Gyroscopic Investing

dualstow wrote: Feeling better about the pp today, Budd?
I shouldn't even ask, b/c it's so ephemeral, but still.

S&P down 1.78%
Dow down > 2%

TLT up .56%
GTU up 1.12%

Budd will only feel half as good about this as he would feel bad about the opposite according to behavioral scientists...he's just screwed both ways going. :-)

On a more serious note, buying puts on a PP makes absolutely no sense to me. If you are truly bearish then just sell outright and don't forget to figure out when you are going to get back in before you get out. What IS a good idea assuming your account is big enough to make it worth it is to rebalance by selling puts (buy rebalance) and calls (sell rebalance). This also assumes you are holding the ETF versions of all this stuff so it is feasible.

The thing to absolutely never forget about options as a hedge is that you have to get both the direction and the timing right or it is almost without fail a money losing adventure.  Selling puts and calls as a way to buy and sell is a very good thing to do. Basically, free money for something you were going to do anyway.

Professor Disorientation wrote: My PP was up .01 today when the market took a mild beating. I know a lot of people are uncomfortable about gold. But the way I see it is that the asset class that is despised today will be prized tomorrow.

Michael

Gold is looking better and better. When the 200 day MA runs horizontal for a while instead of straight down, that will be even better.

Retirement account 70/30 equities/bonds is -1.53% YTD.
Taxable account HBPP 4x25 with cash to maintain a 5.6 year fixed income duration is -1.60% YTD.
Disclaimer: I bought equities in both retirement and taxable accounts when SPY was trading at 190.

The PP was less volatile, but I would have expected either LTT's or Gold to support the portfolio as equities declined. Gold is still -10% YTD and LTT's (dividends not reinvested) are -2% YTD. If the PP works as planned, equities should just be one of the four assets in decline and one or more (perhaps cash this year) of the remaining assets should rise to buoy the overall portfolio. Time will tell.

Lesson learned: you can achieve the same returns with less risk

Austen Heller wrote: Perhaps you need to tighten up your rebalance bands.  Stocks were down 10% a few months back, then popped up near the highs.  Did you harvest any of this volatility?  IMO the 15/35 bands are too wide to capture small swings like we saw in the fall.  Using 20/30 or 22.5/27.5 bands would allow you to get some gains, since the overall returns of the 4 asset classes are predicted to be low going forward.

I think the jury is out on whether modifying the rebalancing bands from HB's 15/35 makes much of a difference (although narrowing the bands will certainly increase your trading fees). There's a good discussion in an older thread here: http://gyroscopicinvesting.com/forum/pe ... -questions