Gyroscopic Investing

I just want to make sure I have this right:
Overall, you're saying you love the pp.

dualstow wrote: ↑Thu Dec 06, 2018 10:12 am I just want to make sure I have this right:
Overall, you're saying you love the pp.

Haha
It is what it is.

Just look at it:

Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.

buddtholomew wrote: ↑Thu Dec 06, 2018 10:36 am Just look at it:

Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.

I have a little bit of buyer's remorse myself, but when stocks are soaring, it doesn't feel like the right time to go all stocks. When stocks are plummeting, I also don't want to be all in stocks. I guess I don't hate the pp that much because aside from trimming my long bonds as they hit breakeven (and keeping the really profitable ones), I have not dismantled it.

If and when gold comes back in my lifetime, that will be the true test of whether or not I am satisfied. If I simply sell off the gold at breakeven, then no.

budd, from Zero Hedge, graph of the dislocation of long bonds and market the past couple months, and they are inferring a bond rally is coming.

Or not...

buddtholomew wrote: ↑Thu Dec 06, 2018 10:36 am Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.

That one is easy -- on a day when stocks tank, 3/4 of your portfolio is protected. And it will do the same on bad days for gold or bonds, too. Unlike the vast majority of asset allocations that are heavily dependent on market cycles, the PP keeps doing its thing no matter how the winds blow.

BTW, it's important to not confuse uncorrelation with negative correlation. No two assets will ever perfectly mirror each other on a daily basis, and if they did the portfolio wouldn't work.

Tyler wrote: ↑Thu Dec 06, 2018 11:31 am

buddtholomew wrote: ↑Thu Dec 06, 2018 10:36 am Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.

That one is easy -- on a day when stocks tank, 3/4 of your portfolio is protected. And it will do the same on bad days for gold or bonds, too. Unlike the vast majority of asset allocations that are heavily dependent on market cycles, the PP keeps doing its thing no matter how the winds blow.

BTW, it's important to not confuse uncorrelation with negative correlation. No two assets will ever perfectly mirror each other on a daily basis, and if they did the portfolio wouldn't work.

It’s not that easy...50% of the portfolio is already negative YTD so how exactly is that protected during a stock market decline. Seems to be blowing in the wind to me.

buddtholomew wrote: ↑Thu Dec 06, 2018 12:25 pm

Tyler wrote: ↑Thu Dec 06, 2018 11:31 am

buddtholomew wrote: ↑Thu Dec 06, 2018 10:36 am Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.

That one is easy -- on a day when stocks tank, 3/4 of your portfolio is protected. And it will do the same on bad days for gold or bonds, too. Unlike the vast majority of asset allocations that are heavily dependent on market cycles, the PP keeps doing its thing no matter how the winds blow.

BTW, it's important to not confuse uncorrelation with negative correlation. No two assets will ever perfectly mirror each other on a daily basis, and if they did the portfolio wouldn't work.

It’s not that easy...50% of the portfolio is already negative YTD so how exactly is that protected during a stock market decline. Seems to be blowing in the wind to me.

budd,

Seems maybe a better course of action for you and some is to just buy puts as insurance? Go 100% stock market and buy an equivalent amount of protection with puts. Always going to eat away a good percentage of your gains, but you can sleep better?

I look at the PP as a smoothing function. Below is my allocation vs. S&P. Sure, still negative. But... the heightened sense of loss I would have right now knowing I *could* have sold out of my stocks in September at 10% gain, vs. being negative again...even though there's no way to have known...would be anxiety producing.

Cortopassi,

Could you extend the start date of your graph back to 1/1/2000 to illustrate to Buddtholomew why some people have a little more faith in the PP than he does?

I can't. This is from Personal Capital which I only started using late last year. But, we can use Portfolio Charts to shown the drawdown pain. Of course the CAGR is lower for the straight PP, but the ulcer index describes me perfectly and gives a good sense of the smoothing.

People might say gold is dead, and bonds multi-decade bull run is over, but who knows.

The stock market sure popped back today.

100% stocks:



Straight PP

Here's an image from Portfolio Visualizer showing the PP performance vs the S&P 500 for 2000 to 2018 (I hope that worked; I don't show images often):



Actually the PP has a higher CAGR and Sharpe ratio and quite a lower maximum drawdown. Of course, that start date is cherry picked, but comeon somebody has to give the PP a little love.

The image didn't take. I think this is the same as you setup. Portfolio 1 is PP, 2 is 100% US Market

Appreciate all the responses, thank you.
I bought more SCV today and I’m not sure I would have if I wasn’t invested in the PP.
I’m obviously watching too closely and it is bothering me.
Will try in the new year to stop this insanity.
Still trying to wrap my head around PP expectations, just don’t want to be caught again if/when stocks recover and Gold/LTT’s sell off.

I am a recovering Buddaholic. But today I had a good day.

I typed up a response (reaction) to Budd's latest. Accurate, filled with facts, witty, with a slight bit of snark...but then I deleted it.

Today, was a good day.

Kbg wrote: ↑Thu Dec 06, 2018 6:02 pm I am a recovering Buddaholic. But today I had a good day.

I typed up a response (reaction) to Budd's latest. Accurate, filled with facts, witty, with a slight bit of snark...but then I deleted it.

Today, was a good day.

You’ve made your point a few times already and I get it.
Thanks for being kind.

Kbg wrote: ↑Thu Dec 06, 2018 6:02 pm I am a recovering Buddaholic. But today I had a good day.

I typed up a response (reaction) to Budd's latest. Accurate, filled with facts, witty, with a slight bit of snark...but then I deleted it.

Today, was a good day.

Good one, Kbg. Your struggle is shared by many. As tiresome as the fallacies and repetition are, I guess it keeps us all sharp. But pity the fool who searches for “does the PP work?” and finds these threads.

Mr Vacuum wrote: ↑Fri Dec 07, 2018 8:07 am

Kbg wrote: ↑Thu Dec 06, 2018 6:02 pm I am a recovering Buddaholic. But today I had a good day.

I typed up a response (reaction) to Budd's latest. Accurate, filled with facts, witty, with a slight bit of snark...but then I deleted it.

Today, was a good day.

Good one, Kbg. Your struggle is shared by many. As tiresome as the fallacies and repetition are, I guess it keeps us all sharp. But pity the fool who searches for “does the PP work?” and finds these threads.

There’s a reason only a handful of investors own the PP and it’s not because it’s at the top of the pyramid year after year. I worry about those who believe the PP is the holy grail to investing when it most definitely is not. Funny how over the years others have come to the realization that a VP heavy in stocks is necessary to balance the 4x25. If you held 4x25 since 2008 how have you done? Poorly, that’s how. Now whose the fool?

The fool is the person who thought it had anything to do with the top of a pyramid.

Mr Vacuum wrote: ↑Fri Dec 07, 2018 10:32 am The fool is the person who thought it had anything to do with the top of a pyramid.

Actually I think you are the fool.
I’ve run across people like you all my life, thinking they are superior than someone else in one way or another.
Again, humorous to me these are usually the losers of the bunch Mr. vacuum cleaner. Like the PP, you suck.

Cmon guys, this forum has generally been a civil place. Let's keep it that way.

Budd, we love you, but your posts CAN be a bit irritating. Day after day, more of the same. We get it, the PP ain't doing so great these days. Believe me, none of us are happy about that. The ones who are happy are the ones who only check in once a year. They get to miss all the drama.

Here's the thing, the PP was never designed to be a high-risk, high-reward portfolio. It's designed to be a low-risk, moderate-reward portfolio. Harry Browne said that it's for the money that you CAN'T AFFORD TO LOSE. That's it. It's not meant for your speculative investments that you hope will do really well, although you realize there's a chance they won't. You already realize this, because you're only 40% in the PP anyway, or something like that. So, why all the griping? It gets old after a while.

We get it, the PP ain't doing so great these days. Believe me, none of us are happy about that.

As I recall, this is the first post that actually agrees with my point of view...many, if not all others, continue to voice how pleased they are with the portfolio performance and I just can’t align with that perspective.

Like I said, I continue to invest in the 4 asset classes, just not 4x25. I was one of those youthful investors 10 years ago who challenged 4x25, only to find out that those who opposed my position either had a healthy dose of stocks or never held the PP in the prescribed allocation ever. Others have long since abandoned the portfolio or returned with a different allocation altogether. Obviously, there are some that have stayed the course.

So yes I have disdain for those “cocky” individuals especially now that the performance bears out my concerns.

Some comparisons. Portfolio 1 is the PP, 2 is 60/40, 3 is 100 stock

From my investing start, 1989. Comments. I stuck through the dot com bubble, but sold out in 2008. Regardless, although the PP is lower across the board, after a slow, steady 20 year rise of the PP, stocks collapsed to be nearly even with it, and has been on a lower trajectory since then, but still up.

We are down over 400 points again right now. Gold is up decently. Treasuries flat. So much of this is recency bias. PP is doing what it is meant to, for me at least. Keeping me calm and not caring about the breathless reporting of the "stock market plunging" which I am sure is all over the news right now.



Someone near retirement, started investing in 1974 (data only goes to 1978)



Someone at 40, start 2000:



Starting 2008:

buddtholomew wrote: ↑Fri Dec 07, 2018 11:51 am Like I said, I continue to invest in the 4 asset classes, just not 4x25.

That's true for many of us here, yet somehow we're able restrain ourselves from bellowing "OMG the PP sucks!" every time something happens in the markets.

flyingpylon wrote: ↑Fri Dec 07, 2018 1:09 pm

buddtholomew wrote: ↑Fri Dec 07, 2018 11:51 am Like I said, I continue to invest in the 4 asset classes, just not 4x25.

That's true for many of us here, yet somehow we're able restrain ourselves from bellowing "OMG the PP sucks!" every time something happens in the markets.

That’s my point, flyingpylon - very rare to find someone who holds 4x25. Perhaps if you did, you may understand my frustration. Nevertheless, it is over the top. That much I do understand.

Budd, I don't think you get our point. Even Harry Browne wasn't 4 x 25, and he was the inventor of the PP. He was only 4 x 25 for a certain portion of his portfolio -- the portion that he figured was too important to bet on riskier investments. Each PP investor has to figure out for themselves what that portion is.