POLL: How did you overcome the fear of tracking error?

[Henryinroad]

This is well known strategy and has been around for a long time. Things very similar are the basic strategy for annuities. It works pretty well when markets are moving and will lose money when markets are flat.

It works way better when internet rates real and nominal are high. The bond component is very important.

Hope there is a scientific method, like backtesting of decades' data, to assess the historic impact of real interest hike to Laddered U.S. Treasuries structure adopted by Swan etf. Unfortunately I dont have the tool. Not sure if the "assorted convexity" can neutralise the impact.

But at this moment it seems bond is in no danger given the latest speech of Powell who reinforce his hawkish view and pessimism..

[Henryinroad]

People always say the same thing. What I've noticed that although some parts of the PP could be expensive, one part is always inexpensive. That's how it works, non-correlated assets. It's just a guess on which one that is... If I had to pick right now it would be gold as the inexpensive asset. When it's $15,000 an ounce $2000 will seem cheap.

If we view the price in absolute term, it might be arbitrary to say its expensive or cheap. But I have a question in my mind, what if we view the asset (stock) in terms of valuation?

1.Buffett Indicator :
https://www.gurufocus.com/stock-market-valuations.php
The Ratio of Total Market Cap to US GDP is back to 2008 level.

2. Shiller-PE:
https://www.gurufocus.com/shiller-PE.php

Would a seemingly overvalued asset be an incentive for a more aggressive rebalancing to you?

[ahhrunforthehills]

People always say the same thing. What I've noticed that although some parts of the PP could be expensive, one part is always inexpensive. That's how it works, non-correlated assets. It's just a guess on which one that is... If I had to pick right now it would be gold as the inexpensive asset. When it's $15,000 an ounce $2000 will seem cheap.

If we view the price in absolute term, it might be arbitrary to say its expensive or cheap. But I have a question in my mind, what if we view the asset (stock) in terms of valuation?

1.Buffett Indicator :
https://www.gurufocus.com/stock-market-valuations.php
The Ratio of Total Market Cap to US GDP is back to 2008 level.

2. Shiller-PE:
https://www.gurufocus.com/shiller-PE.php

Would a seemingly overvalued asset be an incentive for a more aggressive rebalancing to you?

I have researched this a lot. I pretty much learned from my data that the Shiller-PE is essentially useless until you are above the 99% historical average (which we are). However, even then, its usefulness is extremely limited for 2 reasons:

1. Black Swan events. No ratio can predict someone flying a plane into a building, a war, a pandemic, zombies, etc.
2. There is little correlation with stock valuations and stock prices in the minds of investors at the moment. When that is the case, how far can the variance go? Japan went really far, no? Markets can remain irrational longer than you can stay solvent.

All that said, I would still keep it in the back of my mind. For instance, I don't think I would buy into a Golden Butterfly allocation. I think that if you are looking to be "safe" I would recommend:

Golden Butterfly when Shiller/PE & Buffet are at historically underpriced levels and transitioning into a traditional PP when Shiller/PE & Buffet are at historically overpriced levels (basically, a macro-level rebalancing).

With all that said... Long Term Treasuries are a completely different matter. I still for the life of me DO NOT feel "safe" owning them at such low interest rates. The whole Bond Convexity is great, but I am not convinced that our free markets are free enough to allow that to happen.

Maybe someone needs to make a poll on who is holding them and who isn't.