Mathjak Thread of Anti-PP

[ochotona]

[ochotona]

Now is not the time to be in the HBPP, not for me at any rate. When gold did less than nothing after the Grexit scare, I sold it, and fortunately before that gigantic sale was placed a few days ago which beat people up more. I also got out after the long Treasury beating started in earnest.

My financial life is a bit hacked-up right now, my money is stranded for a while in my old employer's 401(k) and I got tired of paying brokerage window fees. That also helped push me out of gold, and long Treasuries. Now I'm in the default core vanilla 401(k) target fund until I can rescue my money in Q1 2016, after 2015 profit sharing (if any) gets paid out.

[Greg]

Some topics on this could be:

1.) Probability of Economic Events over the years (for instance, having prosperity much more often than inflation, i.e. stocks doing better than gold)
2.) Back-testing the various elements, trying to understand why this is
3.) Modifications to make the vanilla/standard PP more robust to current environment
4.) Momentum Investing, other methods to make it better, etc.
5.) etc.

[Cortopassi]

Now is not the time to be in the HBPP, not for me at any rate. When gold did less than nothing after the Grexit scare, I sold it, and fortunately before that gigantic sale was placed a few days ago which beat people up more. I also got out after the long Treasury beating started in earnest.

You were holding gold based on what happened in Greece?  Not Ukraine (old news) Iran (old news) ISIS (old news), etc, etc.  I have gotten past the point of believing any world event outside of nuclear war can stay in people's consciousness long enough to bump gold.  It is what it is.  It doesn't necessarily function the way the majority viewpoints expect it to.  But it must function in some fashion or there wouldn't have been such a bull market in 2000-2011.

So on those investment rollercoaster graphs, you are at about point 12, right? 

[mathjak107]

well I wasn't going to post again but I will respond , it isn't I am anti pp. 

as I explained over and over, there are those  who are pp users who throw comments back at me about how anything other than the pp is " recklessly speeding " or careless investing or any of the other connotations to the fact that anything other than the pp is unsafe.
   
that is hardly true and to date the pp can only claim to be less volatile not safer .

you can't even say it stands up better to needing your money short term since if I did want my money now I would get my but kicked using it so it is time frame sensitive just like any other allocation.

if we are all in agreement with this then I can stop addressing this belief that any other allocation is unsafe and we can all move on  and further our education  in planning for our retirements and future .

[mathjak107]

the issue with Greece and why you would have thought gold would have responded is "derivatives"

there was a ton of money riding  in the credit default swap markets  betting as to whether Greece  paid  or not  . it was a spectacular amount and that is what brought Lehmann down and the crash that followed.
to insure 10 million in greek debt was up to 4 million plus 100k a year .  there was sooooooo much money riding on it that the danger was it may not have been able to be covered.

throw in all the other countries being hurt that are borderline and the perception was there was real danger here .

[ochotona]

I think I am at 9, and waiting to buy all of y'alls gold at 14 when you sell it at $500.

[mukramesh]

you can't even say it stands up better to needing your money short term since if I did want my money now I would get my but kicked using it so it is time frame sensitive just like any other allocation.

I'd say the PP is a bit better at needing money short term because of the 25% cash bucket. Withdrawals from this allow you to not touch your core investments (stocks, bonds, gold) and you can ride out short term dips without 'selling low.'

I know, you'll say that someone holding a 'conventional portfolio' should already have 1-2  years expenses in cash anyway. But the point is, the PP has a built-in cash management strategy.

[Cortopassi]

I am sure there still is danger lurking in every corner, derivatives, debt, pensions, consumer spending, deflation, Ukraine, EU, China and on and on.

But we've seem to become exceptional at being able to continue to kick the can and giving everything an air of normalcy.

I live in Cook County, IL.  The woman who won a few years ago as county president won in a large part because she was going to roll back a 1% sales tax her predecessor put in.  And a couple weeks ago she changed her mind, said pensions are too precarious, and the tax is coming back.

It could just be me, getting older, taking a more cynical view of how things work, but I tend to think instead I was naive when younger.

ochotona -- you sold!  You gotta be at least at 11! 

[Stewardship]

if we are all in agreement with this then I can stop addressing this belief that any other allocation is unsafe and we can all move on  and further our education  in planning for our retirements and future .

They'll undoubtedly see the error of their ways if you just repeat yourself a few more times 

[Stewardship]

I live in Cook County, IL.  The woman who won a few years ago as county president won in a large part because she was going to roll back a 1% sales tax her predecessor put in.  And a couple weeks ago she changed her mind, said pensions are too precarious, and the tax is coming back.

I live in Nevada.  Last night I saw on the local Fox news that Nevada is again ranked lowest in education.  Fox said it's because not enough children in Nevada are eating proper breakfasts.

lol.

http://www.fox5vegas.com/clip/11699056/ ... -education

[goodasgold]

I am opposed to censorship. Let mathjak have his say, although I would appreciate just a wee bit more concision in his postings.

Hell, I even think we should invite Kshartle back so he can have his say. If you don't like his (or anyone else's) postings, nobody is forcing you to read 'em.

[Stewardship]

[align=center]Which one do you want me to release to you: KShartle, or mathjak107?[/align]

[align=center][/align]



I think we should invite KShartle and mathjak107 to debate eachother.  Then we vote on the winner, who receives copies of the books Failsafe Investing and The Permanent Portfolio.

[ochotona]

OMG

Yes, we'd have the Fidelity all-stock portfolio versus the 50/50 gold/stock portfolio.

[buddtholomew]

How do I get a thread named after me? 

[mathjak107]

you can't even say it stands up better to needing your money short term since if I did want my money now I would get my but kicked using it so it is time frame sensitive just like any other allocation.

I'd say the PP is a bit better at needing money short term because of the 25% cash bucket. Withdrawals from this allow you to not touch your core investments (stocks, bonds, gold) and you can ride out short term dips without 'selling low.'

I know, you'll say that someone holding a 'conventional portfolio' should already have 1-2  years expenses in cash anyway. But the point is, the PP has a built-in cash management strategy.

actually that would not be true about needing the money short term.

if you had 100k in the portfolio and took 20k in cash out you need to sell the assets to rebalance. you may as well cut out the middleman and sell the assets directly anyway and avoid switching pockets back to cash again.

some interesting studies have been done by kitces ,pfau and blanchett as far as  buffer buckets of cash..

the studies all concluded that having cash buckets to pull from is more mental masturbation than anything else.

with few exceptions using a systematic withdrawal system pulling  from all assets in  the pie in good times and bad was no better or worse than maintaing a cash buffer to pull from in down turns.

the reason was the cash acted as a weight in up markets and so the portfolio never developed the same level of cushion to support the down markets as not having cash buffers  did.

in the end running simulations after simulations there was little difference in the end .  it was just mentally more comfortable to have that cash buffer to pull from when things were down.

[mathjak107]

How do I get a thread named after me? 

piss everyone off ha ha ha

[Xan]

There's no requirement to immediately rebalance.  I've "borrowed" money from my cash allocation for one reason or another, and considered my obligation to pay it back to still be "cash" for purposes of my balance.

[mathjak107]

then you risk a greater loss if things tumble if they are so out of whack  so it is a double edge sword . you would be market timing in effect.

good thing harry didn't hear this .  that is why we have the bands .

but in all seriousness , it really wouldn't matter where you spend from .

[mathjak107]

some interesting reading on the subject of spending from cash buffers by kitces


https://www.kitces.com/blog/research-re ... ket-timer/

[bedraggled]

Goodasgold is correct, folks.  Mathjack is bringing info and thinking to the forum.

Heck, you've put up with my deflation assertions/questions.

You don't have to read his stuff.

Somebody said this forum was a ghost town a couple of years ago.  Let the guy roll it out. 

Gracious me!

[mathjak107]

the only real benefit a cash buffer would have in theory but never really in practice to date is the proverbial steep long drop at retirement before the benefit of an up cycle.

even those retiring at the start of the great depression ended up okay with about 1/4% cut in draw over their 30 years

suppose you were so unlucky to retire in one of those worst time frames ,what would your 30 year results look like :

1907 stocks returned 7.77% -- bonds 4.250-- rebalanced portfolio 7.02- - inflation 1.64--

1929 stocks 8.19% - - bonds 1.74%-- rebalanced portfolio 6.28-- inflation 1.69--

1937 stocks 10.12 - - bonds 2.13 - rebalanced portfolio -- 7.24 inflation-- 2.82

1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38

for comparison the 140 year average's were:

stocks 8.39--bonds 2.85%--rebalanced portfolio 6.17% inflation 2.23%

so while we  all worry about that proverbial hit early on it never really happened .

the real crucial time frame is the first 15 years . but as bad as those time frames were above a 1/4% drop in draw to 3.75% made everything fine and these were the worst times ever we had .


so what made those time frames the worst ? what made them the worst is the fact in every single retirement time frame the outcome of that 30 year period was determined not by what happened over the 30 years but the entire outcome was decided in the first 15 years.

so lets look at the first 15 years in those time frames determined to be the worst we ever had.

1907--- stocks minus 1.47%---- bonds minus .39%-- rebalanced minus .70% ---inflation 1.64%

1929---stocks 1.07%---bonds 1.79%---rebalanced 2.29%--inflation 1.69%

1937---stocks -- 3.45%---bonds minus 3.07%-- rebalanced 1.23%--inflation 2.82%

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%

it is those 15 year horrible time frames that the 4% safe withdrawal rate was born out of since you had to reduce from what could have been 6.50% as a swr down to just under a  4% withdrawal rate  to get through those worst of times.

but there are excellent ways to still run conventional mixes and have some increased down side protection early on.

for one thing substituting some or all of the bond portion with the higher cash flow of an immediate annuity can cut down on asset selling . it can also leave more money invested in faster growing assets while cash flow is increased.

you can also use a rising glide path in retirement.

you cut back from your growth portfolio to maybe 35% equity's going in and over the next 10-15 years increase equity's by about 2% a year  up to what ever allocation you are comfortable with.

you give up gains early on in exchange for more downside protection but the rising equity glide path adds more earning power to the mix down the road.

coupling an immediate annuity , your own investing and a life policy for a spouse or heirs has been shown to offer the greatest odds of having both a higher cash flow and more left for heirs .

the life policy provides a spouse with 100% tax free money with no rmds instead of forever taxed money.


there is so much research going on today because of the number of baby boomers approaching retirement . much of the research is showing what we thought in the past either has no basis or when looked at a step farther is just not correct .

[drumminj]

Just registered to be able to say I'm happy to see this thread.  Been lurking/reading for a few months and am relatively new to the HBPP.  Discussion/Debate/Dissenting opinions are certainly helpful for evaluating the path you're on.  An echo chamber isn't really helpful, though neither is a constant negative opinion.

[AnotherSwede]

the only real benefit a cash buffer would have in theory but never really in practice to date is ...

How about equity falling 50+%, and then home prices falling 50+% (because they're correlated) and then you lose your job or your marriage or ... at which point you go from your house, but still has your debts, because that's how it works here.

I know people who actually tried this in the 90s.

Drawdowns matter, even in the short term.

if you had 100k in the portfolio and took 20k in cash out you need to sell the assets to rebalance. you may as well cut out the middleman and sell the assets directly anyway and avoid switching pockets back to cash again.

If you had $25000 in each. Then equity falls and possibly bonds also, and of course gold also (because that must always fall at the same time according to you  ). You could use up quite a lot of cash before cash falls below 15%, and if it does you do as Xan describes.

[mathjak107]

it still didn't matter since you would be spending down excessively for only a few years like 2008 before coming back more than before .

it has been demonstrated over and over you would have to create a unique situation to have it matter.

even 2008 was fine.  a diversified mix would not have fallen 50% , in fact a 50/50 mix would have been down about 18%.

based on my entry points in to the pp i would be worse off if i needed the money today than what i used .

more often than not folks fears are worse than reality plays out .

their fears just make them a lot poorer than reality does when it comes to investing.

the way reality generally plays out you gain so much more in the up cycles with conventional mixes that the spending down when things are down still leaves you farther a head .

you would be hard pressed to find any accredited study that shows other wise .

i can post link after link to studies by the greatest researchers today that say you are wrong  and already posted one above .