New PPer needs guidance.

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MachineGhost
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Re: New PPer needs guidance.

Post by MachineGhost » Sun Jun 07, 2015 11:41 am

buddtholomew wrote: Pretty weak argument if these are truly PP principles. Perhaps these investors are selling US equities to purchase INT equities. It's a fallacy to believe money can only flow to one of the 4 asset classes a PP investor holds.
+1.  Don't be a PPhead.  Think outside the box.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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dualstow
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Re: New PPer needs guidance.

Post by dualstow » Sun Jun 07, 2015 11:49 am

This is meant to be an all-weather portfolio in the long-term if not on a daily basis. Either you buy that or you don't.
If you don't, good luck guessing what you're supposed to be buying this month / quarter / year.
forcemeat, ie stuffing, is etymologically related to ‘farce’. When you say something is a farce, a joke, you’re saying something is a bunch of stuffing.
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Tyler
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Re: New PPer needs guidance.

Post by Tyler » Sun Jun 07, 2015 2:46 pm

Mark Leavy wrote: My numbers are using daily data - downloaded from yahoo - dividends going to cash.
Nice spreadsheet, Mark.  I think I found the bug.

You appear to have (rightly) used the adjusted closing price data from Yahoo for the daily asset values.  I believe the adjusted price calculation includes reinvested dividends, so applying the dividends to cash in your spreadsheet basically double-counts them.  Setting all TLT and VTI dividends to zero in your spreadsheet gives you a CAGR of 7.70% Nominal and 5.48% Real, which jives better with the PeaktoTrough data. 
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
Reub
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Re: New PPer needs guidance.

Post by Reub » Sun Jun 07, 2015 2:56 pm

This might have been more true 20 years ago.
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Re: New PPer needs guidance.

Post by Pet Hog » Sun Jun 07, 2015 3:18 pm

Mark Leavy wrote:
Pet Hog wrote:
Mark Leavy wrote: So... here's what I have in my spreadsheet.  From March 26, 2004 to June 5 2015:

The black line is nominal returns (9.58% CAGR over this period)
The blue/purple line, just below it is the inflation adjusted return.  (7.32% over this period)
The vertical lines are rebalance points (15/35)
Mark, I trust your data and number-crunching, but peaktotrough over the same period of time gives a nominal CAGR of 7.50% (dividends not reinvested) or 7.57% (dividends reinvested), and that difference of over 2% from your value seems too big to ignore.  The rebalance dates are different, too.  Are you using monthly or weekly data and, therefore, missing some temporary rebalance band breaches?  Even so, I wouldn't have guessed that checking the account daily, weekly, or monthly would make such a big difference in returns.  Any ideas about the discrepancy?
Thanks for the heads up Pet Hog.  I hadn't thought to check against Peak to Trough.

My numbers are using daily data - downloaded from yahoo - dividends going to cash.

You're right - the difference sounds too big to ignore.
I don't have a lot of time to investigate right now.  Let me think about it...
I tried a quick upload of my excel spreadsheet to google docs and it choked.  When I have more time, I'll figure out how to share the data so that more eyes than just mine can figure out the discrepancy.

Much appreciated.
Mark

Updated -
Here's a dropbox link to my spreadsheet (excel):

https://www.dropbox.com/s/dcfywsgle95g7 ... .xlsx?dl=0
I'm not sure if this allows you to change my personal spreadsheet or not - so please be kind and copy to your own hard drive and play with a local copy.

If you want to play with the allocations or bands - see the light green boxes near the top.  All of the rest of it should be just standard data and formulas.

Cheers,
Mark
Thanks for the link, Mark.  That's an impressive spreadsheet!  Unfortunately, I think I've spotted an error: you have used adjusted-close prices (which assumes reinvested dividends) for VTI and TLT, yet also added all their dividends to SHY.  If so, you've counted the dividends twice, and that would add maybe 1.5% to your CAGR (assuming average yields for VTI and TLT of, say, 2 and 4%, respectively, over the last 11 years).  Is that possible?

EDIT: Just saw Tyler's response! 
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Mark Leavy
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Re: New PPer needs guidance.

Post by Mark Leavy » Sun Jun 07, 2015 4:02 pm

Tyler wrote:
Mark Leavy wrote: My numbers are using daily data - downloaded from yahoo - dividends going to cash.
Nice spreadsheet, Mark.  I think I found the bug.

You appear to have (rightly) used the adjusted closing price data from Yahoo for the daily asset values.  I believe the adjusted price calculation includes reinvested dividends, so applying the dividends to cash in your spreadsheet basically double-counts them.  Setting all TLT and VTI dividends to zero in your spreadsheet gives you a CAGR of 7.70% Nominal and 5.48% Real, which jives better with the PeaktoTrough data.
Outstanding!  Thank you very much for that.
Mark
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Re: New PPer needs guidance.

Post by MachineGhost » Sun Jun 07, 2015 6:44 pm

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"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: New PPer needs guidance.

Post by MediumTex » Sun Jun 07, 2015 10:13 pm

MachineGhost wrote:
buddtholomew wrote: Pretty weak argument if these are truly PP principles. Perhaps these investors are selling US equities to purchase INT equities. It's a fallacy to believe money can only flow to one of the 4 asset classes a PP investor holds.
+1.  Don't be a PPhead.  Think outside the box.
I don't think that money can only flow to one of the PP assets.  I think that money tends to flow in directions that correspond to economic conditions, and if you can locate assets that are good proxies for all conceivable economic conditions, then you should be protected no matter what happens.

When the economy is expanding people tend to buy stocks.

When the economy is contracting, people tend to buy treasuries.

When inflation is rising, people tend to buy gold.

When inflation is falling, it could be for several reasons, and each of those reasons has a PP asset associated with it.

The PP isn't perfect (nothing is), but it's pretty good.
Only strength can cooperate. Weakness can only beg.
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Re: New PPer needs guidance.

Post by Reub » Sun Jun 07, 2015 11:29 pm

It has been pretty good. But was that because of the colossal run up in treasuries and gold in the past 30 or 40 years? Is that over now? Past performance is no..............
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Re: New PPer needs guidance.

Post by MediumTex » Sun Jun 07, 2015 11:50 pm

Reub wrote: It has been pretty good. But was that because of the colossal run up in treasuries and gold in the past 30 or 40 years? Is that over now? Past performance is no..............
The stock market has trounced both gold and treasuries over the last 30 or 40 years.  Does that mean that we should be even more afraid of stocks today than of gold or treasuries?
Only strength can cooperate. Weakness can only beg.
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Mark Leavy
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Re: New PPer needs guidance.

Post by Mark Leavy » Mon Jun 08, 2015 12:04 am

My last off topic post on this thread...

A very hearty thanks to all who helped spot and identify the error(s) in my modeling spreadsheet.
Barrent, Pet Hog, Tyler, MG...

I think I've come to a better understanding of what "adjusted returns" means.  I used to think it was just "split adjusted" but now know that on Yahoo it also means dividend adjusted.

PLEASE DON'T USE THE SPREADSHEET I POSTED!

Tyler's fix will cover most of the corrections, but I'm still worried now that the last few months of data are a mix of "Split Adjusted" and "Yahoo adjusted" data.

Give me a few days to do an update.  I really want the daily returns to reflect the split adjusted closing prices - and the dividends to go to cash.  That is more in line with how my personal finances work.

I'll repost once I get it fixed - as I truly appreciate the scrutiny, honesty and wealth of experience on this board.

Mark
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Re: New PPer needs guidance.

Post by Reub » Mon Jun 08, 2015 12:12 am

MediumTex wrote:
Reub wrote: It has been pretty good. But was that because of the colossal run up in treasuries and gold in the past 30 or 40 years? Is that over now? Past performance is no..............
The stock market has trounced both gold and treasuries over the last 30 or 40 years.  Does that mean that we should be even more afraid of stocks today than of gold or treasuries?
Yes. It is possible I think for the 3 assets to fall at the same time in a post QE world.  They have been artificially propped up by central banks and could all decline together. Even if only 2 of these fell at the same time it would probably not be very good for the portfolio. Are you certain that these scenarios are impossible?
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