Gold Has Outperformed Stocks Over The Past 20 Years

Discussion of the Gold portion of the Permanent Portfolio

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technovelist
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by technovelist » Wed May 20, 2020 7:20 am

mathjak107 wrote:
Wed May 20, 2020 3:01 am
no one will ever convince me that chart reading and tea leave reading are not in the same boat .

it is investors who are looking for the holy grail of investing in some trading system ... the systems come and go after they fail to live up to what it is they do ... in days of 2500-3000 point swings in a day they only work until they dont ...

never would i base my investing on charts , squiggles ,lines or moving averages
Whenever someone tries to tell me about an infallible system, I say "Why is the inventor of this system telling you about it rather than becoming the richest person in the world by using it himself?"

Of course that ends the conversation.
Another nod to the most beautiful equation: e + 1 = 0
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by vnatale » Wed May 20, 2020 8:20 am

mathjak107 wrote:
Wed May 20, 2020 4:00 am
vnatale wrote:
Tue May 19, 2020 6:24 pm
mathjak107 wrote:
Tue May 19, 2020 5:42 pm


Anyone remember Fabian ? And after Fabian came his son ...their system worked well ..well that was until it didn’t
Definitely remember Dick Fabian and his Telephone Switch Newsletter! It was my first investing "scheme". Followed it faithfully for three years from about 1987 to 1990.

I ever created my own Lotus 1-2-3 worksheet with macros that would generate its own signal by his formula so I would not have go call his phone number. I probably did call it, though, just to confirm all was working properly on my end.

Vinny

fabian ..he had a big following ... his system of moving averages was supposed to give up the 10% at the top and bottom and leave you with the 80% in the middle .

it worked very well until it didnt ...

he lost subscribers like crazy ...then his son took over , said the system needed some tweaking to cope with fast moving markets .

he was sure he fixed the problem ... he publicly put his own money in and let subscribers track how he did .

well he too performed quite dismally over time . not only did he get whipped sawed in the volatile markets but by the time things reacted the damage was done ..

they became the poster children for these systems failing to deliver the goods .
I'm fairly certain that I departed before his son took over (although many years later I did read the son's book).

One good thing I did learn from Fabian / Telephone Switch Newsletter was steely discipline when it came to investing.

He advised when you were supposed to be in equities only read information that supported that and when you were supposed to be in cash only read information that supported that. The basic goal was to be firm and resolute in your beliefs and not be swayed by the changing winds. That has stayed with me ever since.

Vinny
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Xan » Wed May 20, 2020 9:00 am

Using a chart like you would tea leaves to predict the next thing the market will do is one thing, and I agree that its utility is tenuous at best.

It's another to post a chart comparing two asset classes over a long period of time, with the conclusion being "gold outperformed stocks over a multi-decade period once, it can happen again".
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Wed May 20, 2020 9:18 am

Sigh. You guys totally and completely miss the boat on what charting and technical analysis is for. It's no wonder that you doubt it since you clearly do not have even the faintest comprehension of its actual purpose. So, let me say this as clearly as I can: TECHNICAL ANALYSIS IS NOT ABOUT PREDICTING THE FUTURE. There, did that sink in? I hope so. Sure, many people have sold systems and their sales pitch has been that it is about predicting the future, and gullible people buy into that stuff and wind up eating it. So it's understandable that this confusion exists.

So now that I've cleared that up, what is technical analysis about if it's not about predicting the future? It is about quantifying and observing trends in sentiment. Sentiment is what drives the markets day to day, so quantifying sentiment has a lot of value and use. Moreover, the way human psychology works just so happens to line up where whatever the trend in sentiment is today, probability is high that the trend in sentiment will be the same a day or a week from now. Now, this isn't always 100% the case. There is no fool-proof 100% always right system. But 80% of the time this is generally going to hold true. So what about the other 20%? This is why I always say here that risk/money management is more important than trading methodology. If you are going to trade using technicals, you need to know how to protect your capital if you're wrong. If you know how to manage risk you can make the most basic of technical strategies work (mine is pretty basic you'll notice if you follow my VP thread). If you do not know how to manage risk, even with the best system in the world you will lose. How many of those salesman mentioned above actually teach their clients how to manage risk? Almost none. Most of them just send out some signals and leave it to their clients to figure it out. It's no wonder that their clients have poor results when they are not ever learning the most important part. Also, another point these false guru's fail to get across is that nobody should be trading with their entire net worth. There is a big reason why I only use discretionary trading on 30% of my portfolio. Why is that? Because that gives me enough to have 2-3 good sized discretionary positions. Why only limit myself to 2-3 positions? Because I have found that if I try to do more than that I'm likely to get impatient and start forcing trades to work. Finding good high probability, high confidence trades is rare. I maybe come up with a handful of these in a good year. It takes some patience to let the trades come to me. It's impossible to find say 10 good high probability trades at any given time. Nobody can look at every chart and form a high probability case. But this is all part of the "risk and money management" umbrella that I mentioned above.

Now, aside from trading, technical analysis still holds value even just for forming theories. I hear all kinds of theory and speculation here, but how often does anyone here actually look at the charts to try to prove or disprove their opinion? Harry Browne used past data to attempt to refute his theory on the PP, and the fact that the data couldn't refute his theory was why he chose it as a system. There is great value in analyzing charts. I trust the data in the charts much more than I trust anyone here's blind opinion or hunch on speculation. Many people here speculate, but they stop at forming a thesis. When you use charts you don't just form a thesis, you wait for the price action to back that up BEFORE you put your money at risk. Charting is a crap filter of sorts for bad ideas. If I'm wrong, and the charts never reflect my thesis, I don't buy in and thus do not risk losing on a bad idea. There is a lot of value in price data. If you are too closed minded to even consider this point, that then it's your loss.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Cortopassi » Wed May 20, 2020 9:36 am

pmward,

Agree that with good risk control, using tech analysis will make it that much more probable that your win-loss is >50% which is all you are looking for generally.

You say it is not about predicting the future, but follow up with with a sentence that includes " probability is high that the trend in sentiment will be the same a day or a week from now."

That seems to be an educated guess on predicting the future, no? I understand all it has to be is better than 50% right, and as long as you can control your losses, you should come out ahead, but it is still trying to predict. And as coronavirus has proven, it is easy to be wrong in both directions, with no warning, hence the risk control.

When I used charting, I was all about using it to predict. My fault. No risk control either, or poor risk control at best.

I am a smart guy. I have zero clue why looking at my past I made such foolish, poorly thought out decisions when it came to investing. I am the guy who paid off his mortgage in 9 years, yet with investing, it's like this weird damaged area of my brain that was always over-run by the get rich quick emotions vs. slow and steady. Way past that now, recovering investor for 6 years now.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by mathjak107 » Wed May 20, 2020 9:51 am

Xan wrote:
Wed May 20, 2020 9:00 am
Using a chart like you would tea leaves to predict the next thing the market will do is one thing, and I agree that its utility is tenuous at best.

It's another to post a chart comparing two asset classes over a long period of time, with the conclusion being "gold outperformed stocks over a multi-decade period once, it can happen again".
anything is possible but the fact is an asset changes its trailing returns daily .... gold may have beat equities hypothetically only if you bought that day and minute . it could have lagged for 19 years but someone somewhere could say gold beat stocks for 20 years .... to be truthful though it would have to be their gold beat equities for 20 years . someone buying in the next day may have different results on a volatile day.


that is my point ... while sounds great theat gold beat stocks for 20 years . that would only be true if you started on the day and second being tracked ... otherwise all bets are off for 19 years and 364 days as to outcome .

it is no different than the portfolio size effect being totally dominating in your own return ....
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Wed May 20, 2020 10:00 am

Cortopassi wrote:
Wed May 20, 2020 9:36 am
pmward,

Agree that with good risk control, using tech analysis will make it that much more probable that your win-loss is >50% which is all you are looking for generally.
If your risk management is right, you don't even need to be right 50% of the time. Done right, you can make a killing while being wrong most of the time. It's all about cutting losses early. If you take say 5 1% losses in a row, then catch one 10% gain, what do you have? A gain on the whole even though you were only right on 1/6 of the trades.
Cortopassi wrote:
Wed May 20, 2020 9:36 am

You say it is not about predicting the future, but follow up with with a sentence that includes " probability is high that the trend in sentiment will be the same a day or a week from now."

That seems to be an educated guess on predicting the future, no? I understand all it has to be is better than 50% right, and as long as you can control your losses, you should come out ahead, but it is still trying to predict. And as coronavirus has proven, it is easy to be wrong in both directions, with no warning, hence the risk control.
I see people here all the time say "I think this is going to happen because x". For instance lately it's been "I think bonds are going to go down because yields have nowhere to go but up". If someone is going to speculate they need a reason to form a thesis. Whether that thesis is logical, fundamental, technical, whatever, it's all a speculation none the less. Even the buy and hold crowd are speculating. They say that "I think stocks will always go up over time because for the last 120 years of data available they have so far done so". There is a speculation and prediction in any portfolio, PP included. So yes, what you want is an educated guess. You want to look for as much proof in as many places as you can. Charts hold a lot of data that can prove or disprove any theory. And human psychology means that price patterns do tend to repeat. But like I said no system is 100% foolproof. The PP has its risk management built into it. It is a full and complete system because of this. Without the rebalancing the methodology wouldn't work like it does. Trading methodologies also need their risk management system attached, whether that is a technical system or a Buffet-esque fundamental system. There is no magic indicator. There is no fool-proof system. So you need to manage your risk.
Cortopassi wrote:
Wed May 20, 2020 9:36 am
When I used charting, I was all about using it to predict. My fault. No risk control either, or poor risk control at best.

I am a smart guy. I have zero clue why looking at my past I made such foolish, poorly thought out decisions when it came to investing. I am the guy who paid off his mortgage in 9 years, yet with investing, it's like this weird damaged area of my brain that was always over-run by the get rich quick emotions vs. slow and steady. Way past that now, recovering investor for 6 years now.
Yes, the investing and trading battle really is a battle with the man in the mirror. I have 3 different strategies in my portfolio. 40% is in a PP, 30% is in a quant strategy, and 30% is in discretionary trading. Each of these buckets has their own rules. I have these rules written down for each. If I follow my rules things will be ok. If I deviate from my rules I then open myself up to potential big losses. For instance, my rule of only having 2-3 discretionary trades limited to 30% total of my portfolio is one of those rules. That means that a discretionary trade is limited to 10-15% of my portfolio, enough to generate good alpha and make an actual difference (any position less than 10% is not enough to move the bar, imo), but not enough to destroy me if I'm wrong. I also have a rule that I always have to have a stop loss in place on discretionary positions, and if the positions go in my favor I trail that stop loss up to guarantee a return. I never sell because I think something has topped, I just trail my stop loss and eventually I get stopped out. I never sell at the peak, but I capture the majority of the move, which is good enough.
Last edited by pmward on Wed May 20, 2020 10:02 am, edited 1 time in total.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Xan » Wed May 20, 2020 10:01 am

mathjak107 wrote:
Wed May 20, 2020 9:51 am
Xan wrote:
Wed May 20, 2020 9:00 am
Using a chart like you would tea leaves to predict the next thing the market will do is one thing, and I agree that its utility is tenuous at best.

It's another to post a chart comparing two asset classes over a long period of time, with the conclusion being "gold outperformed stocks over a multi-decade period once, it can happen again".
anything is possible but the fact is an asset changes its trailing returns daily .... gold may have beat equities hypothetically only if you bought that day and minute . it could have lagged for 19 years but someone somewhere could say gold beat stocks for 20 years .... to be truthful though it would have to be their gold beat equities for 20 years . someone buying in the next day may have different results on a volatile day.


that is my point ... while sounds great theat gold beat stocks for 20 years . that would only be true if you started on the day and second being tracked ... otherwise all bets are off for 19 years and 364 days as to outcome .

it is no different than the portfolio size effect being totally dominating in your own return ....
So what? It's still true.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by shekels » Wed May 20, 2020 10:39 am

Charting will Help you see what is happening at this moment in Time.
The Past is the Past, and If you have the one Indicator that tells the Future good for you. ;)
Can you learn from the past? Sure, but the outcome may be different going forward.
To be on the right side of a trade.
Most people can not/do not devote the time it takes.
In the equity market you are dealing with many participants and ideas/philosophy's that everyone can't be right.
¯\_(ツ)_/¯
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by Vil » Wed May 20, 2020 10:42 am

pmward wrote:
Wed May 20, 2020 10:00 am
You want to look for as much proof in as many places as you can.
In the technical charting books they call it confluence. The same way as in technical analysis there is no single indicator that can give you the complete confidence (as there is no such thing), so you use a confluence of different indicators, so the same way you can use technical chart analysis on top of all the rest - fundamental analysis, crowd psychology/news, etc...

I do concur with what the 'random walks' is stating in a way that good risk/reward positions should be taken only ... And I would say there is a special brand of retail playing stocks that are so much different from the ones listed in the major indexes..
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by pmward » Wed May 20, 2020 11:30 am

Vil wrote:
Wed May 20, 2020 10:42 am
pmward wrote:
Wed May 20, 2020 10:00 am
You want to look for as much proof in as many places as you can.
In the technical charting books they call it confluence. The same way as in technical analysis there is no single indicator that can give you the complete confidence (as there is no such thing), so you use a confluence of different indicators, so the same way you can use technical chart analysis on top of all the rest - fundamental analysis, crowd psychology/news, etc...

I do concur with what the 'random walks' is stating in a way that good risk/reward positions should be taken only ... And I would say there is a special brand of retail playing stocks that are so much different from the ones listed in the major indexes..
Yes, this was what I was getting at, but you put it a bit more distinctly. Once again, going back to the popular bond debate. One could think bonds have nowhere to go but down... but is it really a good idea to sell all your bonds when all evidence is still pointing otherwise (i.e. no confluence)? Shouldn't one at least wait until there is some form of confirmation that bonds are truly likely to go down? I mean, all the people that shorted bonds over the last 10 years trying to call a top before there was any confirmation have had a miserable time. Trying to call an exact top or bottom is a losing bet, imo.

Also, while markets statistically speaking display "random" price movements does not mean that markets truly are random. I mean if they were truly random, why then did they sell off after the news of the corona virus? There was a definite reason for the selloff. The coronavirus was a known entity for a couple months before stocks went down. Likewise with the efficient market hypothesis. Markets cannot be truly efficient, if they did we wouldn't have these volatile bull and bear swings in the markets. But what "random walk" and "efficient market hypothesis" do is give a model for looking at markets as a whole. Models are useful, but never totally right. The Fed uses models as well for all their decisions, and as everyone here is quick to point out they are not always right.

There are always places you can find inefficiencies, trends, and patterns if you look hard enough. For instance, is it random that tech is out performing financials and has been for a decade+ now? Is it efficient that value has underperformed growth for the last 18 years? In both these examples the answer is a resounding no. For now, if one is going to speculate they would do better to invest with these trends and having the wind at their back. Eventually though, these trends will shift, as all trends eventually do. Markets in a way are made up of many pendulums that each swing at a different pace. All trends eventually end, and new ones emerge, so one should never get married to any one idea, asset, strategy, indicator, etc. In markets everything fails at some point. But, if you manage your risk properly your portfolio as a whole doesn't have to fail. This is also why I have strategy diversification in 3 different strategies. What's the likelihood that all 3 strategies fail at once? Incredibly small. Matter of fact, since 1 of my 3 strategies is the PP, being 100% PP has more of a chance of failing than all 3 of my strategies failing at once.
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Re: Gold Has Outperformed Stocks Over The Past 20 Years

Post by mathjak107 » Wed May 20, 2020 12:44 pm

Xan wrote:
Wed May 20, 2020 10:01 am
mathjak107 wrote:
Wed May 20, 2020 9:51 am
Xan wrote:
Wed May 20, 2020 9:00 am
Using a chart like you would tea leaves to predict the next thing the market will do is one thing, and I agree that its utility is tenuous at best.

It's another to post a chart comparing two asset classes over a long period of time, with the conclusion being "gold outperformed stocks over a multi-decade period once, it can happen again".
anything is possible but the fact is an asset changes its trailing returns daily .... gold may have beat equities hypothetically only if you bought that day and minute . it could have lagged for 19 years but someone somewhere could say gold beat stocks for 20 years .... to be truthful though it would have to be their gold beat equities for 20 years . someone buying in the next day may have different results on a volatile day.


that is my point ... while sounds great theat gold beat stocks for 20 years . that would only be true if you started on the day and second being tracked ... otherwise all bets are off for 19 years and 364 days as to outcome .

it is no different than the portfolio size effect being totally dominating in your own return ....
So what? It's still true.
lots of things are true , but can be mis-leading as stated ....the insurance industry thrives on that fact ... ever look at the real story behind variable annuity returns ?

it is very easy for those who are new to all this to not really understand what these terms mean and how it only applies to only that moment in time . just look at the 5%-8% plus swings we saw in TLT in a trading day in march .... what hour you bought could influence trailing return periods when it comes to real time .
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