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 dualstow » Thu Sep 03, 2015 10:54 am

dragoncar wrote: ...
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.

See: https://www.bogleheads.org/forum/viewto ... &start=100

But apparently clocks in thunderstorms have always had three years of negative returns
Ah, thank you for posting that. I have long since misremembered that as "would make me leave."
'Open the hood and look' is milder.
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Re: PSA: I now have a 3-year period with no gains

Post by Jack Jones » Thu Sep 03, 2015 11:58 am

@MediumTex: Is that the epic BH thread that you sometimes refer to?
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Re: PSA: I now have a 3-year period with no gains

Post by MediumTex » Thu Sep 03, 2015 12:43 pm

Jack Jones wrote:
@MediumTex: Is that the epic BH thread that you sometimes refer to?
I think that is a shorter thread that came after the epic thread.
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Re: PSA: I now have a 3-year period with no gains

Post by dualstow » Thu Sep 03, 2015 1:08 pm

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

Post by Jack Jones » Thu Sep 03, 2015 2:02 pm

dualstow wrote: The big one. 72 pages. https://www.bogleheads.org/forum/viewtopic.php?t=15434
It continues with Med Tex in October 2010 http://www.bogleheads.org/forum/viewtopic.php?t=61964
Thanks!
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Re: PSA: I now have a 3-year period with no gains

Post by AdamA » Thu Sep 03, 2015 2:50 pm

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

Post by sophie » Thu Sep 03, 2015 4:13 pm

9.8% officially in 2014 I think.  It's 4.8% total over the last 36 months.  Not negative and possibly not even real return negative if you believe the CPI (see thread I'm about to start), but still discouraging in the face of the tremendous stock market gains.

May I remind everyone though, that judging the stock market performance from the 2009 nadir is quite misleading unless you happened to buy in at exactly that point.  Most of the bull market was about recovering from the 2008-9 crash.  If you bought in at the peak in 2007, you would have been in the red until 2013 - that's NEGATIVE RETURNS FOR 6 YEARS.  If you're thinking that a standard Boglehead 60/40 or similar wouldn't be that bad, think again.  The pictoral performance chart on my Vanguard account says that nominal investment returns with a target date fund were negative between September of 2008 and October of 2011.  Less bad, but still 4 years in the red.

If you believe the PP's fundamentals are no longer sound, that would be a reason to pull out.  Not sure if a 3 year period with lackluster returns should be the criteria though.  By that logic you would most definitely have jumped out of the stock market sometime around 2010-2011, and then you'd have missed the big rally that's gone on since then.
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Re: PSA: I now have a 3-year period with no gains

Post by PP67 » Thu Sep 03, 2015 5:34 pm

It's been tough even for the biggest and brightest...

http://www.zerohedge.com/news/2015-09-0 ... quarter-le


Bridgewater's 'All-Weather' Fund Goes Negative For 2015 After Risk-Parity's Worst Quarter Since Lehman


The $80 billion Bridgewater All Weather Fund, a risk-parity model managed by hedge fund titan Ray Dalio, was down 4.2% in August, according to Reuters citing two people familiar with the fund's performance. This leaves the fund down 3.76% for 2015 as the frameworks for these funds are forced mechanically to reposition as correlations and volatilities across asset classes break down. Just as we saw in the summer of 2013's Taper Tantrum, the last 2 weeks have seen 4 to 5 sigma swings in daily returns and 'generic' risk-parity funds have suffered the biggest 3-month losses since the financial crisis.
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Re: PSA: I now have a 3-year period with no gains

Post by MediumTex » Thu Sep 03, 2015 5:37 pm

PP67 wrote: It's been tough even for the biggest and brightest...

http://www.zerohedge.com/news/2015-09-0 ... quarter-le


Bridgewater's 'All-Weather' Fund Goes Negative For 2015 After Risk-Parity's Worst Quarter Since Lehman


The $80 billion Bridgewater All Weather Fund, a risk-parity model managed by hedge fund titan Ray Dalio, was down 4.2% in August, according to Reuters citing two people familiar with the fund's performance. This leaves the fund down 3.76% for 2015 as the frameworks for these funds are forced mechanically to reposition as correlations and volatilities across asset classes break down. Just as we saw in the summer of 2013's Taper Tantrum, the last 2 weeks have seen 4 to 5 sigma swings in daily returns and 'generic' risk-parity funds have suffered the biggest 3-month losses since the financial crisis.
That makes me so happy to be using the PP.  It looks like YTD it's doing better than just about everything else.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Thu Sep 03, 2015 5:58 pm

bridgewater's is a special situation  , not really representative of a regular fund ..

the problem is they use risk parity to bet against markets and they bet to heavy against the markets  early on  so  going in to in august they never developed the cushion  more conventional funds had .
they lost 4.2 percent in August , posting a negative 3.76  return  . that means they had to be barely up prior to august while conventional funds were doing well .

i know my fidelity blue chip growth and , contra were  all up more than 8% -10% prior  so  while they lost ground they are all positive .

fidelity blue chip growth is up 2.36%  contra  up 1.50 .
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Re: PSA: I now have a 3-year period with no gains

Post by craigr » Thu Sep 03, 2015 6:03 pm

Risk parity. Meh:

http://gyroscopicinvesting.com/forum/pe ... /#msg61780
My bet is on the simple HBPP:

1) Lower costs.
2) Simpler to setup and manage.
3) Fewer moving parts inside the asset classes.
4) No leverage.
5) Doesn't try to complicate things with dubious backwards looking volatility measures.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Thu Sep 03, 2015 6:23 pm

interesting read about them  and their risk parity use .  yeeeech , i will take a good ole fashioned fund any day

http://www.streetinsider.com/Hedge+Fund ... 67437.html
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Re: PSA: I now have a 3-year period with no gains

Post by sixdollars » Thu Sep 03, 2015 7:03 pm

Pointedstick wrote:
iwealth wrote: ONE single year (2013) makes up the entirety of the 2.6% CAGR difference. All of this angst over one year's worth of underperformance in a historic bull market. You read these threads and you'd think the PP was in the midst of a massive drawdown or something. Seriously, sixdollars quote is on the money. It's crazy in here.
I agree, but I think it's a case of expectations not matching up with reality. Right now, everything is treading water, and I think some people assumed that this should be the ideal condition for the PP, and, specifically, that the PP would zig when other things zagged, and on a daily basis, to boot! It's the same old case of wishing for a portfolio that only ever went up, never down. Now that it's going down, there's panic because this wasn't supposed to happen! It's just not realistic.
Yeah, and it's unfortunate that people jumped into the PP without realizing this.  Gumby stated something about this in the bogleheads forum, quoting John Chandler.
Gumby wrote:
He was. However, he never believed in limiting yourself to a 12 month timeline when comparing investments.

John Chandler, who was instrumental in helping Harry Browne research the Permanent Portfolio, said the following about 12-month returns:
    JOHN CHANDLER: The world doesn't really work according to the calendar...A lot, a lot of harm has been done because of the calendar. And one of the harms is trying to make everything fit neatly into a 12 month, or four week, or seven day pattern. The idea of the Permanent Portfolio is is that it invests in asset classes, which respond differently in different economic conditions. The economic conditions that makes one thing goes down, is the same condition that makes another asset go up. But, here is the key and that is that it does not happen overnight. It does take time for these economic forces to take hold. And I rememember back in the seventies, early eighties when we were doing research on the Permanent Portfolio, we found periods as long as 18 months where the portfolio could lose money. But, now that was about the longest we found. Now bear in mind that this is not a promise. It's not a guarantee without — saying that with only 18 months it can work. I can simply say, during the periods when it was being tested. The prices... doing tests on the Permanent Portfolio and what would happen in the different situations over long, long, long periods of time — about 18 months is the maximum we found where the portfolio could lose money before the economic forces took hold and balanced the portfolio out.
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Re: PSA: I now have a 3-year period with no gains

Post by Reub » Thu Sep 03, 2015 8:17 pm

Good to see you guys posting a little bit more often!  ;)
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 04, 2015 4:01 am

"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."

-William J. Bernstein



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 .
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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.

Image


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

Image


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.
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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.
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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."

-William J. Bernstein
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