The GOLD scream room

[dualstow]

It is finished (my buying, that is).

So that's what Jesus was talking about.

[stuper1]

Not if you are using it as Black Swan insurance.

well than remember you can't complain about the value dripping away once the black swan goes bye bye as typically happens over and over .

The last time I checked, any type of insurance is not free. But that doesn't mean that I don't have any insurance on my house, car, life, etc.

[mathjak107]

but we all pick and choose when and what to insure .

i own gold but i do take profits off the table every so often after a run up because of an event or swan and reduce holdings until a drop in price . if you wait for rebalancing time you will usually lose a good portion of what you gain each time .
unlike other assets like stocks and real estate which tend to respond well to time in the market , to get better performance out of gold it takes some timing of the markets . not totally in or out but i lighten up at times until i see a drop and then buy it back . wash and repeat .

but that is my style ,yours can be different . i just found if you get a nice pop in gold if i don't capitalize on it it rarely sticks around .

[Cortopassi]

Who needs insurance. The market never goes down....

[mathjak107]

over the long term it really hasn't . over any typical accumulation period you would have done just fine .

[Cortopassi]

If I had balls of steel, I agree completely, but every downturn I got scared out, so for me, the nice S&P rise over decades with the major bumps in the road in 2001 and 2008 didn't matter. It was the bumps that hurt badly.

Look at those magnitudes! Even the 1987 crash is merely a blip compared to the last two. If/when 2001/2008 repeats, the valley is going to be freaking huge and people will be jumping out windows. But there is so much control now, even from just 9 years ago, that it will be a sight to see when it happens and listen to the jawboning about how we have to save the economy and have to implement x and y and z measures to stabilize the all important stock market. I suspect there will be bail ins, the saving of too big to fail bansk for the good of the American people, nationalization of retirement accounts, etc. Dark vision, eh?

[mathjak107]

i was always a 100% equities investor right up until about 5 years from retiring . but i still run 40-50% equities all the time .

as i mentioned earlier there is no data that supports the fact gun shy folks even stick to more conservative models when they are down .

losing money always brings out bad investor behavior on all levels of volatility .

[Cortopassi]

The only data I need is my own, and although it has only been a bit over 3 years, I feel this is a portfolio I can stick with.

[stuper1]

mathjak107,

You've done well, and I'm happy for you, but do you ever consider that maybe you were a bit lucky in the sense that when the markets were down you didn't also lose your job and have to start relying on "retirement savings" to tide you over until you could find a new job. For some people nowadays, it has taken them years to find a new job, and even then, it may not pay as well as the old job.

I think this is one of the big reasons why many people want to stay away from a 100% equities portfolio during the accumulation phase.

[mathjak107]

lost my job in 2009 .
did you know that even a retiree who was 100% equities (which i don't recommend ) would have had a very very high success rate spending down from 100% equities in both good and bad times .

the reason being the drag from cash and bonds weights things down so much in the up markets so 100% equities develops a much larger cushion .

spending down when you have high level of equities even in a down market is much a do about nothing .

100% equities has a 93% success rate over every rolling 30 year period since 1871 . a 50/50 mix is optimal and was 98% . however going out longer 100% equities takes the prize . it has beaten 50/50 in 40 year retirement periods .

in any case unless you get whacked day 1 in retirement in a very long extended downturn spending from equities is a meaning less event . those who retired in 2008 are on par with every other average group this many years in .

that is what a safe withdrawal rate is based on . it counts on bad years and you spending down . cash buffers actually hurt you and cut income compared to just rebalancing a normal portfolio to create spending cash . if that portfolio is 100% equities and diversified in those equities it really is not a problem financially. mentally is a different issue !

drops are a temporary shorter term condition and mitigating those temporary drops permanently hurts long term gains so for a long term investor short term mitigation becomes meaningless , except perhaps once again , mentally .

[stuper1]

These are interesting thoughts that I have not heard before and find to be let's say non-intuitive. I'm more familiar with phrases like "if you suffer a 50% decline, you then need a 100% increase to break even".

Do you have any good references to point me to that discuss what you're saying?

Thanks.

[ochotona]

If you look at portfoliocharts.com you will see 100% stock for retirees only works for very rich retirees who can take the drawdowns.

[mathjak107]

wrong . the balance has no relationship to success rate .

drawing 4% inflation adjusted is mathematically the exact same success rate regardless of the amount . it is a percentage of draw based .

you can throw any balance you want in to firecalc and you will see it does not change . mathematically it can't .

what might determine what you do safely is the ratio of discretionary to non discretionary spending in your budget .

that is not wealth dependent either , it is just budget and expense related ..

if you ever needed to cut back because things were worse than the worst case scenario's planned around you may have to take a pay cut . if you planned a budget where everything is a need and not a want you can be in trouble .

in fact we have a very size-able portfolio and when we made our retirement plan we planned around staying in queens in nyc . i was able to do a budget that was almost 50% discretionary so if need be we can comfortably cut back if unexpected expenses hammer us .

on the other hand we could have taken the same budget and draw and lived in manhattan but that would have cut the ratio to a level i was not comfortable with and did not leave a good margin for cutting back .,. so in either case the lifestyle is based on the same budget but the flexibilty is what varies .

those with no discretionary spending should not be in equities at all for that matter regardless of wealth .

[mathjak107]

These are interesting thoughts that I have not heard before and find to be let's say non-intuitive. I'm more familiar with phrases like "if you suffer a 50% decline, you then need a 100% increase to break even".

Do you have any good references to point me to that discuss what you're saying?

Thanks.

michael kitces looked in this



EXECUTIVE SUMMARY

The 4% rule has been much maligned lately, as recent market woes of the past 15 years – from the tech crash of 2000 to the global financial crisis of 2008 – have pressured both market returns and the portfolios of retirees.

Yet a deeper look reveals that if a 2008 or even a 2000 retiree had been following the 4% rule since retirement, their portfolios would be no worse off than any of the other “terrible” historical market scenarios that created the 4% rule from retirement years like 1929, 1937, and 1966. To some extent, the portfolio of the modern retiree is buoyed by the (only) modest inflation that has been occurring in recent years, yet even after adjusting for inflation, today’s retirees are not doing any materially worse than other historical bad-market scenarios where the 4% rule worked.

Ultimately, this doesn’t necessarily mean that the coming years won’t turn out to be even worse or that the 4% rule is “sacred”, but it does emphasize just how bad the historical market returns were that created it and just how conservative the 4% rule actually is, and that recent market events like the financial crisis are not an example of the failings of the 4% rule but how robustly it succeeds!

https://www.kitces.com/blog/how-has-the ... al-crisis/

[Libertarian666]

I can't believe that the price is about where I sold a bunch in March. What is wrong with "those people?"

[mathjak107]

i bought back today what i sold at a good couple of thousand dollar difference a few weeks ago . .

wash and repeat .

[Cortopassi]

mj,

You should be posting in the "I'm a closet daytrader forum..."

[mathjak107]

ha ha ha , when it comes to gold -yep , i am a dirty lil timer .

so far so good too. gold has been my biggest winner this year just darting in and out . up multiple 5 digits . selling in a rise and rebuying a few thousand lower putting the difference each time in my other models .

[dualstow]

mj,

You should be posting in the "I'm a closet daytrader forum..."

It's funny how every once in a while mathjak breaks out with some good common sense, the way people say "I went to a fight and a hockey game broke out." Ok, a lot of common sense lately. But I shudder when newcomers ask questions and get answers rife with timing.

[Cortopassi]

mj,

You are:

1) Bragging. Fine, everyone gets to if they want. I have friends who do it all the time, or used to when I listened, about how much they just made on the latest penny stock.

2) Poisoning minds. I'm not trying to be funny here. You are like the latest and greatest stock newsletter scam. Yes, you too can make 10,000+ a month trading gold with little to no risk. I KNOW that's not what you are intending, but that's exactly what is playing in the minds of a lot of people reading your response. Even to me. The first thing that went through my mind is "Damn, he made more in the past couple months than I can hope my PP makes all year. Maybe I can try trading again." Bullshit. 99% of the people in the market cannot do the kind of trading you are doing and handle the losses or protect themselves accordingly. I put myself up as a prime example.

[mathjak107]

i can only tell you what i do , i don't expect anyone to follow suit . but more and more i just find gold is not a buy and hold forever like stocks or bonds . to really make good use of it , it seems you have to nail your profits when these temporary conditions present themselves and buy it back when they don't .

others can buy and hold gold , it is just something i choose not to do and never did . i own it frequently but only until i can sell it and repeat .

[dualstow]

That's exactly what Will Rogers did with stocks!

[Cortopassi]

i can only tell you what i do , i don't expect anyone to follow suit . but more and more i just find gold is not a buy and hold forever like stocks or bonds . to really make good use of it , it seems you have to nail your profits when these temporary conditions present themselves and buy it back when they don't .

others can buy and hold gold , it is just something i choose not to do and never did . i own it frequently but only until i can sell it and repeat .

Fair enough, I don't recall if you ever outlined what you did in 2001 and 2008, -- you held stocks all the way through? Didn't try to time as you do with gold? If not, why? Seems like you could have made a killing and could have smelled it coming a mile away? Or are the gold ups/downs just more obvious to you? And if so, you need to start a newsletter...

Or maybe you did and I missed it.

[mathjak107]

2001 i was fully invested in the growth model but it wasn't too bad since the model avoided tech and dot coms . yeah we were down but retirement was still way off in the future so we just took it in stride. in fact it worked out great because we were making good money in the real estate partnership and investing it through the 2,000's . 2008 we sold two co-ops so the money went right in .

2007 i started to shift over to my retirement model as we just bought the house in the pocono's and i was thinking i would retire very early on .

so i was pretty much at about 40% equities and used a combo of the growth and income model and the income model and no gold .

[mathjak107]

i used a combo of the insight growth and income model and income model starting in 2007 , growth model prior .

today i use a mix of the 3 as i can fine tune the time frames better than with just 2 of the models ..

the growth model runs from 90-100% equities , the growth and income model varies from 60-70% equities , the income model has holdings vary , right now equities 23% .

these are the model results
of course 2000 to 2015 were pretty crappy stock years but the models still did okay considering . in fact you didn't need stocks at all in hind site , the 30 year bond would have beaten them ,.

growth model

2000 minus 10.80
2001 minus 6.40
2002 minus 17.1
2003 +46.10
2004 +12.4
2005 +11.20
2006 15.70
2007 +7.30
2008 minus 42.7
2009 +31.80
2010 +17.7
2011 minus 1.70
2012 +16
2013 +26.50
2014 +9.70
2015 +1
2016 +6.70..

growth and income returns

2000 +2.7
2001 +1.3
2002 minus 6.4
2003 +33
2004 +11.50
2005 +8.20
2006 +13.7
2007 +6.1
2008 minus 33
2009 +28.1
2010 + 12.28
2011 +.30
2012 +13.40
2013 +20.30
2014 +9.30
2015 +1
2016 +8.20
income model

2000 +.30
2001 +1.30
2002 +5.40
2003 +8.40
2004 +4.20
2005 +3.60
2006 + 6.90
2007 +4.00
2008 minus 18
2009 +20
2010 +12.29
2011 +6.30
2012 +10.70
2013 +2.90
2014+7.10
2015+ .1
2016 +6.70

2 years cash