PSA: I now have a 3-year period with no gains

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Re: PSA: I now have a 3-year period with no gains

Post by barrett » Fri Sep 04, 2015 4:43 am

Ah, interesting to know that about Bernstein. I only know of him from his oft-cited quote about PP followers chasing returns.

mathjak, I am only posting so early because I have jetlag and keep waking up at 4:00AM. Don't get too used to having someone to discuss investing with in the middle of the night!
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 04, 2015 4:59 am

you will rarely hear from me after 8pm  as i am falling asleep .

60 may be the new 40 but 9pm is the new midnight .  i am up so early every day , even retired .  been that way for decades .  by 7 am we are at the gym  daily .

headed to the bronx zoo later with the kids and grand kids .
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Re: PSA: I now have a 3-year period with no gains

Post by dualstow » Fri Sep 04, 2015 7:50 am

mathjak107 wrote: 60 may be the new 40 but 9pm is the new midnight .
:D
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Re: PSA: I now have a 3-year period with no gains

Post by kka » Fri Sep 04, 2015 11:14 am

AdamA wrote:
dragoncar wrote:
That's kinda what spurred my post to begin with.  From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look."  We are nearing that point.
2014 returned like 12% on the PP.  Where are you getting this 3-year period of negative returns?
We are getting close -- 1.5% CAGR over the last 36 months.  Slightly positive nominally but 0 real return.  I'd be curious to know if MT has looked under the hood yet and what he sees.

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MT's simpler alternative of 90% PRPFX + 10% EDV has gone literally nowhere on a nominal basis for 4 years.

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I wavered for a short time, but I'm glad that I ultimately stuck with a BH portfolio.  PP is good for maintaining wealth (although if you're really risk averse, a CD ladder will probably do almost as well) but not for growing it.  A good long-term comparison would be PRPFX vs. Wellington.  PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation.  Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy.  I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.

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Re: PSA: I now have a 3-year period with no gains

Post by Tyler » Fri Sep 04, 2015 11:52 am

kka wrote: A good long-term comparison would be PRPFX vs. Wellington.  PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation.  Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy.  I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
Since 1972, the real CAGR of the HBPP is 5.0%.  For Wellington, it's 5.9%.  Perhaps you'd trade the nearly double volatility for an additional 2-3%.  But for less than 1%?  That's still up to you, but it's not as big a difference as you think.

Like all stock-heavy portfolios, VWELX made its name in the 80's and 90's and looks great since 2009.  The PP beat it in the 70's and 2000's and was generally more consistent throughout.
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Re: PSA: I now have a 3-year period with no gains

Post by kka » Fri Sep 04, 2015 1:27 pm

Tyler wrote:
kka wrote: A good long-term comparison would be PRPFX vs. Wellington.  PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation.  Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy.  I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
Since 1972, the real CAGR of the HBPP is 5.0%.  For Wellington, it's 5.9%.  Perhaps you'd trade the nearly double volatility for an additional 2-3%.  But for less than 1%?  That's still up to you, but it's not as big a difference as you think.

Like all stock-heavy portfolios, VWELX made its name in the 80's and 90's and looks great since 2009.  The PP beat it in the 70's and 2000's and was generally more consistent throughout.
Since 1975, it's almost 3% CAGR difference.  I don't think we can count on gold quadrupling again in just a few years like it did after the gold window was closed.
Last edited by kka on Fri Sep 04, 2015 1:47 pm, edited 1 time in total.
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Re: PSA: I now have a 3-year period with no gains

Post by dragoncar » Fri Sep 04, 2015 2:21 pm

AdamA wrote:
dragoncar wrote:
That's kinda what spurred my post to begin with.  From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look."  We are nearing that point.
2014 returned like 12% on the PP.  Where are you getting this 3-year period of negative returns?
http://gyroscopicinvesting.com/forum/pe ... #msg128483
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Re: PSA: I now have a 3-year period with no gains

Post by MediumTex » Fri Sep 04, 2015 2:23 pm

kka wrote:
Tyler wrote:
kka wrote: A good long-term comparison would be PRPFX vs. Wellington.  PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation.  Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy.  I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
Since 1972, the real CAGR of the HBPP is 5.0%.  For Wellington, it's 5.9%.  Perhaps you'd trade the nearly double volatility for an additional 2-3%.  But for less than 1%?  That's still up to you, but it's not as big a difference as you think.

Like all stock-heavy portfolios, VWELX made its name in the 80's and 90's and looks great since 2009.  The PP beat it in the 70's and 2000's and was generally more consistent throughout.
Since 1975, it's almost 3% CAGR difference.  I don't think we can count on gold quadrupling again in just a few years like it did after the gold window was closed.
Even at today's price levels, gold has quadrupled from where it was in 2000.
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Re: PSA: I now have a 3-year period with no gains

Post by AdamA » Fri Sep 04, 2015 2:42 pm

dragoncar wrote: The caveat is that I've been regularly and aggressively contributing to the PP.  So my early gains in 2011/2012 were small as a percent of my current total portfolio value.  Losses in 2015 are applied to a much higher portfolio value.  Hopefully that makes sense.
Don't you see where that logic is flawed, though? 

That doesn't mean the PP has had 3 consecutive negative years, just that you put a large sum of money in during a period in which it took a loss.
Last edited by AdamA on Fri Sep 04, 2015 11:12 pm, edited 1 time in total.
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Re: PSA: I now have a 3-year period with no gains

Post by sixdollars » Fri Sep 04, 2015 3:48 pm

mathjak107 wrote: bernsteins opinions and theory's change way to fast himself ,  he changes them far to much to take anything he says  for more than the moment .

first he was big on retiree's investing through retirement  using equity's  and bonds for their income ,  then he switched sides in his book the age of the investor .  now it was short term bonds , tips and a longevity annuity , equity's were only if you had extra money to inveast after essential expenses were covered  .  then he re-canted that  strategy for now  after another researcher pointed out that rates are just to damn low to make that an option .

i don't take bernstein's opinion on anything for more than the thought in his head at the moment .
It is only natural to change your thoughts when presented with convincing contradictory evidence.  I don't know enough about Bernstein personally, so I'll reserve my judgment.  In any case, what Bernstein said that I have quoted was only an observation.  To me it seems that this observation still holds as evidenced by this very thread.  Even if that is a reason to not believe much of what Bernstein says, I would still say that there's no need to throw the baby out with the bathwater...
"There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."

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Re: PSA: I now have a 3-year period with no gains

Post by rocketdog » Fri Sep 04, 2015 4:00 pm

Pardon the intrusion, but I didn't have time to read all 17 pages of posts in this thread.  I dusted off my PP historical performance spreadsheet and wanted to share some food for thought.  (Note:  the numbers below assume you bought a PP on 1/1 of each year and held it without rebalancing until 1/1 of the following year, at which point you rebalanced to 4x25%):

The worst 3-year performance for the PP was 1999-2001, when it returned a total of 7.8%, or 2.6% annually.
The worst 4-year performance for the PP was 1999-2002, when it returned a total of 14.9%, or 3.8% annually.
The worst 5-year performance for the PP was 1998-2002, when it returned a total of 25.9%, or 5.2% annually. 

Notice that the longer you hold the PP, the more it stabilizes.  As of 12/31/2014 (the most recent full calendar year of PP performance we have), here are the numbers:

3-year performance from 2012-2014 = 13.5%, or 4.5% annually.
4-year performance from 2011-2014 = 24.0%, or 6% annually.
5-year performance from 2010-2014 = 38.5%, or 7.7% annually. 

As you can see, the PP as of 12/31/2014 is still far from experiencing the worst 3, 4, or 5-year period on record.  Again, the longer you hold the PP, the more it stabilizes. 

In fact, in order for the PP to become the worst performer over 3, 4, and 5-year periods as of the end of this year (12/31/2015), the PP would need to provide a dismal 1% return this year.  Is that possible?  Most certainly.  Would you abandon the PP at that point?  If so, consider this...

After the PP experienced its worst 3, 4, and 5-year periods as shown above, its performance steadily improved over the next 5 years.  By 2007, it had rebounded to a 5-year total return (2003-2007) of 52.3%, or 10.5% annually over those 5 years. 

In other words, don't buy high and sell low.  I'm certainly not, although I will admit that I only hold about 40% of my portfolio in a PP, simply because I don't like to put all my eggs in one basket (or in this case, investing strategy).  I treat my PP as the low-volatility portion of my portfolio, almost as if it were a low-volatility bond.  The rest (my VP) I keep in stocks, commodities, and REITs. 

Stick with your plan, and assuming you're a long-term investor don't sweat the short-term gyrations.  As Keynes once said, "The market can stay irrational longer than you can stay solvent."
Last edited by rocketdog on Fri Sep 04, 2015 4:02 pm, edited 1 time in total.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 04, 2015 4:12 pm

if i remember correctly the idea for the pp didn't exist in 1975 .    which also happened to be its best run years  but it didn't exist . to be fair tracking it  before it existed is really not the way to track things ..
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