and if done for the entire US it could potentially raise GDP by almost 13 percent).

There are very few truly nearly "free lunches" in economics. This is one of them. Changing housing policies (i.e. building much more new housing) in order to allow people to afford to move to places where they can employ themselves most productively isn't really a pure deadweight loss to anyone (except maybe those who bought housing at the now inflated prices but oh well, sucks to be them; nobody made them buy a house and it's not written in stone that housing prices can never decline....and besides, even these folks still have to have a place to live and assuming that they will sell at some point any loss or lack of gain on their current residence would be to some extent cancelled out by their savings on their new residence since housing in cities like San Francisco, New York, Seattle, or Chicago is now much cheaper).

PS - When I say "free lunches" I'm not implying that the govt should build the houses and give them away for free (maybe sell at cost plus a small margin though....and we also of course need to change/modify zoning laws and allow for more new construction and much higher density of said new construction, and make permits easier to get...and stop allowing NIMBYs to stop or slow down for a decade or more new housing construction for stupid and frivolous reasons) but rather that by not having enough housing in our most productive areas we are literally leaving hundreds of billions to trillions in potential economic output on the ground for no real good reason at all.

EDIT: When I stated "sucks to be them" above I wasn't trying to be flippant or uncaring; I was just pointing out that no one has a right to expect housing prices to stay high in order for them to make a profit or to not lose money (especially since one of the reasons housing prices are so high is restrictions of various sorts on enough new housing construction in the first place; imagine how much more, say, Wendy's could charge for a hamburger if NO ONE was allowed to build any competition to them like a McDonald's, Burger King, or Steak N Shake, or even grocery stores; it was just buy food at whatever prices Wendy's offers or go hungry; one does not have a free market right to a high price for an item one owns and/or is trying to sell...especially when that high price derives from restrictions on competition to the good/service one is selling in the first place! ). If we are really concerned about current homeowners in HCOL, high-productivity, high-economic output metro areas we could offer a one-time special type of bankruptcy "cramdown" that lets them write down some of their mortgage debt to the average mortgage debt that would be needed to buy a home at the new, lower housing prices prevailing in their metro area; arguably many of the states west of the Mississippi River have something that is in effect like this because even though their laws don't explicitly allow such a bankruptcy their laws DO make most residential mortgages non-recourse which means if the value of your house declines from, say $1 million to $550K and your mortgage is still at, say, $920K you can simply walk away and the bank has to eat any loss they make at the foreclosure sale when the home's current value doesn't come close to what was still owed on the mortgage note; they can still foreclose on you, of course, and they can still blacken your credit, but what they cannot do is get any kind of deficiency judgement against you or seize any assets besides the original home securing the mortgage.
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