Gyroscopic Investing

Posted: **Fri Jun 05, 2015 9:26 am**

buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$

I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.

Posted: **Fri Jun 05, 2015 9:47 am**

Matthew19 wrote:
buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$
I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.

Boom. Exactly the right attitude!

Posted: **Fri Jun 05, 2015 9:49 am**

Matthew19 wrote:
buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$
I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.

That is the correct perspective and your philosophy aligns well with the composition of the portfolio.

Posted: **Fri Jun 05, 2015 10:50 am**

buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$

Are you being sarcastic? Think long-term, not short-term. Nothing is PERFECTLY non-correlated to each other 24/7.

Posted: **Fri Jun 05, 2015 10:54 am**

Matthew19 wrote: I feel like I understand everything except the cash portion. Is a treasury note ladder a pain to manage and would I be better with a money market fund?

CD's would have an edge in laddering due to the available maturity dates (out to 10-years in some cases). If you can handle remembering to buy a new T-Bill every 90 days, then liquidity is a big concern for you, otherwise just stick to 1-year. There's no autorollover for T-Bills akin to CD's at TreasuryDirect AFAIK but maybe Fidelity has an option like that.

Posted: **Fri Jun 05, 2015 11:03 am**

Matthew19 wrote: I'm about 70% cash right now with the rest split between miners and foreign stocks. I have about 60k in paper losses on the miners, which absolutely makes me sick considering how hard I have to work for that.

What does everyone use to track their PP as a whole? Iv looked at Google Finance, where you just plug in your buys and get a nice overview.

The best day to start a PP is always the present day! IMHO, you're also in great shape even from a tax perspective, especially if capital losses on the miners would offset any gains in the foreign stocks for tax purposes.

I personally use Mint to track my net worth and total investment account balances, and the Yahoo Finance app to glance at daily ETF movements. The investment side of Mint isn't that great for detailed tracking, but I kinda like it that way. I prefer to stay out of the weeds as much as possible, and will login to my brokerage when I need to to check the bands occasionally.

Welcome to the forum!

Posted: **Fri Jun 05, 2015 11:08 am**

Matthew19 wrote: I feel like I understand everything except the cash portion. Is a treasury note ladder a pain to manage and would I be better with a money market fund?

Fidelity has a nice tool for building a treasury ladder, and I believe you can even automate repurchasing new treasuries when they expire. That said, I personally went with a simple STT ETF for convenience. When I needed cash for a down payment on a house, selling a chunk of SCHO seemed easier than figuring out how to dissect a ladder.

Posted: **Fri Jun 05, 2015 1:20 pm**

Matthew19 wrote:
buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$
I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.

If the PP were a 10 hour international flight, budd would be the guy sitting next to you who turns to you every 30 minutes and says: "I'm pretty sure the plane is about to crash."

Posted: **Fri Jun 05, 2015 1:26 pm**

Matthew19 wrote: I feel like I understand everything except the cash portion. Is a treasury note ladder a pain to manage and would I be better with a money market fund?

On most brokers it is dead simple. At least it is on Fidelity. They will probably send you notices every single time a rung rolls over, which is a bit silly but not a problem. I have T-Bills and so just a one-rung "ladder", and every few months I get a message about how they're expiring and how I have thousands and thousands of gov't and commercial bond options available that I should roll it into, ha, ha. I think they finally stopped sending me the physical letters in the mail. Maybe. Or maybe I just tune it out now. Set it up and it just automatically does its thing.

Posted: **Fri Jun 05, 2015 1:26 pm**

MediumTex wrote:
Matthew19 wrote:
buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$
I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.
...and now that the plane has crashed, what do you say Mr. T?

If the PP were a 10 hour international flight, budd would be the guy sitting next to you who turns to you every 30 minutes and says: "I'm pretty sure the plane is about to crash."

Posted: **Fri Jun 05, 2015 1:27 pm**

buddtholomew wrote:
Matthew19 wrote:
buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$
I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.
That is the correct perspective and your philosophy aligns well with the composition of the portfolio.

See, he was just testing you! You passed.

Posted: **Fri Jun 05, 2015 1:36 pm**

buddtholomew wrote:
MediumTex wrote:
Matthew19 wrote: I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.
...and now that the plane has crashed, what do you say Mr. T?

If the PP were a 10 hour international flight, budd would be the guy sitting next to you who turns to you every 30 minutes and says: "I'm pretty sure the plane is about to crash."

I didn't realize the plane had crashed. What makes you say that?

Is there something unusual about the PP's recent performance?

Posted: **Fri Jun 05, 2015 1:58 pm**

If your definition of "financial plane crashing" is "portfolio ever declines in value," then I suppose I can see how a YTD 0.5% nominal loss is a plane crash.

Posted: **Fri Jun 05, 2015 2:10 pm**

Since the start of the year, the portfolio is down what, 0.75% this year?

So, the equivalent of flying along at 30,000 feet and plummeting to 29,775.

Posted: **Fri Jun 05, 2015 4:10 pm**

MediumTex wrote:
Matthew19 wrote:
buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$
I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.
If the PP were a 10 hour international flight, budd would be the guy sitting next to you who turns to you every 30 minutes and says: "I'm pretty sure the plane is about to crash."

Budd is the guy next to you during turbulence saying "wow, this jet airliner, often touted for it's extreme stability in flight, is sure rocking a lot! airliner for the lunch you can't afford to lose, my ass!"

Posted: **Fri Jun 05, 2015 4:24 pm**

dragoncar wrote: Budd is the guy next to you during turbulence saying "wow, this jet airliner, often touted for it's extreme stability in flight, is sure rocking a lot! airliner for the lunch you can't afford to lose, my ass!"

Deep and subtle with the deftest touch.

[claps]

Posted: **Fri Jun 05, 2015 5:58 pm**

iwealth wrote: Since the start of the year, the portfolio is down what, 0.75% this year?

So, the equivalent of flying along at 30,000 feet and plummeting to 29,775.

I'm imagining the following conversation.

Budd: "I should never have gotten on this plane flight. I felt fine as we ascended, but now it feels as though we're falling way too fast..."
Me: "Dude, we've only descended like 225 feet."
Budd: "OMG turbulence! I think the plane is crashing!"
Me: "This is normal for a long plane ride - I'd almost find it more strange if we encountered NO turbulence."
Budd: "Hold me, I'm scared."
Me: "Okay, come on in buddy."

Posted: **Fri Jun 05, 2015 9:12 pm**

I really fear this is what will happen to budd when the PP hits that infamous maximum drawdown that I-used-to-mention-but-no-longer-do-due-to-he-who-shall-remain-nameless:

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Posted: **Fri Jun 05, 2015 10:19 pm**

MachineGhost wrote: I really fear this is what will happen to budd when the PP hits that infamous maximum drawdown that I-used-to-mention-but-no-longer-do-due-to-he-who-shall-remain-nameless:

I was thinking more of an internal pressure-induced event:

I watched "Scanners" for the first time when I was about 12 years old, and in retrospect that was probably not a good idea. It's a disturbing movie.

Posted: **Fri Jun 05, 2015 11:50 pm**

I didn't expect this thread to end up with exploding heads haha

I'll say this for anyone who feels like they are missing out the stock market gains: the people who are stock heavy aren't selling, and you probably wouldn't be either. When it turns and takes a dump they will give it all back. I did it in 2010-2013 with the gold miners. Huge gains at first, but I never sold and now they are all negative. I would have loved to have had the modest gains of the PP instead of being half right in asset class timing.

Posted: **Fri Jun 05, 2015 11:53 pm**

Matthew19 wrote: I didn't expect this thread to end up with exploding heads haha

Going from some basic PP newbie questions to an exploding head without straying too far off topic and doing it in under 4 pages is pretty impressive.

Posted: **Sat Jun 06, 2015 12:00 am**

Maybe budd has a point. Is the PP positively biased because of the long term bull markets in gold and treasuries? Are we only here because of recency bias? What if these bulls have run their course? How do we know that what has happened in the past will repeat in the future? What if business cycles behave differently or these assets become less valuable or worthless?

Posted: **Sat Jun 06, 2015 12:22 am**

Reub wrote: Maybe budd has a point. Is the PP positively biased because of the long term bull markets in gold and treasuries?

What long-term bull market in gold?

Posted: **Sat Jun 06, 2015 1:23 am**

Pointedstick wrote:
Reub wrote: Maybe budd has a point. Is the PP positively biased because of the long term bull markets in gold and treasuries?
What long-term bull market in gold?

And I would point Reub back to some of the PP basics, like if one asset is falling, another asset MUST be rising, and if you can somehow find proxies for assets associated with all conceivable economic environments, then you will always have at least one winner in your portfolio, and that's enough to protect you.

Posted: **Sat Jun 06, 2015 1:54 am**

Good question Reub (and Budd).

I think you should always question the fundamentals of any system. The problem is in not having a decent metric to evaluate whether the fundamentals are working or not. You can't look at the day to day swings. That is just noise and will drive you crazy. But without something else to look at, you can never be sure that it is all working.

The metric that I have finally settled on is a linear fit of the inflation adjusted returns. Here's the vanilla HBPP over the last 10 years:

[img width=800]http://i57.tinypic.com/2z8ng2w.png[/img]

The linear fit of the inflation adjusted growth rate is 8.45%.
The average (RMS) deviation from that best fit line is 4.88%
The largest deviation from the line (not MaxDD) is 13.5%
Our current deviation from that best fit linear line is 8.58%

So... yes we are down a little bit from average over the last 10 years.
We are still aways a bit from even our worst 10 year slump.

Nothing in this picture makes me think the model is broken.

Think of this post as just an example. You need some metric that can give you an accurate picture of the model performing to plan. Pick whatever you want - but a day/week up/down will not give you the information you are looking for.

Hope this helps.

All the best,
Mark

Gyroscopic Investing

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