Kbg wrote:For what it's worth (not much), I would wave off a trend following PP. Gold is the only asset of the three that trends well.
There is no way to backtest this as it is all discretionary. It may help and won't hurt that much.
What a bunch of rubbish! All three assets trend well. You don't think T-Bonds have been trending for 30 years? Or stocks in the 90's? LOL!
It's a great idea though but rebalancing bands are not hit that frequently so it could be risky. Then again, true bear markets don't occur all that often either. Definitely anything that reduces the whipsaws of trend following is a plus to the CAGR. I've seen it in my own backtests.
It can be backtested. Just need to add an additional check after a rebalancing band is triggered. But certainly not in AmiBroker until someone figures a way to get the rebalancing bands implement. Support is no help.
Rather than using one size fits all rebalancing bands for the portfolio, just use trend following on each individually. That's what I hav to do as it's the only way I can sleep at night.
Last edited by MachineGhost on Wed Jul 13, 2016 11:43 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Bonds below the zero bound rely on the Greater Fool theory to work.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Just as with gold, smart money is massively short Treasuries. But unlike gold, the dumb money is massively long Treasuries. Both are at 21 year highs.
"Bond King" Gundlach said he has fielded more investor questions about buying Treasureis recently than at any other point in his career. And no one he talks to thinks interest rates can go higher today. He thinks a reversal could be an "unexpected" move by central banks to quit QE and move to "helicopter money".
Boy, I think I'm gonna speed up my final gold accumulation... might even now be cheaper to buy it in Britain, eh?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Yes you are right it could be backtested. Totally agree about AB. I don't know why Tomasz doesn't build a function that allows one tap individual position equity without having to resort to using the custom backtester. OBTW, when are you going to post max intraday drawdown post 1981? Pretty please will you do that?
Yes you are right it could be backtested. Totally agree about AB. I don't know why Tomasz doesn't build a function that allows one tap individual position equity without having to resort to using the custom backtester. OBTW, when are you going to post max intraday drawdown post 1981? Pretty please will you do that?
1982 to date is 7.85% CAGR and -14.46% MaxDD. Do keep in mind Vanguard S&P500 had atrocious tracking error for about a decade after its introduction so the return may be a bit understated compared to what is possible nowadays.
Looks like 1981 was no more than a 2 sigma event based on 1982+:
Last edited by MachineGhost on Thu Jul 14, 2016 10:47 am, edited 3 times in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Last edited by MachineGhost on Fri Jul 15, 2016 10:40 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
The max intraday DD post 1981 I think is a better practical DD bogey, but who knows? Eventually I'd like to attempt coding a min variance PP similar to the Gestault U series on the PP from a couple of years back. Trying to get my brain around matrix algebra again first though.
hi this is my first post here. I learnt of the permanent portfolio several months back and subsequently read both harry brown's and greg rowlands recent book (clearly written I should add). what i took away was the permanent portfolio basically says buy your four assets in equal quantity for protection - since you are a fool if you think you can predict the future - and then shut up and get on with life and stop obsessing about it. i started reading this blog a few days back and see so many people obsessing how to tweak it, back test it and predict the future. seems at odds to me ?
grapesofwrath wrote: i started reading this blog a few days back and see so many people obsessing how to tweak it, back test it and predict the future. seems at odds to me ?
haha, yeah, it boggles the mind, doesn't it? The variable portfolio or vp is supposed to be an outlet for other investments so that we can avoid tweaking. Some just can't resist leveraging, taking out the cash portion, replacing the cash portion, and so on.
Also, once you learn the rules, there isn't that much to talk about, save fretting over the price of gold and the crazily low yields. Hence "other discussions."
thank you for the welcome. i will try ignore the navel gazing... i thought this forum may serve useful advice on implementation issues. what i have is not too far removed from pp. i have a significant chunk in "cash" - a vanguard short term treasury fund, and also in a vanguard long term treasury fund. i've been wondering about instead buying the bonds from the treasury directly (a self constructed bond ladder). my thinking was this would reduce some of the "institutional risk" and it may also reduce the fees i pay albeit it with a little bit more work on my part (the vanguard fee is low % but the total is noticeable). i've never bought treasuries directly. is it easy ? how does one set a price or you just take what is there? would you expect an institution (eg blackrock, vanguard etc) to gets a lower purchase price than the little person which would offset their fee ? thanks.
It's easy. I think there are How To stickies on it in the bond section. There's treasury direct, which I consider to be a clunky website, but you can do it. It's easier still in Vanguard and Fidelity, and fee-free in both.
You can look at the prices in the secondary market. I usually buy at auction when I have the cash which means I "just take what is there" with regard to price, but I'm pretty sure I'm in the minority.
I'm certain institutions get better prices because they can buy at such high volume. Enough to offset the fund fee? Well, I don't avoid treasury funds due to the fees, as they're not that high to begin with. I just like holding the pure bonds and knowing that nothing else is mixed in. You can buy teriyaki sauce with all the crap in it, or you can make your own from soy sauce, brown sugar, sake & mirin.
Still, I seem to remember Craig saying the Vanguard fund is fine. I used to hold it, and TLT and EDV.
Kbg wrote:The max intraday DD post 1981 I think is a better practical DD bogey, but who knows? Eventually I'd like to attempt coding a min variance PP similar to the Gestault U series on the PP from a couple of years back. Trying to get my brain around matrix algebra again first though.
I've tried it all. It doesn't improve it much. In some cases adding in correlation and momentum kills the return as well as the MaxDD. I'd say just stick to 12-month trailing volatility for sizing during rebalancing for the least amount of work.
I ran an optmization and 33 trading days was optimal for the volatility calculation: 7.94% CAGR and -19.78% MaxDD. I imagine there's some interplay between the optimal rebalancing band, volatility calculation period and rebalancing frequency.
Last edited by MachineGhost on Sat Jul 16, 2016 1:16 am, edited 2 times in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
grapesofwrath wrote:hi this is my first post here. I learnt of the permanent portfolio several months back and subsequently read both harry brown's and greg rowlands recent book (clearly written I should add). what i took away was the permanent portfolio basically says buy your four assets in equal quantity for protection - since you are a fool if you think you can predict the future - and then shut up and get on with life and stop obsessing about it. i started reading this blog a few days back and see so many people obsessing how to tweak it, back test it and predict the future. seems at odds to me ?
Welcome to the forum! In 1987 when the PP first came out was a different world then. Tweaking wasn't really practical or on anyone's radar. Even now, any tweak really needs to be looked at with a skeptical and jaded eye since there's so many contrary influences to overcome. It certainly isn't mandatory and if you want to just live your life instead of being obsessed, you'll be fine.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
grapesofwrath wrote: how does one set a price or you just take what is there? would you expect an institution (eg blackrock, vanguard etc) to gets a lower purchase price than the little person which would offset their fee ? thanks.
Sign up for a TreasuryDirect account and you can look around and at the buying process.
The way the auction process works is fair. Everyone gets the same price.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Kbg wrote:The max intraday DD post 1981 I think is a better practical DD bogey, but who knows? Eventually I'd like to attempt coding a min variance PP similar to the Gestault U series on the PP from a couple of years back. Trying to get my brain around matrix algebra again first though.
You can't ignore a MaxDD just because you don't like it!
I cleaned up my data some more so now 1982+ basis Jan is 8.10% CAGR and -14.19% MaxDD.
The other bad news is the MaxDD has increased to -26.38% for 1968+.
Interestingly, P2T shows using other durations and bands is still inferior to 40/10 and 30-year Treasury, at least for recently. See the Resort thread for the chart.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Kbg wrote:
You can't ignore a MaxDD just because you don't like it!
I cleaned up my data some more so now 1982+ basis Jan is 8.10% CAGR and -14.19% MaxDD.
The other bad news is the MaxDD has increased to -26.38% for 1968+.
Interestingly, P2T shows using other durations and bands is still inferior to 40/10 and 30-year Treasury, at least for recently. See the Resort thread for the chart.
True bro. I just think going off the gold standard was a one off. Kinda like the Swiss currency peg. Once it came off, boom.
Personally, if one is going to tweak going forward I think we need to spend some time with the LTT component. I see nothing particularly weird about gold or stocks at a macro level. Yes US stocks are expensive which doesn't bode well but there's nothing abnormal. LTTs not the case. I've held them since I got into PP and don't plan on changing until I see concrete evidence of a global turn. Will definitely get some pain at the turn but that's OK. The fact is LTTs are doing exactly what they should.
Off the top of my head, one simple tweak may be to overweight/explicitly add a small wedge of banks/financials when the turn occurs. What else does well in a rising interest rate environment? Could tweak to those as well.
In any event, my personal opinion is that LTTs are going to be the pivot off which PP relative performance turns.
