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 11, 2015 10:27 am

mathjak107 wrote: except why look at just the last 15 years when equity's had a sluggish run . how  about the last 20 or 30 where the balance is 2 to 3x  higher than the pp . or even the 5 year .

the fact is all that counts is your own results and what you are averaging with any portfolio over the time frame you have it
Math -

OK, so from 1/1/95 through yesterday, here is what I get on Peaktotrough.com (annual rebalances & dividends reinvested):

PP - 7.51% CAGR with a maximum drawdown of 14.18% and no other drawdowns greater than 10%. Total ending balance is $41,756.

60/40 S&P 500 & 10-year treasuries - 8.46 CAGR with a maximum drawdown of 29.91% and another of 23.39%. 8 total drawdowns of 10% or greater. Total ending balance is $53,728.

So greater volatility for a better ending bottom line. Back to what you wrote a few months ago, one needs a high "pucker factor" with a more volatile portfolio. Can you accept that most of us that implement a PP or something that is even PP-ish just aren't interested in the drama that comes with riding out those storms? We get that you have done well and you have added a lot to this forum in other areas. As for the PP, maybe its Waterloo is in fact here. We shall see. Maybe stocks are about to plunge or go to the moon. If the latter happens, well at least we own some stocks (and will be overbalanced in them much of the time, so holding more than 25%).

I guess rather than us reading posts that are so similar (I know, I know, I can just ignore them if I like), maybe you should just post the Mathjak 16 (5? 3?) Golden Rules Of Investing somewhere on here.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 11, 2015 1:13 pm

of course i agree about that fact . but what i disagree with is cherry picking time frames to make the pp compare better to a more aggressive model by singling in the worst period .  because while you could pull out the 2000-2015 time frame to compare the big factor is up to 2000 we had one of the greatest stock bull runs ever , with 17 years of almost 14% cagr .

in the end forget these charts . all that matters is what you do and if you are happy .
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Re: PSA: I now have a 3-year period with no gains

Post by bedraggled » Fri Sep 11, 2015 1:21 pm

Math,

barrett has an idea here.  We all recognize you are one of the sharper knives in the drawer.

So... posting Math's 16 Golden Rules of Investing is an excellent idea- a collection in one place.

You might get  a place of honor at the top with Tyler.  You will have then ARRIVED!

Well done, barrett!
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 11, 2015 2:00 pm

as soon as i know what those rules are i will let ya'all know .

i only have 1 rule when it comes to investing

"stay flexible and nudge the portfolio like steering a big ship to keep it on course.

there is not a strategy or trading system that does not need to be fined tuned and updated along the way to  keep it up with the times which do change .
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Re: PSA: I now have a 3-year period with no gains

Post by goodasgold » Fri Sep 11, 2015 2:25 pm

mathjak107 wrote:
i only have 1 rule when it comes to investing

"stay flexible and nudge the portfolio like steering a big ship to keep it on course.
    Hmmmm.... Sounds like "sell at the bottom and buy at the top" to me. Nothing new here, Mathjak.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 11, 2015 2:43 pm

Thank you, you reminded me of rule #2

Buy low and sell high has lost more money for investors than any other mantra.

We all thought low was when markets fell 2000 points in 2008-2009.

Little did anyone know we had 4000 more to go.

So all those who thought they were buying low either got stopped out or scared out.

On the other hand buy high and sell higher has made more money than anything else.

An object in motion stays in motion until it hits something.

Odds are if you want to sell you will not be the last man on the line in a
bull market and that the very next move will result in a loss and spiral
downward.
Trying to buy low has not made nearly as much money as buy high and sell higher .

Google it for some interesting thoughts on that as a mantra. Think of gold.
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Re: PSA: I now have a 3-year period with no gains

Post by MediumTex » Fri Sep 11, 2015 2:54 pm

mathjak107 wrote: of course i agree about that fact . but what i disagree with is cherry picking time frames to make the pp compare better to a more aggressive model by singling in the worst period .  because while you could pull out the 2000-2015 time frame to compare the big factor is up to 2000 we had one of the greatest stock bull runs ever , with 17 years of almost 14% cagr .

in the end forget these charts . all that matters is what you do and if you are happy .
The only reason that we pulled the 15 year data was because you presented your 15 year returns as if to show how much better your strategy was than the PP, and yet the PP would have provided you with better returns over that same period.

In general, the PP will give you lower returns and lower volatility than more aggressive allocations, and that's what the PP investor wants--less volatility along with consistently positive real returns.  Yes, we are turtle jockeys.  That's the kind of ride we like.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 11, 2015 3:26 pm

you know i agree with that . capital preservation is certainly a good thing .

my only objection is when the charts are created to show how the pp is right up there during only select time frames  vs  more conventional portfolio's .  my example was that i did a lot better than the s&p 500 did  the last 15 years as the s&p 500  is only one fund and one segment of the market .

so my point using just an s&p 500 fund the last 15 years would not be representative of what a fully integrated portfolio did  with midcaps and small caps with enough weighting so they were not dominated totally by the s&p 500 like a total market fund is ..

it was not a comparison to the pp since  it was one of the most sluggish 15 year periods we had . especially since the 15 years prior were some of the best ever for a conventional portfolio so regression to the mean says it has to give back at some point .
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Re: PSA: I now have a 3-year period with no gains

Post by Xan » Fri Sep 11, 2015 3:40 pm

mathjak107 wrote:my example was that i did a lot better than the s&p 500 did  the last 15 years as the s&p 500  is only one fund and one segment of the market .
So your suggestion is that everybody simply needs to be as lucky as you were?
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 11, 2015 3:48 pm

not at all ,  what everyone needs to do is just watch their own performance and stop trying to go by what was , or could have been .

if you are happy with it , then that is your benchmark . not the fact you can pull out times that came and went and feel good about them .  do i think i will ever see 14% a year ffor so long ?  oof course not , in fact right now i see single digit gains .

so i watch the portfolio , i watch the bigger picture and i nudge it as we go along .
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Re: PSA: I now have a 3-year period with no gains

Post by goodasgold » Fri Sep 11, 2015 4:20 pm

mathjak107 wrote: Buy low and sell high has lost more money for investors than any other mantra....

On the other hand buy high and sell higher has made more money than anything else.
Well, MJ, you will have a great future in your new career endorsing whichever brand of crystal ball you use to come up with your latest "guaranteed miracle forecast" for... tomorrow, but no longer? How about the Joe Granville model? As I recall, Joe was so confident of his forecasting prowess that he predicted a date for the next Big One earthquake, which he said would flatten Los Angeles. (He made that prediction decades ago, by the way.)  ::)

No thanks, I'm sticking with the PP.  ;D
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 11, 2015 5:37 pm

no crystal ball needed , they are just nothing special funds  both equity's and bonds . at times they may contain reits and commodity's .  been 30 years now and never needed a crystal ball .

you do realize there are millions of successful investors who use conventional allocations and  do just fine self included .

see this is the problem i have with many pp users who get it in their head that their way is the only way and everything else is speculating . .

fine tuning different types of diversified funds that better fit the time  is hardly speculating .  the reality is that even if the weighting was off a bit it still  doesn't matter much in the long term scheme of things . so  as an example i would not use fidelity multinational and export when the dollar is strong  but it was a great fund when the dollar was weak .  i would swap out some total bond fund for the limited term bond fund  now ,  there are times funds are taken over by better managers , etc . , that is hardly joe granville stuff .
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Re: PSA: I now have a 3-year period with no gains

Post by Pointedstick » Fri Sep 11, 2015 6:27 pm

mathjak107 wrote: fine tuning different types of diversified funds that better fit the time  is hardly speculating .  the reality is that even if the weighting was off a bit it still  doesn't matter much in the long term scheme of things . so  as an example i would not use fidelity multinational and export when the dollar is strong  but it was a great fund when the dollar was weak .  i would swap out some total bond fund for the limited term bond fund  now ,  there are times funds are taken over by better managers , etc . , that is hardly joe granville stuff .
Another way to put this is that you are adjusting your asset allocation according to what you project will do the best in the near future, and extrapolating which trends appear sufficiently durable that  that you believe can continue to make money off them for a while longer, and which trends are nearly played out such that they are no longer going to do well. You are not taking an agnostic view; you are using your intuition and experience to forecast what will make more money based on conditions in the present and near future.

In other words, speculating. ;) …Unless you have a very different definition of the term!
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Fri Sep 11, 2015 6:39 pm

You mean like throwing good money after bad year after year speculating on gold that some event  will make it go up and hopefully over the next 40 years do better than a t-bill  like the last 40 failed to do ?

I mean call a spade a spade. If you want to call adjusting a portfolio slightly with different types of funds ,holy cow what do you call this .

Yeah i know you call it insurance that way you don't have to acknowledge the fact you have a lot of money riding on a speculation in gold.
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Re: PSA: I now have a 3-year period with no gains

Post by MediumTex » Fri Sep 11, 2015 9:38 pm

mathjak107 wrote: You mean like throwing good money after bad year after year speculating on gold that some event  will make it go up and hopefully over the next 40 years do better than a t-bill  like the last 40 failed to do ?

I mean call a spade a spade. If you want to call adjusting a portfolio slightly with different types of funds ,holy cow what do you call this .

Yeah i know you call it insurance that way you don't have to acknowledge the fact you have a lot of money riding on a speculation in gold.
PP investors don't speculate in gold.  They just hold it and buy or sell according to the PP rebalancing guidelines.

Even during the 1982-2000 bear market for gold, there were years when it was the best performer in the portfolio, and it helped smooth out the poor performance of the other assets in those years.

Gold is just a tool; it's not a religion.
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Re: PSA: I now have a 3-year period with no gains

Post by Cortopassi » Fri Sep 11, 2015 9:53 pm

MathJ,

As MT just said, it is the component volatility in gold that is used, and the rebalancing takes advantage (longer term) of that.

For my investing career, starting in 1989, if I were in the PP following the 35/15 rebalancing bands, I would have rebalanced 7 times in 27 years:

2 times because T-bills hit the 35% mark
2 times because S&P hit the 35% mark
2 times because gold hit the 35% mark
1 time because gold hit the 15% mark

So no one is letting it ride on gold.  As long as rebalancing is done on some consistent basis, over time the peaks and valleys in certain components get transferred from/to the others.

It's not like all PPers invested in gold at $1900 and are screwed because it has been going down forever.  Increases in gold were effectively passed to other components during rebalancing.

Of course I would rather see an upslope on all components, but if gold hits 15% I'll have no problem allocating others to bring it back up.  Haven't decided if I will rebalance annually or 35/15 though.
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Re: PSA: I now have a 3-year period with no gains

Post by frommi » Sat Sep 12, 2015 1:04 am

mathjak107 wrote: You mean like throwing good money after bad year after year speculating on gold that some event  will make it go up and hopefully over the next 40 years do better than a t-bill  like the last 40 failed to do ?

I mean call a spade a spade. If you want to call adjusting a portfolio slightly with different types of funds ,holy cow what do you call this .

Yeah i know you call it insurance that way you don't have to acknowledge the fact you have a lot of money riding on a speculation in gold.
When you are a pro at investing, why do you need a fund manager at all? Just costs you extra money. Btw. momentum investing only works until it doesn`t and when it fails, it fails big time. You don`t want to bet your whole portfolio on that one strategy.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Sat Sep 12, 2015 2:59 am

so putting more and more money  as it falls in to what has been the worst investment in history  is not speculation even though you are  waiting for some unique event to make it go up which it has not done so yet  .  but weighting a portfolio towards lower rates when the fed tells you this is what it is doing or the dollar strengthening  is speculating .
i think you guys need to take a step back and realize you have more danger and weight  in that gold than anything i have ever done weighting a portfolio for what the economic conditions warrant .

because you disguise  the fact by claiming you are not betting on a thing by the very nature you have money in an investment that has been historically so poor and undependable as far as what it reacts to  you are speculating on it .

you can't call what my portfolio strategy has been for 30 years speculating without calling this investment in gold even more  speculative . my weighting has never cost me more than a percent or two when wrong not  40-50% of my money  , certainly no where near the damage gold has done .
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Re: PSA: I now have a 3-year period with no gains

Post by MediumTex » Sat Sep 12, 2015 3:25 am

mathjak107 wrote: so putting more and more money  as it falls in to what has been the worst investment in history  is not speculation even though you are  waiting for some unique event to make it go up which it has not done so yet  .  but weighting a portfolio towards lower rates when the fed tells you this is what it is doing or the dollar strengthening  is speculating .
i think you guys need to take a step back and realize you have more danger and weight  in that gold than anything i have ever done weighting a portfolio for what the economic conditions warrant .
You are offering a criticism of one asset in the PP without a lot of substance to your criticism beyond the asset had an 18 year bear market.

If you want to criticize the structure of the PP, do that, but singling out one PP asset and saying it's a foolish asset to hold tells us nothing about whether the overall portfolio is a good allocation method.

I could argue that LT treasuries are an even riskier asset to hold than gold, but it would be a meaningless argument in the context of the PP because the PP isn't depending on LT treasuries doing well for the overall portfolio to perform well.

I know you believe that the three volatile assets have nowhere to go but down (except equities maybe), but that's just your belief, and our beliefs about a volatile asset are always speculative.

People always think one or two of the PP's volatile assets are dumb investment (usually gold and LT treasuries), but owning an asset when people think it's dumb is often the best time to own it, even if it doesn't look that way at the time.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Sat Sep 12, 2015 3:31 am

i am only criticizing it because of the fact of what was said to me about  speculating because of a slight tilt in a portfolio which in itself causes no harm but has seen a good amount of added value over the decades added . but yet when it comes to the pp any actions are never speculative  in nature even when they certainly are ..i didn't say it was foolish to hold the gold i said whether you like it or not that was speculating

kind of a case of the emperors new clothes  .  in effect you have lots of money riding on the fact an event may or may not ever happen so you want to be there if it does .  just by definition having money allocated to something that may never happen that money is committed to a speculation . . which by the way does far more harm to the portfolio's performance than a slight weighting in an already diversified fund .

i think those pp users that call what i do speculating need to take a hard look at their own strategy before casting stones .  just by nature of betting on the long shot with gold or the underdog you are speculating on that outcome far more than i am on mine . .  or are you not speculating on interest rates  taking a huge gamble with that part of your money as to which way bond rates go .

while you call it a strategy  you are really pre-buying before something may play out  possibly wasting money for years . my strategy is at least wait for some of the more concrete signs of it being there .

as  Bernstein says about the pp  the PP' attempts to insure equally against economic conditions that are anything but equally likely to occur.

could i give up some of the initial gains ?  sure i could but i likely made way more by not getting in as part of my strategy and having my money doing nothing for years or decades that wasn't done far better with a another asset .

the proof is in the pudding as they say since the strategy which i use has grown 3x the balance over my investing lifetime than the  pp although with more volatility , but so what , if we are talking losing money from the risk of speculating  the pp was the loser over many time frames , to the point even conservative wellesly  beat the pants off it the last 30 years ..  but volatility and loss from speculation are two different things . volatility is just riding the market's natural cycles . it does not mean more risk


investing in cash instruments has low volatility but to a retirement it is the highest risk  as an example since it has failed the most time frames ..

the point is while you may not think so the pp is a bigger speculation on  more remote events playing out than what i do  .  because if they don't  large chunks of money are dead in the water for quite a long time .

so if you call what i do speculative then what you do is far more speculative  because not only do you run the risk of having money in an asset class that may not respond but at the expense of not having it in a better choice of asset class .

the fact you created a low volatility range  for your speculation does not make it better or more rewarding  financially  it may only have smaller swings  and a smaller return .. .

equal dollars placed on not equal outcomes is weighting , like it or not .
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Re: PSA: I now have a 3-year period with no gains

Post by Pointedstick » Sat Sep 12, 2015 8:32 am

Looks like I struck a nerve!

All we're doing is quibbling over terms, though. I'm simply doing is using Harry Brown's own definitions of the words: investing is accepting the market return of an asset through thick and through thin; speculating is trying to beat the market return of an asset through any kind of strategy that involves timing, tilting, leverage, selective purchasing, etc.

According to these definitions, buying stocks is investing, and speculating is when you buy stocks when valuations are low, or when you predict that valuations can go still higher, or when you switch in and out of different classes of stocks according to the valuations of each, or when you pick individual stocks that you believe will beat market indices, etc. Buying gold is investing; speculating is when you buy gold according to interest rates, inflation rates, world demographics, etc. Buying 30 year treasury bonds is investing; speculating is when you buy 30 year treasury bonds when you perceive that interest rates are high and bound to go lower.



Your entire premise seems to be, "investing is stupid; speculation is smart and can make you more money." And, you may be right! It certainly works for some people. There it nothing wrong with speculating. But, like all higher-risk-higher-reward strategies, it's easy for the winners to say that everyone should follow in their footsteps, ignoring the losers who, for their trouble, came out worse than those who chose simpler, lower-risk-lower-return strategies.

But telling everyone that they ought to be speculating instead of investing strikes me as akin to trying to tell everyone that they ought to own their own small business because working for a paycheck is stupid and won't make you a multi-millionaire. Maybe so, but such advice ignores the very important reality that small business ownership requires a particular set of temperaments and talents that not everyone possesses. So too with your own advice. You're preaching about the value of buying a $6,000 Nikon D4S to a bunch of amateur photographers perfectly content with their smartphone cameras.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Sat Sep 12, 2015 9:05 am

i think the problem is i consider swapping out different type funds at different times no more speculating than you in the pp  weighting money wise equally when chances of outcomes are quite unequal . that my friend is the definition of weighting ..  even if i am wrong the odds are i may not beat market returns but get market returns . which is why at this point 30 years later the growth model from fidelity insight -fidelity monitor has beaten the market by almost 500k on a 100k investment .

so i so don't consider that speculating but investing  the same as anyone else who invests and does not speculate .
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Re: PSA: I now have a 3-year period with no gains

Post by Pointedstick » Sat Sep 12, 2015 9:10 am

mathjak107 wrote: i think the problem is i consider swapping out different type funds at different times no more speculating than you in the pp .
Consider why you swap them out: because your intuition and experience tells you that not doing so will lag the performance you expect if you do. You may be right and you may be wrong; if you are right, you will realize performance that beats the market index; if you are wrong, your performance will lag it.

This is not what we do with the PP, or any dumb index fund portfolio for that matter. We hold the assets through thick and through thin, only being or selling according to pre-determined, mechanical rules designed to return the portfolio to the original profile, not over or underweight assets according to our beliefs about what till do better going forward.
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Re: PSA: I now have a 3-year period with no gains

Post by mathjak107 » Sat Sep 12, 2015 9:13 am

the numbers speak for themselves as i said the proof is in the pudding . speculators usually lose , this is far from speculating and i take issue with any pp'er who calls it that . especially when they are weighted with as much riding on the most  likely outcome as the  most remote  outcome .  those are bernsteins words not mine .





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

Post by Pointedstick » Sat Sep 12, 2015 9:18 am

Mathjak, discussion is impossible if we don't agree on terms. For the purpose of this discussion, or any discussion of investing in the context of Harry Browne, Speculating has nothing to do with your asset allocation among broad asset classes and everything to do with when you change your asset allocation, or how you buy and sell assets. A 100% stock index portfolio is not speculating; a 100% stock portfolio with the different sectors weighted differently over different times according to current events or projected future events is speculating.

You speculated and won. That's great! Hats off to you! "Speculating" is not a dirty word. It's just something we're not very interested in doing.
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