Kevin K. wrote: ↑Sat Jun 06, 2020 5:43 pm
So the juxtaposition I'm seeing is mainstream firms like Vanguard and DFA predicting that international and value are going to soar based purely on valuations (as they've been predicting - incorrectly - for many years now) while the NYT article is talking about STRUCTURAL changes to the stock markets that got underway during the Great Recession and have been launched into hyperspace by the pandemic. It kind of looks like QQQ might be a better call than VBR going forward.
I understand the argument that current conditions may disproportionately harm small caps. But there's more to the structural makeup of the stock market than company size.
For reference, the thing that eventually pushed me over the top on my own SCV vs SCB debate (I settled on SCV) was when I realized just how different the sector makeup is for SCV vs LCB. Large caps are dominated by tech and healthcare, while small cap value is heavily weighted towards financials and industrials (SCB is a lot more similar to LCB in sector makeup than you'd think). Balance them equally and you get a nice amount of sector diversification on top of the other economic diversification in the portfolio.
Will tech and healthcare do better than financials and industrials in the near term? Sure - it's very possible. But having my bases covered in a methodical rebalancing structure gives me the confidence to stick with the plan no matter what industry takes the lead next.
So clear, so well-reasoned, so helpful! Thanks - again! - Tyler. The GB is so well thought-out.
It seems like the only real obstacle to "staying the course" with the GB or PP is the one William Bernstein wisely pointed out years ago: tracking error regret, which in turn is only a danger to the degree that one insists on following stock market news.
Kevin K. wrote: ↑Sat Jun 06, 2020 5:43 pm
Another question for GB fans here is to what extent people consider it heretical to use something other than SCV for the second 20% of the stock allocation. I understand Tyler's well thought-out recommendation of SCV or SCB as complementing the TSM allocation. And he has mentioned that perhaps a slice of international could be OK, but not really needed in a portfolio that holds 20% gold.
The sea change (if that's not too dramatic a phrase) I'm seeing is captured in this recent NY Times article:
The trends talked about in that article, which is from late April, have only increased since. Even my least-favorite stock market talking head seems to get this one right:
"The coronavirus pandemic and corresponding lockdown made way for “one of the greatest wealth transfers in history,” CNBC’s Jim Cramer said Thursday.
The stock market is rising as big business rebounds from state-ordered stoppage of nonessential activity, while small businesses drop like flies, the “Mad Money” host said.
“The bigger the business, the more it moves the major averages, and that matters because this is the first recession where big business … is coming through virtually unscathed, if not going for the gold,” he added."
So the juxtaposition I'm seeing is mainstream firms like Vanguard and DFA predicting that international and value are going to soar based purely on valuations (as they've been predicting - incorrectly - for many years now) while the NYT article is talking about STRUCTURAL changes to the stock markets that got underway during the Great Recession and have been launched into hyperspace by the pandemic. It kind of looks like QQQ might be a better call than VBR going forward.
Thoughts?
Another variation as well would be QQQ/SCV instead of SPY/SCV. I think QQQ/SCV has a greater juxtaposition than SPY/SCV. I'll admit, I'm not a big believer in value long term, as I think value indexes contain mostly worthless zombie companies, but they do still have periods (like the last couple weeks) of severe outperformance whenever you get a massive crap big. And generally speaking, the times when SCV out performs are usually the times when QQQ underperforms, and the reverse. So I think QQQ/SCV would be something to think about, especially since you're bullish on QQQ.
mathjak107 wrote: ↑Sat Jun 06, 2020 4:35 pm
It also has given him pretty poor returns now for 15 years compared to many mutual funds ...I mean fidelity contra beat Berkshire every time frame the last 15 years ....what ever he had, that mojo seems to be gone for a long time .
The poor choices he made the last decade in investments is pretty bad
Oh I agree with you. Though I don't think that his choices in investments necessarily were bad on the whole (aside from maybe Wells Fargo), but the fact that value itself has been such a poor performer for 18 years now. Any true blue value guy has underperformed over the last 18 years now. Eventually that pendulum will swing back again, but who knows how long that will be? Odds are Buffet won't be in charge of Berkshire anymore at that time, and they likely will no longer be pure value. But yes, any actual fund manager would have been fired with his poor performance over the last dozen years or so. But that's the difference between a fund and a company. A fund is forced to chase current trends (plenty of value managers have loaded up on growth stocks in the last decade simply to keep their jobs), a company has a bit more room to stick to their formula and wait out the inevitable swing back into favor. Value out performed growth for many decades, so there are still another couple decades of potential mean reversion in growths favor to bring both back to even on the longest timeframe.
Kevin K. wrote: ↑Sat Jun 06, 2020 11:51 am
A chorus of wise advice here I must say - or rather, ruefully admit, since I sold my SCV at a loss a few weeks back and reverted to the PP from the GB.
We have a similar story. Earlier this year my wife and I moved SCV-invested money from our employer-provided individual HSA accounts to new HSA accounts at Fidelity. The HSA companies requested that we first sell the SCV so we would be transferring cash. By the time the move was complete (it took over a month), equities had bottomed and were heading back up. My wife and I continued to think that equities would take another dive, which they never did. And each of our Fidelity HSA accounts still hold that money in cash. So, we've lost out on some significant gains on that money.
I think our lesson is to stick to the allocation plan; that is, we should have immediately reinvested the money in SCV as soon as the transfer occurred. But maybe we still haven't learned that lesson because with SCV prices being up a lot, we are now reluctant to buy high. So, even now, we aren't sticking to the plan.
Fortunately the HSA amounts are less than 10% of the total SCV investment allocation in our GB portfolio. But still, I think there is a lesson here.
LittleDinghy wrote: ↑Sun Jun 07, 2020 5:42 pm
I think our lesson is to stick to the allocation plan; that is, we should have immediately reinvested the money in SCV as soon as the transfer occurred. But maybe we still haven't learned that lesson because with SCV prices being up a lot, we are now reluctant to buy high. So, even now, we aren't sticking to the plan.
Just because something is up does not mean it is "high". Can you see your emotional bias coming forth there in that wording? SPY is 5% away from all-time highs. SLYV is still 25% away from all-time highs. Relatively speaking, there's still a lot of room left for SCV to play catch up. If your allocation is to hold 20% SCV, I would just plug your nose and do it. I mean it sounds like you would still be buying in cheaper than you sold, so that should be something you should celebrate and not want to risk missing out on! There are rules in the portfolio for a reason. It's almost a sure bet that whenever you break or bend the rules of your portfolio you're going to live to regret it eventually.
pmward wrote: ↑Sun Jun 07, 2020 5:51 pm
Can you see your emotional bias coming forth there in that wording? SPY is 5% away from all-time highs. SLYV is still 25% away from all-time highs. Relatively speaking, there's still a lot of room left for SCV to play catch up. If your allocation is to hold 20% SCV, I would just plug your nose and do it. I mean it sounds like you would still be buying in cheaper than you sold, so that should be something you should celebrate and not want to risk missing out on! There are rules in the portfolio for a reason. It's almost a sure bet that whenever you break or bend the rules of your portfolio you're going to live to regret it eventually.
Thank you for pointing out my emotional bias in my language. And you're right, it probably is still worth less than when we sold it. We'll take a look.
sophie wrote: ↑Sat Jun 06, 2020 3:02 pm
... eventually I realized I was simply letting not so smart people parrot their latest stupid ideas into my head. Don't let that happen! ...
There is so much wisdom here but this is the best quote of the week!
I love the bit more of simplicity of it. Intermediate treasury is a lot easier to find in retirement accounts.
There is absolutely nothing wrong with that portfolio. It looks pretty sane.
Careful with your metrics, though. It's tough to measure what you get when you reduce cash/bond exposure for more equities.
It almost always makes the numbers better. But there are a lot of real life trade-offs happening there. It isn't just all what you can see in the numbers.
When I war-game against real life, I like to remove cash from the percentages and divide my portfolio up as 5 years living expenses in cash - and then the rest divvied up in LT bonds, Equities and Physical Gold - with exposures to your preference.
EDIT: If you are still working and very confident in your income, then that could replace the cash cushion that I use.
PP67 wrote: ↑Mon Mar 23, 2020 10:15 am
My simplistic way of potentially dealing with rebalancing a GB (which is just a HBPP + 20% VB for me) was to track the HBPP portion separately and when the HBPP portion hits a 15%/35% limit on any of the HBPP assets I would rebalance everything back to a GB allocation (20% in all 5 assets). My rational is that whatever environment caused one of the HBPP components to trigger a rebalance would probably hold true for a GB allocation as well.
I currently have 18.4% VTI, 27.2% TLT, 21.9% GLD and 32.5% "cash" in my HBPP portion which is getting close to the 35% limit. My GB allocation currently works out to be 16.7% VTI, 9% VB, 24.7% TLT, 20% GLD and 29.6% "cash". If my HBPP "cash" portion hits 35%, I would try to rebalance everything back to 20% each in a GB allocation (or as reasonably close).
I'm not experienced in finance, but I play a ton of boardgames. I have no idea how this rebalancing scheme works in real life but numerically it is an elegant solution. I'm most likely going to adopt it as I sort out my finances and transition to a HBPP/GB asset allocation.
Have you kept to it? Or have you changed your process over the past couple of years.
(on a seperate note I just read this thread over the past ninety minutes as I procrastinate on finishing some overdue work that I was supposed to deliver on Friday. I feel like I just read a novel...but maybe its my stress from being behind. Cheers!)
1/n weirdo. US-TSM, US-SCV, Intl-SCV, LTT, STT, GLD (+ a little in MF)
I have RSP on the brain today (equal-weight S&P500 ETF). A GB with 40% RSP beats a GB with 20% ISV and 20% VTI, but the limiting factor for my backtesting (portfoliovisualizer.com) is when GLD started. It makes sense, RSP is not an implicit growth strategy (unlike cap-weighted ETFs) is therefore more value-ish, and has less weight put into the "titans" of the day of the S&P500, smaller firms contribute more.
ochotona wrote: ↑Sat Jun 11, 2022 4:03 pm
I have RSP on the brain today (equal-weight S&P500 ETF). A GB with 40% RSP beats a GB with 20% ISV and 20% VTI, but the limiting factor for my backtesting (portfoliovisualizer.com) is when GLD started. It makes sense, RSP is not an implicit growth strategy (unlike cap-weighted ETFs) is therefore more value-ish, and has less weight put into the "titans" of the day of the S&P500, smaller firms contribute more.
I may be wrong here, but doesn't PV let you use the ticker ^GOLD to go back to 1985 (or even 1972) rather than just using the ticker symbol GLD?
ochotona wrote: ↑Sat Jun 11, 2022 4:03 pm
I have RSP on the brain today (equal-weight S&P500 ETF). A GB with 40% RSP beats a GB with 20% ISV and 20% VTI, but the limiting factor for my backtesting (portfoliovisualizer.com) is when GLD started. It makes sense, RSP is not an implicit growth strategy (unlike cap-weighted ETFs) is therefore more value-ish, and has less weight put into the "titans" of the day of the S&P500, smaller firms contribute more.
Would you say that such funds are a kind of automatic buy-low sell-high?
ochotona wrote: ↑Sun Jun 12, 2022 6:21 am
I will have to try!
And that point the GB devolves into an HBPP with an equity tilt...
Isn't that the basic point of the GB? It's a HBPP with a prosperity tilt with <choose favorite factor(s)> to spice up the second equity peortion.
Then again, as I write this, maybe GB is more than that. The current market is showing why the SV tilt makes sense as a preferred tilt for the GB. It's a mini-barbell for the equities portion. In a bubble you have the MCW portion to pull the train, and when it deflates, you have the SV to avoid the worst of the losses.
Last edited by joypog on Sun Jun 12, 2022 9:01 am, edited 1 time in total.
1/n weirdo. US-TSM, US-SCV, Intl-SCV, LTT, STT, GLD (+ a little in MF)
ochotona wrote: ↑Sat Jun 11, 2022 4:03 pm
I have RSP on the brain today (equal-weight S&P500 ETF). A GB with 40% RSP beats a GB with 20% ISV and 20% VTI, but the limiting factor for my backtesting (portfoliovisualizer.com) is when GLD started. It makes sense, RSP is not an implicit growth strategy (unlike cap-weighted ETFs) is therefore more value-ish, and has less weight put into the "titans" of the day of the S&P500, smaller firms contribute more.
Would you say that such funds are a kind of automatic buy-low sell-high?
Wall street guys are so slick. The MCW guys says look at the high churn in that fund! The Equal Weights guy retorts with your line.
Listening to investing podcasts that interview fund managers are a masterclass in sales! Most of those guys are so goddamn smooth, they talk like they're just sharing knowledge for 58 minutes and land with a subtle drop for their project in the last 120 seconds.
1/n weirdo. US-TSM, US-SCV, Intl-SCV, LTT, STT, GLD (+ a little in MF)
Xan wrote: ↑Sun Jun 12, 2022 8:29 am
Would you say that such funds are a kind of automatic buy-low sell-high?
YES. Whenever they rebalance to equal Dollar amounts for each security, they will do that.
Market-cap weighted are a momentum strategy. The titans of the S&P500 got that way because they have grown a lot in recent years, which results in them having a large weight.
You're being ridiculous. The smallest companies in the SP are like Alaska Airlines, News Corp, Fox News, DaVita, Norwegian Cruise Lines .. Don't throw that Joe's Vegan Taco stuff around any longer. You make yourself look absurd. Your posts don't deserve a reply
Ocho, you seem to be having a disproportionate response. It's perfectly sufficient to point out the smallest companies in the fund without the personal insults. Please try to remember that most of the people who are reading posts are not the person you're responding to, and are happy to learn things like what the smallest companies are. The insults are pretty off-putting.
vnatale wrote: ↑Sun Mar 22, 2020 9:38 pm
In 2029 I wonder what people will be writing about what Permanent Portfolio holders did in 2020 and what gold did during the year....
Vinny
I'm setting a reminder in my calendar.
MM Ruby on Rails rules all www.allterraininvesting.com
