Trump's Effect on the PP

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Re: Trump's Effect on the PP

Post by MachineGhost » Sun Nov 13, 2016 12:37 pm

Roy wrote:The last 3 days are dust in the wind—just as a few bad days in 2013 were, or those 3 great days (whenever), or the years that the PP lagged the broad market, or when it outperformed it when needed most.

All that is old news buried under a smooth flowing, longer-term trendline—but only if one does not fret over the dailies.

That the PP is a method that works—and works perhaps as well as anything can—is the sort of old news that allows one to do things other than watch it.

But the behavioral stuff is perneciously timeless. And for all the brilliance in its simple, effective design, it can not offer proof against one’s own gremlins.
I nominate the above for post of the year!
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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!
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Re: Trump's Effect on the PP

Post by IDrinkBloodLOL » Thu Nov 17, 2016 8:42 am

rickb wrote: Trump will actually do whatever is best for Trump. First order of business is drastically reduce taxes on the wealthy. Second is to eliminate the estate tax so his kids will end up with everything he's scammed. Everything else is simply noise (he has no principles and no morals).

He's suggested "negotiating" (AKA defaulting) on US Treasuries. IMO, this is what's driving the treasuries beat down. If the "validity of the public debt of the United States ..." (see https://en.wikipedia.org/wiki/Fourteent ... nstitution) can be questioned, then one of the fundamental premises of the PP (the US will never default on treasuries) breaks. This is a very, very, very big deal. One way this happens is the Republican congress refuses to increase the debt limit. Trump is (at least notionally) a Republican. I suspect the market is simplified terrified about this (IMO, not terrified enough).
This is what I am worried about. It seems like PP implicitly assumes that united states money and bonds will never become worthless. A student of history knows all countries are temporary phenomena, especially democracies. Our democracy is looking to be on its last legs, beginning to see advanced and widespread corruption, civilian unrest, attacks on our soil by foreigners going unpunished, and demographic replacement of our founding stock.

Therefore to me in this increasingly unstable world I am really beginning to worry the PP is at abnormal risk of receiving a 50% hair cut in not a very long time.

I am really thinking 50/50 stock and gold, or some split off stocks, REITs and gold is what I will move towards. I am still thinking it through, but in this world it is obvious gold is a store of value through inflation, multinational corporations will be fine even as countries wither and die, and somebody will always be making a killing charging everyone rent.

Trying not to go all chicken little, but soon we might see Browne's assumptions go obsolete.
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Re: Trump's Effect on the PP

Post by buddtholomew » Thu Nov 17, 2016 8:56 am

IDrinkBloodLOL wrote:
rickb wrote: Trump will actually do whatever is best for Trump. First order of business is drastically reduce taxes on the wealthy. Second is to eliminate the estate tax so his kids will end up with everything he's scammed. Everything else is simply noise (he has no principles and no morals).

He's suggested "negotiating" (AKA defaulting) on US Treasuries. IMO, this is what's driving the treasuries beat down. If the "validity of the public debt of the United States ..." (see https://en.wikipedia.org/wiki/Fourteent ... nstitution) can be questioned, then one of the fundamental premises of the PP (the US will never default on treasuries) breaks. This is a very, very, very big deal. One way this happens is the Republican congress refuses to increase the debt limit. Trump is (at least notionally) a Republican. I suspect the market is simplified terrified about this (IMO, not terrified enough).
This is what I am worried about. It seems like PP implicitly assumes that united states money and bonds will never become worthless. A student of history knows all countries are temporary phenomena, especially democracies.

Therefore to me in this increasingly unstable world I am really beginning to worry the PP is at abnormal risk of receiving a 50% hair cut.

I am really thinking 50/50 stock and gold, or some split off stocks, REITs and gold is what I will move towards. I am still thinking it through, but in this world it is obvious gold is a store of value through inflation, multinational corporations will be fine even as countries wither and die, and somebody will always be making a killing charging everyone rent.

Trying not to go all chicken little, but soon we might see Browne's assumptions go obsolete.
I seriously doubt that the future will play out as you describe.
The fundamental premise of the PP is to hold all assets at ALL times.
I will continue to reinvest interest payments into LTT's as I believe the flight to safety and deflation are still possibilities.
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Re: Trump's Effect on the PP

Post by IDrinkBloodLOL » Thu Nov 17, 2016 9:00 am

buddtholomew wrote: I seriously doubt that the future will play out as you describe.
The fundamental premise of the PP is to hold all assets at ALL times.
I will continue to reinvest interest payments into LTT's as I believe the flight to safety and deflation are still possibilities.
I get that, but is that in actual fact a good idea? How has a Venezuelan PP done recently? What I'm getting at is... are we assuming there are no possible scenarios where PP gets trashed bad enough to set you back a decade? Does the PP still work if you no longer believe America is magic?
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Re: Trump's Effect on the PP

Post by buddtholomew » Thu Nov 17, 2016 9:47 am

IDrinkBloodLOL wrote:
buddtholomew wrote: I seriously doubt that the future will play out as you describe.
The fundamental premise of the PP is to hold all assets at ALL times.
I will continue to reinvest interest payments into LTT's as I believe the flight to safety and deflation are still possibilities.
I get that, but is that in actual fact a good idea? How has a Venezuelan PP done recently? What I'm getting at is... are we assuming there are no possible scenarios where PP gets trashed bad enough to set you back a decade? Does the PP still work if you no longer believe America is magic?
I don't hold a Venezuelan PP as the country is not the world's reserve currency.
What other country do you expect to take America's place?
We truly live in a time when the cards are stacked on our side if you live in the US.
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Re: Trump's Effect on the PP

Post by IDrinkBloodLOL » Thu Nov 17, 2016 10:01 am

buddtholomew wrote: I don't hold a Venezuelan PP as the country is not the world's reserve currency.
What other country do you expect to take America's place?
We truly live in a time when the cards are stacked on our side if you live in the US.
Just to drive my point home, what if in some setting the world had an oligopoly of competing powers with separate currencies, such as the USA, China and Russia, and there was no clear singular world reserve currency? What if in another hypothetical, the oil economy collapsed due to a combo of diminishing supply and highly successful alternative technology, leaving currency markets upended? Before the gold standard was thrown out, nobody would believe paper had value unless it was a claim on gold, how are we sure 2016 is not a similar environment where we naively scoff at the idea of a world where the petrodollar is not the most important reserve of currency?
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Re: Trump's Effect on the PP

Post by buddtholomew » Thu Nov 17, 2016 10:31 am

IDrinkBloodLOL wrote:
buddtholomew wrote: I don't hold a Venezuelan PP as the country is not the world's reserve currency.
What other country do you expect to take America's place?
We truly live in a time when the cards are stacked on our side if you live in the US.
Just to drive my point home, what if in some setting the world had an oligopoly of competing powers with separate currencies, such as the USA, China and Russia, and there was no clear singular world reserve currency? What if in another hypothetical, the oil economy collapsed due to a combo of diminishing supply and highly successful alternative technology, leaving currency markets upended? Before the gold standard was thrown out, nobody would believe paper had value unless it was a claim on gold, how are we sure 2016 is not a similar environment where we naively scoff at the idea of a world where the petrodollar is not the most important reserve of currency?
Yikes, can you imagine the ramifications to the retail investor if such an outcome would come to fruition?
I can't so I hold all assets at ALL times as 2 assets losing 50% of their value represents a 25% portfolio decline.
This does not take into consideration how the remaining two assets respond.

25% drawdown is awful but not catastrophic.
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Re: Trump's Effect on the PP

Post by MachineGhost » Thu Nov 17, 2016 11:56 am

Use trend following on T-Bonds and stop worrying about it.
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Re: Trump's Effect on the PP

Post by IDrinkBloodLOL » Thu Nov 17, 2016 12:51 pm

buddtholomew wrote: I seriously doubt that the future will play out as you describe.
The fundamental premise of the PP is to hold all assets at ALL times.
I will continue to reinvest interest payments into LTT's as I believe the flight to safety and deflation are still possibilities.
buddtholomew wrote:yeah, its fucked up.
All the gains this year are disappearing before my eyes.
I've sat through more painful drops in gold and treasuries than I ever would have experienced in a 50/50 stock/bond portfolio.
Completely give up...
So are you all in or are you having your own doubts? Why are you acting like I am a retard who just does not understand Browne's ideas when you say stuff like this?
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Re: Trump's Effect on the PP

Post by dutchtraffic » Thu Nov 17, 2016 3:37 pm

CullyB wrote:What is the maximum time horizon on 2 of the assets falling simultaneously? It sure looks like that might happen for the next 4 years or even 8.
All 4 of them could decline for the next 300 years.

What do you mean..?
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Re: Trump's Effect on the PP

Post by buddtholomew » Thu Nov 17, 2016 3:37 pm

IDrinkBloodLOL wrote:
buddtholomew wrote: I seriously doubt that the future will play out as you describe.
The fundamental premise of the PP is to hold all assets at ALL times.
I will continue to reinvest interest payments into LTT's as I believe the flight to safety and deflation are still possibilities.
buddtholomew wrote:yeah, its fucked up.
All the gains this year are disappearing before my eyes.
I've sat through more painful drops in gold and treasuries than I ever would have experienced in a 50/50 stock/bond portfolio.
Completely give up...
So are you all in or are you having your own doubts? Why are you acting like I am a retard who just does not understand Browne's ideas when you say stuff like this?
45% of retirement assets invested in the PP.
Feel very uncomfortable holding gold and treasuries, always have, always will.
If you buy into the philosophy it makes sense to hold all assets at all times.
I've considered shortening duration further (5.6 years), but concerned that the PP will not have sufficient fixed income exposure to respond to a stock and/or gold decline.

It looks like you are a new PP poster, so wanted to share some of the feedback I have received over the years.
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Re: Trump's Effect on the PP

Post by dutchtraffic » Thu Nov 17, 2016 3:41 pm

So let me get this straight.

Everybody is whining like crazy for ages that rates are waayyyyy too low, and when they finally rise a tiny tiny bit, everybody goes full-mental mode...? Look at the longterm chart, it barely moved, it's still a loonnnnggg way down to get to normal rates. And it's still a very big "IF", if rates even go back to 'normal' anytime soon.

Why are you guys investing?
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Re: Trump's Effect on the PP

Post by MachineGhost » Thu Nov 17, 2016 6:17 pm

I had a spark of inspiration this morning and am mulling over a fix for the PP's Achilles' Heel.

What most of us didn't realize until just this very atomic moment is that "Tight Money" is the same thing as "Liquidity Crisis" aka 2008. The PP got destroyed in 2008 before just barely recovering on a calendar year basis.

Gesundheit!
"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!
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Re: Trump's Effect on the PP

Post by rickb » Thu Nov 17, 2016 6:28 pm

dutchtraffic wrote:So let me get this straight.

Everybody is whining like crazy for ages that rates are waayyyyy too low, and when they finally rise a tiny tiny bit, everybody goes full-mental mode...? Look at the longterm chart, it barely moved, it's still a loonnnnggg way down to get to normal rates. And it's still a very big "IF", if rates even go back to 'normal' anytime soon.

Why are you guys investing?
I'm very sanguine about the PP's ability to withstand interest rate increases, stock market crashes, etc.

On the other hand, I'm skeptical of the PP's ability to withstand an idiot congress led by an ignoramus who together seem like the perfect storm that may end up with the US defaulting on Treasuries and/or the US dollar losing its worldwide reserve currency status.

The PP is constructed assuming a 0% chance the US defaults (well, not quite - the gold you can hold in your hand is meant to preserve at least a portion of your assets in any conceivable or inconceivable SHTF scenario). My problem is that the chance of the US defaulting given our recently elected congress and president seems to have gone from an ignorable SHTF sort of probability to something greater than 1% and possibly as high as 10-20%. This seems to me to be a Nassim Taleb sort of "Black Swan" event. Extremely difficult to estimate, albeit relatively low, probability, but very high impact (sort of like Trump winning the election in the first place).

The IMF already has SDRs as a new global currency, see http://www.imf.org/en/News/Articles/201 ... e-Renminbi . What happens if the US dollar loses its reserve currency status is that demand for US Treasuries tanks. This would be a problem at our current deficit spending rate, let alone a significantly increased deficit spending rate caused by drastically cutting taxes on the uber wealthy and increasing spending to "defend" our border from those pesky Mexicans trying to steal our jobs and rape our women.

I guess I feel like we've taken a huge dump and blithely assuming it's going to miss the fan is perhaps excessively wishful thinking.
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Re: Trump's Effect on the PP

Post by MachineGhost » Thu Nov 17, 2016 7:24 pm

rickb wrote:On the other hand, I'm skeptical of the PP's ability to withstand an idiot congress led by an ignoramus who together seem like the perfect storm that may end up with the US defaulting on Treasuries and/or the US dollar losing its worldwide reserve currency status.
Are you referring to Congress not raising the debt ceiling? They always use that as ploy to get concessions from the other side of the aisle. Can't imagine why they would fight themselves now not to raise it. It only affects new spending anyway, not debt oustanding. They're gonna have to raise it for Trump's planned spending.
The IMF already has SDRs as a new global currency, see http://www.imf.org/en/News/Articles/201 ... e-Renminbi . What happens if the US dollar loses its reserve currency status is that demand for US Treasuries tanks. This would be a problem at our current deficit spending rate, let alone a significantly increased deficit spending rate caused by drastically cutting taxes on the uber wealthy and increasing spending to "defend" our border from those pesky Mexicans trying to steal our jobs and rape our women.
SDR isn't a financial asset. It's internal accounting Monopoly money like the Fed's bank reserves. Is of no real world consequence. Even if the dollar dose lose it's reserve currency status (which is already ongoing gradually because no one has a vested interest in a shock therapy approach), it won't displace Treasuries as the widest, deepest and most liquid financial asset in the world anytime soon.

You're getting a tax cut too. Why are you obsessed that those with higher incomes (i.e. job creators and capitalists that do more for the economy than you ever will) will get a bigger relative reduction? Deficit spending + lower taxes = inflationary. Isn't that what we've been trying to stoke for 8 years now without success?

P.S. I hope you read "You Are Still Crying Wolf" in the other thread. It is not mentally healthy to be publically ranting against delusions that exist only in your own mind.
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Re: Trump's Effect on the PP

Post by rickb » Thu Nov 17, 2016 8:30 pm

MachineGhost wrote:
rickb wrote:On the other hand, I'm skeptical of the PP's ability to withstand an idiot congress led by an ignoramus who together seem like the perfect storm that may end up with the US defaulting on Treasuries and/or the US dollar losing its worldwide reserve currency status.
Are you referring to Congress not raising the debt ceiling? They always use that as ploy to get concessions from the other side of the aisle. Can't imagine why they would fight themselves now not to raise it. It only affects new spending anyway, not debt oustanding. They're gonna have to raise it for Trump's planned spending.
Yes - I'm referring to Congress not raising the debt ceiling. I suspect the Tea Partiers will continue to try to prevent this, not to get concessions from the "normal" Republicans but because they're zealots who believe increasing the federal debt is inherently evil. The question is whether the rational Republicans will prevail (and, IMO, "rational Republican" at this point seems to be nearly an oxymoron).
MachineGhost wrote:SDR isn't a financial asset. It's internal accounting Monopoly money like the Fed's bank reserves. Is of no real world consequence. Even if the dollar dose lose it's reserve currency status (which is already ongoing gradually because no one has a vested interest in a shock therapy approach), it won't displace Treasuries as the widest, deepest and most liquid financial asset in the world anytime soon.
A major reason Treasures are the widest, deepest, most liquid financial asset in the world is because the US dollar is the (still dominant) reserve currency. If countries start using SDRs instead of Treasuries, demand for Treasuries decreases (even though SDRs are about 50% Treasuries).
MachineGhost wrote:You're getting a tax cut too. Why are you obsessed that those with higher incomes (i.e. job creators and capitalists that do more for the economy than you ever will) will get a bigger relative reduction? Deficit spending + lower taxes = inflationary. Isn't that what we've been trying to stoke for 8 years now without success?
My concern about tax cuts for the rich in this context is how it affects the deficit. The deficit ballooned under Reagan's tax cuts (and Bush's), which increases the need to sell Treasuries. I think it's been shown over and over that tax cuts for the rich (as opposed to tax cuts or even rebates for the non-rich) do not stimulate the economy - they just increase the debt (and the gap between the haves and the have-nots, which I think is dangerously high already, see https://en.wikipedia.org/wiki/French_Revolution).
MachineGhost wrote:P.S. I hope you read "You Are Still Crying Wolf" in the other thread. It is not mentally healthy to be publically ranting against delusions that exist only in your own mind.
Yes I've read it.
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Re: Trump's Effect on the PP

Post by dutchtraffic » Thu Nov 17, 2016 8:41 pm

Why would the tax cuts only be for "the rich"....?
That's a total false statement, watching a bit too much of the left media?

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Re: Trump's Effect on the PP

Post by I Shrugged » Thu Nov 17, 2016 9:25 pm

Rick, a person I knew well based his investment decisions on his political beliefs. It did not work. I don't knock you if you don't think the PP will work. But take a chill pill. (I'm assuming you're serious, and not using this thread just to bitch about Trump. And I realize I have done a lot of gratuitous bitching about Obama, so I can't be too high and mighty.) But anyway, if you are seriously concerned about the PP, I'd say count to 10. Months.

One thing I felt before the election: We are due for a recession, probably another debt crash. No matter who won. The PP held up well in the big one. So we shall see.
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Re: Trump's Effect on the PP

Post by I Shrugged » Thu Nov 17, 2016 9:32 pm

MachineGhost wrote:I had a spark of inspiration this morning and am mulling over a fix for the PP's Achilles' Heel.

What most of us didn't realize until just this very atomic moment is that "Tight Money" is the same thing as "Liquidity Crisis" aka 2008. The PP got destroyed in 2008 before just barely recovering on a calendar year basis.

Gesundheit!
For the past year or so I have been saying here that Tight Money is impossible to imagine now. Therefore throwing the 25% cash into question.

I don't agree that it is the same as the Liquidity Crisis. That was deflation. IMO.

The only way I can see tight money is if the money creation finally succeeds in igniting inflation, it starts to get out of hand, and the Fed goes Volker. Otherwise, we are so far removed from normal Fed/business cycles that I don't see it.

Something bad is coming. We just can't see it. I still like the PP.
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Re: Trump's Effect on the PP

Post by MachineGhost » Thu Nov 17, 2016 9:53 pm

rickb wrote:Yes - I'm referring to Congress not raising the debt ceiling. I suspect the Tea Partiers will continue to try to prevent this, not to get concessions from the "normal" Republicans but because they're zealots who believe increasing the federal debt is inherently evil. The question is whether the rational Republicans will prevail (and, IMO, "rational Republican" at this point seems to be nearly an oxymoron).
They have 48 of 435 seats in the House and 4 out of 100 in the Senate. There should be a lot more than 48 Democrats willing to support fiscal spending under Trump since there's never a tax or spend program they don't like.
A major reason Treasures are the widest, deepest, most liquid financial asset in the world is because the US dollar is the (still dominant) reserve currency. If countries start using SDRs instead of Treasuries, demand for Treasuries decreases (even though SDRs are about 50% Treasuries).
You can't use SDR's -- they're not investable financial assets and the IMF has no legal authority nor is a sovereign. Because of economic growth over the last 60 years (which goes hand in hand with debt issuance), there is so much capital now sloshing around the world that it has no place to go but into Treasuries because no other market is simply large enough. That fact is just not going to change anytime soon. A hell of a lot needs change in terms of structure before Treasuries can no longer be a safe haven. That will take decades and if Trump is successful in revitalizing the economy, it is going to push it back even more.
My concern about tax cuts for the rich in this context is how it affects the deficit. The deficit ballooned under Reagan's tax cuts (and Bush's), which increases the need to sell Treasuries. I think it's been shown over and over that tax cuts for the rich (as opposed to tax cuts or even rebates for the non-rich) do not stimulate the economy - they just increase the debt (and the gap between the haves and the have-nots, which I think is dangerously high already, see https://en.wikipedia.org/wiki/French_Revolution).
Tax cuts promote economic growth, increase GDP and thus general tax revenues, but the effect is stronger when the economy is doing poorly or marginal income tax rates are way too high. This has been shown in the peer reviewed literature. But unless you also restrain spending to be under the newly increased level of revenues, you sure aren't going to decrease a deficit. So spending is the real problem for that claim, not the tax cuts. But the problem with decreasing the deficit during a moribund economy as we have now is it acts deflationary and not inflationary because a deficit provides badly needed savings and income to the private sector. That is what the last eight years has demonstrated. Now, you can't be worried about growing the deficit and the Tea Party at the same time. It's one of the other.

The French Revolution?!! That happened not because of the gap between the rich and the poor, but because the rich aristocratic elites didn't share their ill-gotten wealth with the mass, toiling poor aka socialism or deficit spending... the exact same kind of negative forces that elected Trump against all of the ruling Democratic elitists (and Establishment Republicans). Unlike in the 1700's, we no longer tolerate that kind of self-centered aristocracy -- again as Trump's recent win illustrated. So once again, its deficit spending or the Tea Party. You can pick one or the other, but not both.
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Re: Trump's Effect on the PP

Post by MachineGhost » Thu Nov 17, 2016 10:05 pm

I Shrugged wrote:For the past year or so I have been saying here that Tight Money is impossible to imagine now. Therefore throwing the 25% cash into question.

I don't agree that it is the same as the Liquidity Crisis. That was deflation. IMO.
But they're both the same thing. Cash becomes more valuable relative to all other assets. What's different is the source. In theory, the Fed causes tight money (i.e. high yields) which makes cash more attractive relative to all other assets and panic selling causes liquidation of all assets other than cash which is why bonds and gold can go down along with stocks under either scenario.

We're witnessing minor tight money right now as the Fed continues to raise the FFR and some minor panic selling as the bond market continues to increase yields on expectations of future economic growth. This is what the PP doesn't like. I say rather than gamble on the vagaries of timing to offset the losses, there must be a better way to protect the PP.
"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!
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Re: Trump's Effect on the PP

Post by doodle » Fri Nov 18, 2016 8:26 am

MachineGhost wrote:
I Shrugged wrote:For the past year or so I have been saying here that Tight Money is impossible to imagine now. Therefore throwing the 25% cash into question.

I don't agree that it is the same as the Liquidity Crisis. That was deflation. IMO.
But they're both the same thing. Cash becomes more valuable relative to all other assets. What's different is the source. In theory, the Fed causes tight money (i.e. high yields) which makes cash more attractive relative to all other assets and panic selling causes liquidation of all assets other than cash which is why bonds and gold can go down along with stocks under either scenario.

We're witnessing minor tight money right now as the Fed continues to raise the FFR and some minor panic selling as the bond market continues to increase yields on expectations of future economic growth. This is what the PP doesn't like. I say rather than gamble on the vagaries of timing to offset the losses, there must be a better way to protect the PP.
Long time away here, just getting back into this again. I'm not sure how to magnify the volatility of cash, but I agree this is definitely an area of concern for me regarding this portfolio. In this present environment im about 40 percent cash at the moment....and having trouble rebalancing.

One strategy that I was surprised that never gained traction here was selling calls and puts as a way to boost returns. It seems like there should be a way devise some sort of algorithm around the rebalancing bands that gives an indication of what level to sell calls and puts. With highly volatile assets that the portfolio holds it seems that a decent return should be able to be generated by this. Am I missing something?
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Re: Trump's Effect on the PP

Post by sophie » Fri Nov 18, 2016 8:35 am

MachineGhost wrote: We're witnessing minor tight money right now as the Fed continues to raise the FFR and some minor panic selling as the bond market continues to increase yields on expectations of future economic growth. This is what the PP doesn't like. I say rather than gamble on the vagaries of timing to offset the losses, there must be a better way to protect the PP.
The Fed will do what it wants, but it has only limited effect on bond yields compared to market forces. We are still in a deflation/de-leveraging phase, with too much debt at all levels and too large a proportion of the US population barely managing to stay afloat financially. This latter is due to a variety of causes (warning: unsupported speculation follows): high levels of unskilled immigration (plus the use of H1B visas to fill STEM jobs at low salaries), high birth rates in the lowest economic classes, continuous downward pressure on wages, the evaporation of full time skilled manufacturing jobs and their replacement with part time/unskilled/service jobs, local taxes and health care costs vastly outpacing inflation and wage increases, increased state spending on welfare programs, etc. None of these are going to change anytime soon, Trump's election notwithstanding.

The thing that I like the most about the PP is that it reacts to the real market, not the one that pundits think we have. It's quite possible the current increase in bond yields is only a blip. When the yields go up and stay up, then I'll believe that the economic environment is truly changing.
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Re: Trump's Effect on the PP

Post by MachineGhost » Fri Nov 18, 2016 8:41 am

doodle wrote:One strategy that I was surprised that never gained traction here was selling calls and puts as a way to boost returns. It seems like there should be a way devise some sort of algorithm around the rebalancing bands that gives an indication of what level to sell calls and puts. With highly volatile assets that the portfolio holds it seems that a decent return should be able to be generated by this. Am I missing something?
Two things. The rebalancing bands would be so far out of the money there wouldn't be any premium to collect. And the assets are not "highly volatile" -- they're only all about 15% average in the long-term. When you sell insurance all you are doing is taking on the outsized risk of having to payout a claim when there is any kind of Black Swan event. That is not compatible with the PP philosophy.

You could continously short VIX for the essentially the same thing and while you would make double or triple digit returns each year, you would incur high double digit losses during inclemental weather. So in the end selling volatility doesn't offer anything to the PP in terms of risk control, just leverages it up to the wrong direction.
Last edited by MachineGhost on Fri Nov 18, 2016 8:49 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

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Re: Trump's Effect on the PP

Post by MachineGhost » Fri Nov 18, 2016 8:43 am

sophie wrote:The thing that I like the most about the PP is that it reacts to the real market, not the one that pundits think we have. It's quite possible the current increase in bond yields is only a blip. When the yields go up and stay up, then I'll believe that the economic environment is truly changing.
No breakout yet:

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"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!
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