Depressed

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buddtholomew
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Depressed

Post by buddtholomew » Mon Dec 14, 2015 11:36 am

Nothing left to say. I don't understand my investments anymore. Gold and LTT's hammered again. What did I do wrong?
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: Depressed

Post by Reub » Mon Dec 14, 2015 11:42 am

Hang in there, budd! Climb back in off of the ledge. Confess all of your sins and just come back to the vanilla PP. Just don't look for a month or so and all will be fine. Promise!
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Re: Depressed

Post by koekebakker » Mon Dec 14, 2015 11:43 am

The PP's low correlations tend to play out rather well over longer time periods. On any given day anything can and will happen. Nothing to worry about!
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buddtholomew
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Re: Depressed

Post by buddtholomew » Mon Dec 14, 2015 11:46 am

Thanks guys...just struggling here...
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: Depressed

Post by Alanw » Mon Dec 14, 2015 11:54 am

It will be very interesting to see what happens Wednesday especially with LTT's.
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Re: Depressed

Post by jafs » Mon Dec 14, 2015 11:57 am

I'd say if you really don't understand why you're invested the way you are, it's worth considering a different plan, one that you do understand and are more comfortable with over time.
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Re: Depressed

Post by Cortopassi » Mon Dec 14, 2015 11:59 am

I feel the same way Budd.  Finally felt like I was doing the right thing for the first time in 25 years starting in 2014 with the PP.  Yet for my entry point in 2014 to where we are now, virtually 2 years of exactly nowhere...

I know 100% it would have been worse doing what I was doing, but that is little consolation as I get another year closer to retirement!

If MG ends up being right about long term crappy low returns on all assets, we are all screwed to some extent unless you can sock away a few million and expect no return.
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buddtholomew
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Re: Depressed

Post by buddtholomew » Mon Dec 14, 2015 12:19 pm

jafs wrote: I'd say if you really don't understand why you're invested the way you are, it's worth considering a different plan, one that you do understand and are more comfortable with over time.
That's generally good advice, but how does it apply to an investor that is diversified across all asset classes?
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: Depressed

Post by Reub » Mon Dec 14, 2015 12:25 pm

MG would probably recommend more Magnesium or SOD but I'll just say hang in there with your diversified PP and you'll be fine. Sleep well my friend!
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Re: Depressed

Post by Pointedstick » Mon Dec 14, 2015 12:28 pm

buddtholomew wrote:
jafs wrote: I'd say if you really don't understand why you're invested the way you are, it's worth considering a different plan, one that you do understand and are more comfortable with over time.
That's generally good advice, but how does it apply to an investor that is diversified across all asset classes?
Take consolation in the fact that pretty much nobody is doing better, I guess. It's a challenging time for passive investors right now. There is no shame in being down a bit when there are few gains to be had anywhere.
Last edited by Pointedstick on Mon Dec 14, 2015 12:34 pm, edited 1 time in total.
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jafs
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Re: Depressed

Post by jafs » Mon Dec 14, 2015 12:33 pm

I don't know about specifics.

But there are lots of other possibilities for investment, some of which might be more understandable for you.
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Re: Depressed

Post by Cortopassi » Mon Dec 14, 2015 12:38 pm

Budd, all:

I've always been interested in protecting my holdings by buying married puts at the same time.  If you don't know what that term is, please look it up.

I wonder about the potential of holding the stock PP and then, based off the Ivy 10 month moving averages, instead of being either completely in or out of an asset you simply either hold or don't hold puts equivalent to their value?

For example, say you've got 100k in GLD and according to the 10 month MA, you are in a "sell" state.  but instead of selling, you buy puts that are 1 month out.  Right now, GLD is about 102.00.  A 102 strike put with an expiration of Jan 15, 2016 (1 month out) is $2.15.  Each put covers 100 shares.  100k of GLD corresponds to about 980 shares, round to 1k shares.  You'd need 10 puts at $215 each to cover that, or $2150.00.

$2150/month protection for $100k of GLD --- this sort of number is what always prevented me from spending for the "insurance" of married puts.  You can go every 3 months instead, March calls are $3.50 for the same strike so you'd spend $3500 for 3 months of downside protection.  Still a lot for something that can expire worthless.

If gold goes up or stays flat, the options would expire worthless (but you participated in gains you would not have at least per Ivy because you would have been out).  If GLD goes down, you'll have basically 1:1 protection on your holdings and lose very little, effectively averaging down your price.

You can also do a % of your total holdings and not 100% to save cash outlay.

Has anyone ever effectively implemented this or have any thoughts?  It's always AFTER the fact that I wish I did it.  There are many instances where it would have saved my ass, but I have to balance that with how much would have also expired worthless along the way.
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buddtholomew
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Re: Depressed

Post by buddtholomew » Mon Dec 14, 2015 12:42 pm

I have considered options to protect positions, but the other assets in the portfolio should in theory hedge each other. Isn't that the premise of the PP?
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Re: Depressed

Post by AdamA » Mon Dec 14, 2015 12:56 pm

buddtholomew wrote: Isn't that the premise of the PP?
Yes. 

If you're having a rough time with this year's performance, just keep in mind that every prior down year has been followed by a double-digit (positive) year. 
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Re: Depressed

Post by lordmetroid » Mon Dec 14, 2015 1:24 pm

Interest rates hikes on the horizon, I can only see the price in bond market to plummet. Although treasuries will gain more dividend I doubt it will compensate for the forthcoming bond bear market. Stocks seems to also enter a bear market and gold has been sinking ever since 2011. Does this spell doom for the permanency of of the permanent portfolio. Will the PP bear market extend and maybe even accelerate in 2016?

I simply see no opportunity for passive investments at this point in time. I can't even buy bonds because the Swedish bonds are also in a bear market.
A month ago I abandoned the permanent portfolio for a dual momentum strategy but I yesterday I liquidated all my positions. Only problem now is that I have no idea when I shall reenter the market.
Last edited by lordmetroid on Mon Dec 14, 2015 1:28 pm, edited 1 time in total.
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Re: Depressed

Post by Austen Heller » Mon Dec 14, 2015 1:37 pm

Perhaps you need to tighten up your rebalance bands.  Stocks were down 10% a few months back, then popped up near the highs.  Did you harvest any of this volatility?  IMO the 15/35 bands are too wide to capture small swings like we saw in the fall.  Using 20/30 or 22.5/27.5 bands would allow you to get some gains, since the overall returns of the 4 asset classes are predicted to be low going forward.
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Re: Depressed

Post by Mark Leavy » Mon Dec 14, 2015 2:05 pm

Cortopassi wrote:
I've always been interested in protecting my holdings by buying married puts at the same time.  If you don't know what that term is, please look it up.

-snip-

Has anyone ever effectively implemented this or have any thoughts?

-snip-
I've thought about this a lot.  It seem like a great strategy on the surface.  But if you look at the details of how the PP works, you see that there are really small moments in time when it rescues all of the losses.

Any sort of option clips the highs and the lows.  In general, if you sell or buy options to hedge the PP, they will generate a small return most of the time.  But what happens is that they clip off the large swings that happen when there is a large economic event.  And these gains are what make the PP sustainable in the long run.

So... long story short, I believe that surrounding the PP with options (and I have thought of every way imaginable...) will end up failing you when you need it the most.

The steady stream of cash in selling puts or calls can be nice - until it is not...
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Re: Depressed

Post by Tom » Mon Dec 14, 2015 2:32 pm

AdamA wrote:
buddtholomew wrote: Isn't that the premise of the PP?
Yes. 

If you're having a rough time with this year's performance, just keep in mind that every prior down year has been followed by a double-digit (positive) year.
I second this.  It seems to me that next year could be a volatile one - and that could be good for the overall PP.  It will also remind many of us struggling why we chose this strategy.  It won't always be that we're lagging or slightly down while others are slightly up.  There will be times when people are freaking out and we're making money.  That is a good feeling - I know it from experience through the financial crisis.  I can deal with the currently lag/losses b/c I've seen the protection it can offer first hand.
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Re: Depressed

Post by Fred » Mon Dec 14, 2015 3:39 pm

AdamA wrote:
buddtholomew wrote: Isn't that the premise of the PP?
Yes. 

If you're having a rough time with this year's performance, just keep in mind that every prior down year has been followed by a double-digit (positive) year.
Close but no cigar for 2014, according to PeakToTrough any way. But I'll take 9.76% next year.

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Re: Depressed

Post by AdamA » Mon Dec 14, 2015 3:48 pm

Fred wrote:
Close but no cigar for 2014, according to PeakToTrough any way. But I'll take 9.76% next year.

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Round up.

;)
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Re: Depressed

Post by Libertarian666 » Mon Dec 14, 2015 9:53 pm

Option buyers usually get hosed.

Option sellers are the ones who usually make out.

Of course they get massacred once in awhile, so it sort of evens out.
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buddtholomew
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Re: Depressed

Post by buddtholomew » Thu Dec 17, 2015 11:39 am

Gold neutralized, PP neutralized.
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Re: Depressed

Post by Reub » Thu Dec 17, 2015 11:46 am

The sun will come out tomorrow.
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buddtholomew
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Re: Depressed

Post by buddtholomew » Thu Dec 17, 2015 12:27 pm

Is anyone on this board approaching a tolerance band and do you intend to rebalance?
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Re: Depressed

Post by Reub » Thu Dec 17, 2015 1:41 pm

Seriously though, have you considered adding a little more cash to your portfolio to help you sleep better at night?
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