Gyroscopic Investing

MediumTex wrote:What is your understanding of the maximum peak to trough PP drawdown that occurred in the 1981-1982 period?

My understanding is that it was not 25%.  It was, instead, less than 25%.  That is my understanding.  Thanks for asking!

I believe this is also Mr. Ghost's understanding, that he knows he doesn't have a leg to stand on with his erroneous/exaggerated/misremembered claim, because otherwise he would simply post the data showing his rectitude and we would all proceed to agree with him.  Instead, he has chosen to "dig in" and continue to lob his spurious criticism of the PP as frequently as he possibly can work it in.

The rest of us just say: Show Me the Data!

But he can't.  'Cause his claim is bogus.  He doesn't have the data.

Also, as a minor, tiny, irrelevant I'm sure, note: the biggest actual "draw-down" (you know, the kind that actually exists outside of Ghostly imaginations) for the PP came immediately after experiencing a ~18.5% gain in a single month.  It lasted for three months and at bottom amounted to a loss of ~20%.  Oh, the humanity.

Yep, gold can be volatile.  Yep, gold sure was volatile in 1980.  Yep, gold could be volatile again.  And yep, the PP smoothed things out as well as could possibly be expected when an asset amounting to 25% of it suddenly skyrockets to the moon and then just as suddenly crashes to the floor.

LC475 wrote:

MediumTex wrote:What is your understanding of the maximum peak to trough PP drawdown that occurred in the 1981-1982 period?

My understanding is that it was not 25%.  It was, instead, less than 25%.  That is my understanding.  Thanks for asking!

I believe this is also Mr. Ghost's understanding, that he knows he doesn't have a leg to stand on with his erroneous/exaggerated/misremembered claim, because otherwise he would simply post the data showing his rectitude and we would all proceed to agree with him.  Instead, he has chosen to "dig in" and continue to lob his spurious criticism of the PP as frequently as he possibly can work it in.

The rest of us just say: Show Me the Data!

But he can't.  'Cause his claim is bogus.  He doesn't have the data.

Also, as a minor, tiny, irrelevant I'm sure, note: the biggest actual "draw-down" (you know, the kind that actually exists outside of Ghostly imaginations) for the PP came immediately after experiencing a ~18.5% gain in a single month.  It lasted for three months and at bottom amounted to a loss of ~20%.  Oh, the humanity.

Yep, gold can be volatile.  Yep, gold sure was volatile in 1980.  Yep, gold could be volatile again.  And yep, the PP smoothed things out as well as could possibly be expected when an asset amounting to 25% of it suddenly skyrockets to the moon and then just as suddenly crashes to the floor.

This is pretty much how I see it too. Still waiting for MG's data on his 25% claim.

I have no reason to doubt MG, but I am continually surprised that he doesn't just post the data.  It's like when Fox news kept asking for Obama's birth certificate.  It's all silly, but here we are.  Just post the data and put the haters to bed.

MachineGhost wrote:

Coffee wrote: P.S. The PP is the super safe car that doesn't have enough horse power to get out of its own way and ends up getting creamed by a big rig truck that has, "Market Returns" painted on the side.

+100

[align=center][/align]

dragoncar wrote: I have no reason to doubt MG, but I am continually surprised that he doesn't just post the data.  It's like when Fox news kept asking for Obama's birth certificate.  It's all silly, but here we are.  Just post the data and put the haters to bed.

+1

MG please don't post the data. Your word is good enough for me.

dragoncar wrote: I have no reason to doubt MG, but I am continually surprised that he doesn't just post the data.  It's like when Fox news kept asking for Obama's birth certificate.  It's all silly, but here we are.  Just post the data and put the haters to bed.

Well, if a certain Low Class dickhead hadn't acted like one, because I was on the threshold of doing so... <shrug>

As I've said several times already and am repeating myself one more time, use Peak2Trough's backtester from 1968 with annual rebalancing and throw in a few percents to account for different rebalancing dates.  That is my final word on the subject.  If you got a problem with a -25% nominal (1969) or -25% real (1980), take it up with your own psychology, NOT ME.

MachineGhost wrote:

dragoncar wrote: I have no reason to doubt MG, but I am continually surprised that he doesn't just post the data.  It's like when Fox news kept asking for Obama's birth certificate.  It's all silly, but here we are.  Just post the data and put the haters to bed.

Well, if a certain Low Class dickhead hadn't acted like one, because I was on the threshold of doing so... <shrug>

As I've said several times already and am repeating myself one more time, use Peak2Trough's backtester from 1968 with annual rebalancing and throw in a few percents to account for different rebalancing dates.  That is my final word on the subject.  If you got a problem with a -25% nominal (1969) or -25% real (1980), take it up with your own psychology, NOT ME.

Are you 12?

Well since I have real money in this I care about the answer...and using several sources here's what I come up with for 1969 which is the year in question:

- DJI: -26% (Jan 69 6276, Jan 70, 4648)
- Gld: -17.4% (Jan 69 42.30 mo avg, Jan 70, 34.94 mo avg. Kitco London spot monthly average)
- TBonds: ~-12.5% (Jan 69 yield 5.74, Jan 70 yield 6.81, assume 6% coupon rate avg and roughly -12.5%...FRED data has the 10 yr at -5.01% for the year.)
- TBills: + 6.5% (Annual return, several sources/FRED)

And the final math is...-12.35% for the year. Looking at the prices for both gold and stocks by month both pretty much went straight down from Jan to the end of the year. So the draw down absolutely was not worse by much. In every case of the above, I assumed/took the worst prices.

So MG...show us the data. I'll grant you a couple of percent more if you can prove the T-Bonds different from what I posted. Other than that and greater than 25%, no way. If you have a backtest showing that, categorically you have bad data somewhere. Of this I am positive. One maybe able to squeak out a little bit more down from Jan-Jul 70 as the stock mkt kept going down; however, this is counterbalanced by both T-Bonds and gold going up during the same time period. Thus, Dec was likely the nadir.

Case closed w/o you posting data and sources.

MediumTex wrote:
...
Are you saying that we might see regular posters just disappear for months and post nothing?

Seems unlikely.

Yes, unlikely indeed 

Kbg wrote: Well since I have real money in this I care about the answer...and using several sources here's what I come up with for 1969 which is the year in question:

- DJI: -26% (Jan 69 6276, Jan 70, 4648)
- Gld: -17.4% (Jan 69 42.30 mo avg, Jan 70, 34.94 mo avg. Kitco London spot monthly average)
- TBonds: ~-12.5% (Jan 69 yield 5.74, Jan 70 yield 6.81, assume 6% coupon rate avg and roughly -12.5%...FRED data has the 10 yr at -5.01% for the year.)
- TBills: + 6.5% (Annual return, several sources/FRED)

And the final math is...-12.35% for the year. Looking at the prices for both gold and stocks by month both pretty much went straight down from Jan to the end of the year. So the draw down absolutely was not worse by much. In every case of the above, I assumed/took the worst prices.

So MG...show us the data.

I have to say I'm feeling a bit sorry for MG.  I value his contributions generally and hope others do as well.  What was that quote about he who is without sin should cast the first stone?  I think we've all made mistakes in our posts...if mistake this was.

The yield curve was inverted in 1969 so it may not have made much difference, but the above numbers are for 10 year Treasuries.  There were no 30 years issued then, so perhaps MG's data was extrapolated somehow...with no gold and no Treasury options, the PP in 1969 is a purely mythological beast anyway.  Can we all agree that a) a 25% drawdown remains within the realm of possibility for the PP, albeit rare and likely transient, and b) that if you invest in any kind of volatile assets you need to be prepared for big drawdowns? 

At the risk of sounding like a broken record, let me add that this is why the cash allocation is important.  It's my definition of being "prepared for big drawdowns".  It's not only to dampen the extent of the swing, it's there to let you weather dips in other assets - and even take advantage of them.

Now back to your regular programming!

MG didn't say "It's realistic for the PP to have a drawdown of 25%", he said that it had in fact suffered such a drawdown, and then when anybody asked him when, why, or how, that person was berated mercilessly.  MG said that the numbers were readily available, at least one time he even posted an enormous useless chart of numbers, which I believe was a snow job since they didn't support his statement.  People were called stupid or lazy for not finding his [ultimately nonexistent] data, and people were called "dickheads" for asking for it.

Then finally when he found out he'd been wrong the whole time, instead of saying "I screwed up, sorry" he made it sound like other people's fault.

I think everyone here is perfectly willing to forgive the mistake.  The bigger problem is how he treated everyone involved.  Expressing the slightest remorse would go a long way, but there hasn't been any sign of that.

Yes, I saw the spicy language but I've seen it from plenty other people on the board too.  OK point taken...MG AND OTHERS please tone down the criticisms.

I thought the issue was settled by Gosso's charts, posted in another thread?  It showed at least one 25% drawdown.  I believe daily data was required to find it, but monthly data came close.

sophie wrote: Yes, I saw the spicy language but I've seen it from plenty other people on the board too.  OK point taken...MG AND OTHERS please tone down the criticisms.

I thought the issue was settled by Gosso's charts, posted in another thread?  It showed at least one 25% drawdown.  I believe daily data was required to find it, but monthly data came close.

(I'm going to stay out of the MG feud, but it would be nice to see calmer heads prevail).

The 25% drawdown is the result of the extreme volatility of gold during its parabolic move in late 1979 and early 1980.  I doubt something that extreme would occur again in one of the PP assets in our life time, but it might.  IMO a reasonable expectation for a nominal PP drawdown (measured with daily data) is in the -15% neighborhood. 

From May 1969 to May 1970 there was a -15% nominal drawdown in the PP.  However I converted 20 year bonds into 30 year bonds, which may not be appropriate, but gives us a rough look into how a PP might have performed.

Just for fun I calculated multiple max drawdowns for the PP by changing the month of annual rebalancing:

Jan -22.6%
Feb -22.0%
Mar -26.3%
Apr -26.1%
May -25.1%
Jun -25.3%
Jul -24.8%
Aug -24.3%
Sep -22.4%
Oct -22.5%
Nov -21.9%
Dec -20.2%

Bands 15/35 -19.7%  (during gold's parabolic move the 15/35% rebalancing bands rebalanced on Sept 5, 1979 and Jan 2, 1980)

The max drawdown always ended on March 27, 1980.

In all honesty I'm not sure how much the max drawdown really tells us, I much prefer to measure rolling real returns since I believe the risk of not producing a real return is far more damaging than a blip of extreme volatility.  Although the extreme volatility might cause investors to sell and then realize their paper losses, in which case it is a real risk.

sophie wrote: I have to say I'm feeling a bit sorry for MG.  I value his contributions generally and hope others do as well.

Me too (a lot). He brings data. Data is good. It is facts, not opinion.

MG (the board)...if it wasn't clear, let me say so publicly. I will attack data any day of the week and if I post data/analysis that looks jacked up I welcome and encourage full frontal assaults on mine. Attacking data is OK in my book. Attacking the poster on a personal level is totally not cool in my book.

If my posts were interpreted as such, full up public apology is proffered.

And in the end we all found out that even if the year was wrong PP has had at least one 25%+ DD...this is why we attack data, to learn from it.

sophie wrote: I have to say I'm feeling a bit sorry for MG.  I value his contributions generally and hope others do as well.  What was that quote about he who is without sin should cast the first stone?  I think we've all made mistakes in our posts...if mistake this was.

Don't feel sorry for me.  I've washed my hands of the whole business, because, frankly, I really don't care on an emotional basis any more what PP denizens choose to be or not be deluded about.  Whether it was a mistake or not, I honestly don't know.  I'll find out some day when I get around to recreating the conditions that showed a -25% MaxDD.

I suppose the lesson learned here is not to rely on spotty memory when performing a public service.  But when I get personally attacked in a continually insidious manner, I'm naturally bound to act defensive and prone to non-compliance.  My "spicy language" is only in response to that.

The yield curve was inverted in 1969 so it may not have made much difference, but the above numbers are for 10 year Treasuries.  There were no 30 years issued then, so perhaps MG's data was extrapolated somehow...with no gold and no Treasury options, the PP in 1969 is a purely mythological beast anyway.  Can we all agree that a) a 25% drawdown remains within the realm of possibility for the PP, albeit rare and likely transient, and b) that if you invest in any kind of volatile assets you need to be prepared for big drawdowns? 

I've explained my position in another (new) thread.  30-year T-Bond returns were not extrapolated.  And there are various contingencies that could have pushed the MaxDD down to -25%.

Anyway, everyone ought to realize I've been standing on principle here.  I am not anyone's slave, especially LC475's.  If you want the data to prove me wrong (or right), do it yourself.  I am no longer providing a public service.

Xan wrote: MG didn't say "It's realistic for the PP to have a drawdown of 25%", he said that it had in fact suffered such a drawdown, and then when anybody asked him when, why, or how, that person was berated mercilessly.  MG said that the numbers were readily available, at least one time he even posted an enormous useless chart of numbers, which I believe was a snow job since they didn't support his statement.  People were called stupid or lazy for not finding his [ultimately nonexistent] data, and people were called "dickheads" for asking for it.

Then finally when he found out he'd been wrong the whole time, instead of saying "I screwed up, sorry" he made it sound like other people's fault.

I think everyone here is perfectly willing to forgive the mistake.  The bigger problem is how he treated everyone involved.  Expressing the slightest remorse would go a long way, but there hasn't been any sign of that.

You're making grand suppositions here.

I was perfectly jovial until LC475 publically and personally attacked me over this issue.  If you think that I'm the one that reacted inappropriately in defense, I don't know what to tell you.  The search function is available to anyone on this forum.  If they can't find the data showing a -25% MaxDD, they should have messaged me privately instead of piling onto LC475's public ad hominem behavior.

I honestly don't know of it is/was a mistake and if I was wrong, so I'm not certain to be be begging forgiveness just to smooth things over.  Besides, that won't ever happen anyway until LC475 first apologizes.

So deal with it.  I was providing a public service.  If you didn't like it or found it was deficient in some way (it took you YEARS to figure that out?), don't be attacking me personally.  So f*ck you, LC475.  I hope you're happy now because now you have nothing either way.

Gosso wrote: Mar  -26.3%
Apr  -26.1%
May  -25.1%
Jun  -25.3%

Still waiting for that apology, LC475.  Are you man enough to do it?

Everyone.....chill.....out.

Austen Heller wrote: Everyone.....chill.....out.

https://www.youtube.com/watch?v=IfL_PwWdNGU

I don't know about this whole permanent portfolio thing either. I mean, who is this "Harry Browne" guy anyway? If he's so smart, why is he dead?

Why did he have a "radio show" instead of a podcast? All of the really smart people have podcasts. And WHERE exactly is his YouTube and Instagram?

The only gold I like is the gold in my wife's jewelry.

Buy long term treasury bonds at 3.5%? Are you nuts? They can't possibly go any lower than this! Okay there's at 3% now but they can't possibly go any lower. Get ready for a bond blood bath! 2.5%? Well... they definitely can't go any lower than this! I'll just do a 3-way split between gold, stocks and cash until interest rates rise then I'll buy back into bonds around 4% to 4.5% or so.

I really like the idea of the permanent portfolio and the stability it provides. What if I do it simpler and just use the Vanguard Balanced 60/40 fund (60% Total Stock Market to 40% Total Bond Market) for about 95% of my portfolio and then gold for the last 5%. Maybe mix in a little Gold Miner Stock mutual fund and a REIT fund for a little extra juice for inflation?

TripleB wrote:
The only gold I like is the gold in my wife's jewelry.

Never gets old, ever. EVER.

sophie wrote: The yield curve was inverted in 1969 so it may not have made much difference, but the above numbers are for 10 year Treasuries.  There were no 30 years issued then, so perhaps MG's data was extrapolated somehow...with no gold and no Treasury options, the PP in 1969 is a purely mythological beast anyway.  Can we all agree that a) a 25% drawdown remains within the realm of possibility for the PP, albeit rare and likely transient, and b) that if you invest in any kind of volatile assets you need to be prepared for big drawdowns? 

Exactly! Can we please stop speculating about this chimerical 1969 drawdown?? If anyone mentions it again, I'm going to cry unicorn! ;-)

MachineGhost wrote: Still waiting for that apology, LC475.  Are you man enough to do it?

I would love to give you all the apologies your heart desires!

Unfortunately, you have me on ignore, and far be it for me to break the laws of Physics or The Internet.  So if you cannot receive it, can I truly be said to have given it?

Ahh well, it's all for the best.  This way you're not deprived of the opportunity to question my manhood.

This has the power to calm any person down.
https://www.youtube.com/watch?v=O7D-1RG-VRk