What would it take to cause you to lose faith in the PP?

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Re: What would it take to cause you to lose faith in the PP?

Post by pmward » Sun Mar 01, 2020 10:47 am

Eh, I think there are so many factors people need to think about when deciding to pay or keep a mortgage. When looking at a mortgage you don't just care about todays rates, you care about the rates averaged out over the life of the loan. There is a gamble to both paying the mortgage off as well as keeping the mortgage. In both cases we don't know what tomorrow will bring. But, I'm personally in the camp that over 30 years inflation will eventually kick in and pay the mortgage off for me. Not to mention, the value in keeping my cost of living tethered to 2014 allows me to save and invest more and more each year, especially living in a city where both rents and housing prices have been going up 5-8% every year consistently (which also means the capitol appreciation on my home is way outpacing my 3% mortgage). There's nothing inherently wrong with leverage, provided you keep your total leverage within reason for your income (preferably, with a buffer) and are in a portfolio that over the long haul will generate on the whole more than the interest on the leverage. There are so many variables people need to consider here though. How close to retirement one is, how long they plan to live in the house, what their monthly budget looks like, how much of their net worth is in their home (and does it justify diversification to minimize that potential point of failure), what their retirement or other financial goals are, what one believes the future holds for things like cost of living, inflation, portfolio returns, rates, etc. It's definitely not a cut and dry, black and white, kind of deal. For me, it makes sense to stay levered on my house. For Mathjak it obviously doesn't. But we are both in very different stages of life and at different parts of our financial journey. From what I understand, Mathjak has pretty much won the game, and as such it makes no sense to take any more risk than is absolutely necessary. I'm still playing the game, and have some lofty future goals, so a little leverage does help.
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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Sun Mar 01, 2020 11:07 am

Kitces who is one of the most forward thinkers and researchers today has made me have a whole different view on the mortgage vs cash or paying off debate You really do want not just a gain but a risk premium for leveraging. Reverse compounding Ain’t your friend when thousands extra are going out in down years multiplying sequence risk
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Re: What would it take to cause you to lose faith in the PP?

Post by pmward » Sun Mar 01, 2020 2:57 pm

Calling someone a "forward thinker" is about as subjective as it gets. There are plenty of other financial guru's out there that would laugh at his opinions. I'm merely saying that the answer to the question is different for everyone. There is no black and white answer to this. There are way too many potential variables. And, since nobody truly knows what the future holds, either way is a gamble. I like the odds of the hand I have though, and am willing to play that hand.

I'm personally sitting on a 3% mortgage, in a house that has appreciated 5-8% every year that I've owned it, for a large house in an upper scale neighborhood, that has a mortgage and escrow monthly payment that is less than the current rent for an average 2 bedroom apartment in an average area, and I theoretically could cash in taxable investments and pay the house off tomorrow if I really wanted to (so there is no default risk)... I personally think I'll take my chances. But I can also see and totally understand why someone else would choose to pay the mortgage first, or take the Dave Ramsey middle way of investing 15% of income and the rest to the mortgage.
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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Sun Mar 01, 2020 3:35 pm

It all depends where someone’s line in the sand is as far as risk premium. Mine is where I wouldn’t do it for a balanced portfolio. If I was still in my pedal to the metal growth stage I certainly would do it with a high equity level As far as kitces , when it comes to thoughts , myth busting and retirement planning I can think of few in his class. Certainly not Bernstein Blanchette is also very good.

don't forget an average return means little when you are leveraged with a mortgage ...if you owe a big balance up front and hit down years you are down plus thousands in interest . but if you are down years later with a small balance , maybe only a few hundred of your mortgage is interest ... to take on that sequence risk where not only am i betting on a return but i am betting on the order of that return i need more compensation to do that
Last edited by mathjak107 on Sun Mar 01, 2020 6:17 pm, edited 2 times in total.
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Re: What would it take to cause you to lose faith in the PP?

Post by vnatale » Sun Mar 01, 2020 4:52 pm

pmward wrote:
Sun Mar 01, 2020 2:57 pm
Calling someone a "forward thinker" is about as subjective as it gets. There are plenty of other financial guru's out there that would laugh at his opinions.
Michael Kitces IS one of the true giant in personal finance.

https://www.kitces.com/

He is full of substance backed with research. I would not think there would be many, if any, who would laugh at his opinions.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Sun Mar 01, 2020 6:13 pm

no one moves the financial industry with their studies in the field of retirement planning like kitces does .
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Re: What would it take to cause you to lose faith in the PP?

Post by vnatale » Sun Mar 01, 2020 6:26 pm

mathjak107 wrote:
Sun Mar 01, 2020 6:13 pm
no one moves the financial industry with their studies in the field of retirement planning like kitces does .
If there was a Mt. Rushmore of personal finance, he'd certainly be one of my four up there!

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Sun Mar 01, 2020 6:44 pm

he actually lifts the hood and looks inside... it is crazy how many old school beliefs we had that were actually not the best way to do things once the facts and figures are in .

my favorite go to people are :

michael kitces
david blanchett
moshe milevsky

i learn as much as i can from those guys .

sometimes dr wade pfau but he can be a bit of a salesman more than a researcher .
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Re: What would it take to cause you to lose faith in the PP?

Post by vnatale » Sun Mar 01, 2020 7:09 pm

mathjak107 wrote:
Sun Mar 01, 2020 6:44 pm
he actually lifts the hood and looks inside... it is crazy how many old school beliefs we had that were actually not the best way to do things once the facts and figures are in .

my favorite go to people are :

michael kitces
david blanchett
moshe milevsky

i learn as much as i can from those guys .

sometimes dr wade pfau but he can be a bit of a salesman more than a researcher .
I'm aware of Pfau and held him in high regard. Had no idea regarding what you say about him.

Until now I've never heard of Blanchett.

Milevsky is the Toronto University professor who has a strong belief in annuities?

When William Bernstein was more active, he was in my Top 3. Anything he says is always going to carry a lot of weight for me.

And, your initial sentence brings me back to baseball! Prior to the revolution in statistical analysis pioneered by Bill James it seems like for the first century plus of baseball statistics were not really used for decision making. Which led to all these lead-off batters who instead of leading in getting on base the most, led in making the most outs overall! He totally revolutionized the way baseball decisions were made. And, I think you will agree with a quote of his that I forced myself to memorize: "To be in command of the issues you must be in command of the details."


Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Mon Mar 02, 2020 3:07 am

i have no use for bernstein and i dont agree with a lot of his thinking because it contradicts what others like kitces have found which make far more sense to me . .

kitces work speaks for itself as he dives under the hood of myths and old wives tales . he questions just about everything , kind of like the myth busters of financial planning in the area of retirement planning .

milevsky is a MATHEMATICAL genius as it applies to evaluating retirement situations or analyzing annuity products ... his now famous paper retirement ruin and the sequence of returns revolutionized retirement planning with his findings about sequence risk .

https://annuitystraighttalk.com/FreeDow ... levsky.pdf

he is a master at analyzing different types of annuities and aye or naying them . he had analyed a particular glwb and could not figure out how the insurer gave you what they did . he said in his study every one should run out and buy this particular product because it offered so much and he could not calculate how .

well he was right and while the inurerer honored what they sold they stopped the product .

pfau is to pro annuities and runs aground many times trying to come up with more comprehensive retirement planning using them .

his idea of using a rising glide path in retirement was mathematically correct and a great idea but kitces and blanchette had shown that low rates were the krytonite to idea as far as pulling it off now .
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Re: What would it take to cause you to lose faith in the PP?

Post by pmward » Mon Mar 02, 2020 9:50 am

vnatale wrote:
Sun Mar 01, 2020 4:52 pm

his opinions.
Key word "opinion". An opinion is still an opinion. It does not mean he is right in everything he says. In general, I'm also very skeptical of hero worship. He may have some nice things to share and bring to the table (and I will take a look into his other work based on both of your recommendations), but no one is infallible and nobody's word should be taken as the gospel... especially in these confused and backwards times when people are holding bonds for capitol appreciation and stocks for yield... all data, reason, and common sense have broken down ages ago. We can do all the past research we want, but the past no longer reflects what will happen in the future. We are in uncharted territory. All bets are off.
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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Mon Mar 02, 2020 12:26 pm

oh there are things i don't agree with from all of the think tank crew . but if it makes sense to me then that may change my own view .
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Re: What would it take to cause you to lose faith in the PP?

Post by vnatale » Mon Mar 02, 2020 6:12 pm

pmward wrote:
Mon Mar 02, 2020 9:50 am
vnatale wrote:
Sun Mar 01, 2020 4:52 pm

his opinions.
Key word "opinion". An opinion is still an opinion. It does not mean he is right in everything he says. In general, I'm also very skeptical of hero worship. He may have some nice things to share and bring to the table (and I will take a look into his other work based on both of your recommendations), but no one is infallible and nobody's word should be taken as the gospel... especially in these confused and backwards times when people are holding bonds for capitol appreciation and stocks for yield... all data, reason, and common sense have broken down ages ago. We can do all the past research we want, but the past no longer reflects what will happen in the future. We are in uncharted territory. All bets are off.
It is oftentimes stated that everyone is entitled to an opinion. That is true. But that does not make all opinions equal.

Some people's opinions have no value for me while others I greatly value.

If Kitces states something I know that it is based upon substantial research.

My first knowledge of him came when I was working at a CPA firm, maybe ten or so years ago. I was trying to resolve a tax problem. I went to the internet to see if I could find anything on this unique problem. Somehow I sent the question to Kitces (and this was before he was nationally known). I was hoping for a two sentence response. I was shocked when he sent me back his full opinion with about five tax code citations attached to it! And, he was seeking no fees for that advice.

Several years later I asked him a question regarding personal retirement plans. Again I got the full response while not seeking any fees for this advice. I'd asked the same question of by boss, one of the CPA firm partners, and Kitces gave me the far more comprehensive response.

I've since found out that this is typical Kitces behavior. He is definitely one of the good guys. Wanting us all to know as much as possible to both take care of ourselves and for financial planners to be better to be able to well take care of their clients.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: What would it take to cause you to lose faith in the PP?

Post by Tortoise » Sun Mar 08, 2020 2:42 pm

I haven’t lost faith in the PP yet. In fact, I’m liking it now more than ever.

Just compared PP vs. all-stock performance over the past three years (Mar 6 to Mar 6). Both have returned a total of ~30%, but the PP did it with 65% less volatility than stocks.

This is exactly why I became a PP investor in the first place. Decent long-term returns with much lower volatility than any other portfolio with comparable return.
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Re: What would it take to cause you to lose faith in the PP?

Post by Maddy » Tue Mar 10, 2020 9:53 pm

I was really afraid to look at my account today, but I finally bit the bullet and peeked. Much to my surprise, I'm actually UP from where I was a few months ago. What an incredible relief, and what a strange and wonderful experience to finally feel a sense of calm in the midst of significant market turmoil. I'm liking it!
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Re: What would it take to cause you to lose faith in the PP?

Post by dualstow » Tue Mar 10, 2020 10:02 pm

I’m picturing you at ease in your cabin.
Sam Bankman-Fried sentenced to 25 years
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Re: What would it take to cause you to lose faith in the PP?

Post by Maddy » Wed Mar 11, 2020 12:15 pm

I've been a philosophical adherent to the PP for nearly a decade now, having been badly burned in the 2007-08 fiasco and having learned some hard lessons about market timing. But it was not until this year that I had the opportunity to invest once again. Notwithstanding my fright last week over the first of several deep plunges in the S&P, I'm absolutely delighted about how all this is working out. What's really jumping out at me, at this point, is that while I understood the theory behind the PP, it wasn't until I actually had skin in the game that I got a real gut-level feel for how well it works and how much it would reduce my anxiety over investing. It's freaking ELEGANT.
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Re: What would it take to cause you to lose faith in the PP?

Post by Lonestar » Thu Mar 12, 2020 11:13 am

I don't use the classic PP allocation but use a modified version. For those that were at or close to 25-25-25-25 at the first of the year, what are the YTD returns as of today? Just curious.
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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Thu Mar 12, 2020 11:30 am

After today I would guess negative 2-3%
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Re: What would it take to cause you to lose faith in the PP?

Post by Ugly_Bird » Thu Mar 12, 2020 11:45 am

Lonestar wrote:
Thu Mar 12, 2020 11:13 am
I don't use the classic PP allocation but use a modified version. For those that were at or close to 25-25-25-25 at the first of the year, what are the YTD returns as of today? Just curious.
Was +2% YTD this morning. Probably will go to negative before tomorrow.
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Re: What would it take to cause you to lose faith in the PP?

Post by Cortopassi » Fri Mar 13, 2020 8:53 am

PP lessening volatility and smoothing definitely broken over the past couple days with bonds and gold not pulling their weight.

On 3/9 I was up 6% YTD. Today, 3/13 I am down 4.45%. 10.5% swing in 5 days, wow.

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Re: What would it take to cause you to lose faith in the PP?

Post by mathjak107 » Fri Mar 13, 2020 1:21 pm

is that including todays sell off in gold and tlt ?
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Re: What would it take to cause you to lose faith in the PP?

Post by Cortopassi » Fri Mar 13, 2020 2:54 pm

At least as of this morning, yes
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Re: What would it take to cause you to lose faith in the PP?

Post by Cortopassi » Sat Mar 14, 2020 10:25 am

Here they are after mutual funds were priced in

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Re: What would it take to cause you to lose faith in the PP?

Post by pmward » Sat Mar 14, 2020 7:04 pm

What are you down from the peak exactly? You can set the date range to be the date of the peak and it will tell you.
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