Stock scream room

Discussion of the Stock portion of the Permanent Portfolio

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ochotona
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Re: Stock scream room

Post by ochotona » Fri Mar 18, 2016 8:47 pm

Stocks are really, really overbought at present. We could be looking at a repeat of the Oct-Nov 2015 rally, which ended badly. I would shy away from buying stocks at this time. I think it may become more clear in a month or two if this is a lasting rally or if there is going to be another cliff dive.

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Re: Stock scream room

Post by Cortopassi » Fri Mar 18, 2016 9:23 pm

Ocho,

Fair to say, at least for the past 2 months, that anyone following the 10 month MA Ivy signals will have lost out on these gains, and likely buy in higher at the end of March?
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Re: Stock scream room

Post by ochotona » Sat Mar 19, 2016 6:09 am

A whipsaw is a real possibility, unfortunately, and more likely when using 10 month MA as opposed to 12 month total return.
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Re: Stock scream room

Post by ochotona » Sat Mar 19, 2016 12:18 pm

The blackout period for stock buybacks is beginning next week. Companies buying back shares of their own stock (to increase earnings per share) have been a major prop keeping the market up. What will happen over the next six weeks as this prop comes off?

http://www.bloomberg.com/news/articles/ ... e-earnings
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Re: Stock scream room

Post by buddtholomew » Tue Mar 29, 2016 12:51 pm

I followed Sophie's lead and invested 1/3 in stocks, gold and treasuries yesterday morning.
Either someone is playing a cruel joke or these assets are really green today.
I had just reached the point of analysis paralysis and forced myself not to stay in cash.
We'll see how it turns out, but 40% cash is too much for even me.
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Re: Stock scream room

Post by MachineGhost » Tue Mar 29, 2016 2:24 pm

buddtholomew wrote: I followed Sophie's lead and invested 1/3 in stocks, gold and treasuries yesterday morning.
Either someone is playing a cruel joke or these assets are really green today.
I had just reached the point of analysis paralysis and forced myself not to stay in cash.
We'll see how it turns out, but 40% cash is too much for even me.
I'm still roughly 60% in cash.  Its frustrating but I just don't see enough investment opportunities yet.  So this year, I've decided to freeze portfolio contributions and just DCA in from existing capital over 108 weeks since I expect global recession and/or political crisis throughout the rest of this year and next.  At least in those assets that are All Systems Go right now: gold and T-Bonds (stocks are looking to flip back to bullish at end of this month).  T-Bonds is an interesting conundrum because the yields are so low it doesn't justify more than a 5-year maturity exposure and the yields on CD beats it.  I don't like the idea of investing in long-duration T-Bonds as a stand-alone without justification that it is the best to be in, not second, third or fourth.  Just too risky.

I bet most didn't know it took only about 2.5 years during the Great Depression to get back to breakeven after 1929-1933.  The Nifty Fifty 1973-1974 bear that killed first responder's pensions (and Polaroid!) was the real killer.  It took 12 years just to get back to breakeven.  The PP would have saved your ass, literally.

And I bet most don't realize the PP is really just a 50%/50% portfolio, hence why the 4% SWR rule works.  mathjak could have learned something if he had stuck around.
Last edited by MachineGhost on Tue Mar 29, 2016 2:31 pm, edited 1 time in total.
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Re: Stock scream room

Post by bedraggled » Tue Mar 29, 2016 2:46 pm

MG,

And how many know of the bull market of 1932-1937?

How's that vacation, by the way?  Two years of Business Week got read pretty quickly!

Cheers.
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Re: Stock scream room

Post by MachineGhost » Tue Mar 29, 2016 3:02 pm

bedraggled wrote: MG,

And how many know of the bull market of 1932-1937?

How's that vacation, by the way?  Two years of Business Week got read pretty quickly!

Cheers.
Yeah, yeah, I promise I'm leaving now!
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Re: Stock scream room

Post by bedraggled » Tue Mar 29, 2016 3:04 pm

MG,

No acknowledgement of the 1932-1937 bull market?
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Re: Stock scream room

Post by barrett » Tue Mar 29, 2016 3:22 pm

I'm not MG but here's a good inflation-adjusted stock chart for the last 100 years:

http://www.macrotrends.net/1319/dow-jon ... ical-chart

People talk (fairly) about gold going through long down periods. There are time periods on here where one would have to have a LONG time horizon for stocks in order to avoid selling.

And, yes, that '32-'37 rally was not bad.
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Re: Stock scream room

Post by Kbg » Wed Mar 30, 2016 12:20 am

TLT hauling the mail again this year. YTD +8.8%.
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Re: Stock scream room

Post by dualstow » Wed Mar 30, 2016 7:16 am

Kbg wrote: TLT hauling the mail again this year. YTD +8.8%.
http://gyroscopicinvesting.com/forum/bo ... /144/  8)
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Re: Stock scream room

Post by Kbg » Wed Mar 30, 2016 10:35 am

The main reason I pointed this out is because the exact purpose of LTTs in the PP is for exactly the kind of conditions we are in now (no/lo/deflation) but we continually want to WIN (whip inflation now)!  I still find it amazing that people can't really stop or have a very difficult time not predicting which is the whole philosophy behind a PP.

I totally understand and would agree with tilting a PP to one's circumstances. A younger person definitely should up the stock allocation as an example or go with a leveraged version of the PP.

I'm really not an HB groupie as I have a lot of money in other trading strategies, but I think HB was very smart man. It is not often you see a strategy do exactly what it purports to do over a very long time frame. PP certainly does.
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Re: Stock scream room

Post by bedraggled » Wed Mar 30, 2016 12:18 pm

Ralph Acampora says stocks are now just dandy.

Does this mean Dow 50,000?  Might have an effect on the HBPP. 

Who knows.
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Re: Stock scream room

Post by dualstow » Wed Mar 30, 2016 12:26 pm

Kbg wrote: I totally understand and would agree with tilting a PP to one's circumstances. A younger person definitely should up the stock allocation as an example or go with a leveraged version of the PP.
I don't think a leveraged pp is a great idea. Just my opinion.
A stock-heavy Vp for younger investors makes sense, though.
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Re: Stock scream room

Post by Pointedstick » Wed Mar 30, 2016 1:01 pm

Yeah, I'm nearly done moving towards a mostly 5x20 Golden Butterfly portfolio and really loving how the small caps I recently picked up have zoomed since then.
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Re: Stock scream room

Post by MachineGhost » Wed Mar 30, 2016 1:22 pm

Hindsight bias.

The Golden Butterfly portfolio is B.S..  Does anyone really think such a "free lunch" is that easy to get all packaged up for you by your friendly neighbor, Mr. Wall Street?  ::)

You're not gonna get more prosperity by data mining to the past.  You will if you tilt to the discounted future.  That should be bloody obvious, I would think.

Lets take dividend paying stocks for example.  Historically, they traded at about a 25% discount to intrinsic value.  Now, the trade at a huge premium to intrinsic value.  Do you want to invest in them right now?  The answer should be -- again, bloody obvious.
Last edited by MachineGhost on Wed Mar 30, 2016 1:31 pm, edited 1 time in total.
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Re: Stock scream room

Post by Pointedstick » Wed Mar 30, 2016 1:30 pm

I have no idea what you mean by, "You will if you tilt to the discounted future." Would you mind talking in something other than unclear soundbites?
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Re: Stock scream room

Post by MachineGhost » Wed Mar 30, 2016 1:41 pm

Pointedstick wrote: I have no idea what you mean by, "You will if you tilt to the discounted future." Would you mind talking in something other than unclear soundbites?
They're not soundbites. :P  Markets discount the uncertain/unknowable future.  You must take a risk to get a reward right?  So what is "risky" right now from an unfamiliar, outgroup perspective?  That's where the growth of the future will be just like it was in the illustrous past for "The Golden Butterfly".  You can't project the current ex-post facto assured comfort of data mining to what it was like to invest at the time.  It would have felt like it would right now if I told you to look outside the overvalued, dying public equity markets for your future growth.

Example: On May 16 of this year, Title III (Regulation CF) will go live for everybody to invest in startups.  How do you feel about that?  Well, that's how it would have felt investing in value or small pre-1973 when the Nifty Fifty absolute dominated everything, or stocks were hated between 1929-1937 or later on during 1973-1982.  The funny thing is you likely could not have invested back then because there were no vehicles to do so, another source of hindsight bias.  Even during 1994-2000 you had a long period of underperformance by value that has only gone to equlibirum and far surpassed it during 2000-2016.  Value is now overvalued, but it has more to do with sloppy implementations by the fund companies than anything else (the size effect isn't investable via a fund).  Keep in mind, proper studies account for risk-adjusted returns after transaction costs and taxes.  There's no point in trying to get "Smart Beta" exposure ala "The Golden Butterfly" if you pay more in total expenses than the S&P 500.

Don't get me wrong.  It's definitely going in the right direction to diversify Prosperity strategies, but you need to go further than just accept what Wall Street has packaged for you.  Swedroe, for instance, pushes "Smart Beta" funds so he an unrevealed bias and an agenda to push what he does even though the evidence is DFA's "Smart Beta" funds are just closet indexers with higher fees.
Last edited by MachineGhost on Wed Mar 30, 2016 1:50 pm, edited 1 time in total.
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Re: Stock scream room

Post by Pointedstick » Wed Mar 30, 2016 1:53 pm

So you're saying that startups are going to be the new hot thing? But how do you know? You're guessing just like the rest of us. Maybe it will amount to a fat lot of nothing. Do you have any plans to move any money to take advantage of this?
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Re: Stock scream room

Post by MachineGhost » Wed Mar 30, 2016 2:11 pm

Pointedstick wrote: So you're saying that startups are going to be the new hot thing? But how do you know? You're guessing just like the rest of us. Maybe it will amount to a fat lot of nothing. Do you have any plans to move any money to take advantage of this?
I'm just giving startups as an example where it is much easier to see that a fundamental shift is taking place (IPO's have dropped big time since the 1980's-2000's and it seems to be correlated to Bush's suffocating Sarbanes-Oxley Act).  Of course I don't know if startup investing is going to be the next hot thing, but that's why you diversify Prosperity.  I've already moved money into startups and late stage investing.  Diversyfy, diversfy, diversfy.
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Re: Stock scream room

Post by Tyler » Wed Mar 30, 2016 2:38 pm

MachineGhost wrote: Hindsight bias.

The Golden Butterfly portfolio is B.S..  Does anyone really think such a "free lunch" is that easy to get all packaged up for you by your friendly neighbor, Mr. Wall Street?  ::)

You're not gonna get more prosperity by data mining to the past. 
Forget Wall Street -- What about nicely packaged up by your friendly neighborhood charting guru?  ;)

The Golden Butterfly is 80% Permanent Portfolio, and the extra 20% small cap VP simply tilts it slightly to prosperity with one additional low-cost index fund.  If it's purely a result of data mining, then we all have bigger issues.  I fully believe in the PP, so I'm not so quick to dismiss similar iterations of the same idea. 

The thing I most like about both the PP and GB is that their performances are remarkably independent of start date.  Now that's not to say that the future will be exactly like the past, but that's also not the point.  When you're investing in something that has done consistently well in all sorts of economic conditions, the exact order of the future is a lot less important.  IMHO that's a perfectly reasonable application of back testing, but everyone is entitled to their own opinions and portfolio choices. 

FWIW, after lots of consideration I'm also going into the GB (with minor tweaks) with my own money.  I'll be happy to report back along with Pointedstick how it goes. 
Last edited by Tyler on Wed Mar 30, 2016 3:03 pm, edited 1 time in total.
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Re: Stock scream room

Post by dualstow » Wed Mar 30, 2016 2:48 pm

Not sure if this has come up, but there are two kind-of-ETFs that track startups.
http://www.investopedia.com/articles/in ... artups.asp
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Re: Stock scream room

Post by MachineGhost » Wed Mar 30, 2016 5:13 pm

Value doesn't work if you don't buy value.  My point in a long-winded manner was that context matters.  You can't just data mine the past for returns without understanding the context of how those returns came about AND if current such conditions exist in the present.  That's just not the case for "Small Cap Value":

Image

So you're overpaying for horribly diluted glamour stocks that are at least half MidCap exposure.  In case like this you have to compare to a non-"Smart Beta" fund which invests in that composition already to make sure you're not paying more for the toothless "Smart Beta" fund.

If you want to invest in value, then invest in real value.  If you want a certain marketcap exposure, then invest in real marketcap exposure.  Failing that, then be completely agnostic to value/growth and size by utilizing the Equal Weight MarketCap that I came up with.  Or stick to a market-cap weighted S&P 500 for cheap and find your extra Prosperity growth elsewhere.  Remember, historically, public nanocap and microcaps generated the most long-term return (and I'm sure it might have been better expressed as value or growth more than size), but because of changing fundamentals, that has switched to private companies.  We're no longer going to see a Microsoft IPO at .07 a share, yet the effect from a reality that no longer exists is in the indexes used to data mine.
Last edited by MachineGhost on Wed Mar 30, 2016 5:24 pm, edited 1 time in total.
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Re: Stock scream room

Post by Tyler » Wed Mar 30, 2016 5:28 pm

Fair enough. 

FWIW, my personal tweak is to use small cap blend instead of small cap value.  I've done a lot of research, and eventually decided that just buying small cap blend is close enough without over-thinking value vs. growth cycles.  Half VTI and half VB splits money equally between large, mid, and small caps and would likely satisfy your equal weight preference. 

It also has other side benefits for my situation, but that's a topic for another thread. 
Last edited by Tyler on Wed Mar 30, 2016 9:23 pm, edited 1 time in total.
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