Any Changes for the New Year?

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Cortopassi
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Any Changes for the New Year?

Post by Cortopassi » Tue Dec 29, 2015 3:33 pm

You may recall my intention was to revisit the 25/25/25/25 allocation in January, thinking about switching to a Golden Butterfly or similar variant -- at a minimum adding some level of small cap and/or international.

The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.

I am leaning toward a middle ground allocation that increases stocks and does as little as possible in forcing me to trade out of existing positions, at least in taxable accounts.  I do have two others where the total stock exposure is 45% and 50% but I figure that's pushing it.

The main source of new buying for the stock exposure comes from cash, so little selling.

My allocation targets:

20% Total Stock Market
10% Small Cap Value
10% Emerging Market
25% LTTs
10% Cash/STTs
25% Gold

I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
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Re: Any Changes for the New Year?

Post by buddtholomew » Tue Dec 29, 2015 3:45 pm

Increasing equities and fixed income duration accordingly makes sense to me. I too hold SCV/EM in retirement accounts and re-balance with 5% bands.
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Re: Any Changes for the New Year?

Post by dualstow » Tue Dec 29, 2015 4:37 pm

Cortopassi wrote: The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.
...
I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
I am the only one who knows this, but gold is going to start clawing back in the year 2032 and not before. I feel a little guilty about my monopoly of this knowledge, so I'm going to invest as if I never had this foresight.

If anything, I'm going to try to exercise more discipline in getting more new cash into the pp's four assets instead of the vp. Out of sheer laziness, I have put money into the vp because it was more convenient and not because of some strategy. I then rationalized because it's so hard to buy ten gold coins at a time. In 2016 I'm really going to stay on target. Make the pp a bigger part of my total.
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Re: Any Changes for the New Year?

Post by Reub » Tue Dec 29, 2015 4:54 pm

dualstow wrote:
Cortopassi wrote: The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.
...
I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
I am the only one who knows this, but gold is going to start clawing back in the year 2032 and not before. I feel a little guilty about my monopoly of this knowledge, so I'm going to invest as if I never had this foresight.

If anything, I'm going to try to exercise more discipline in getting more new cash into the pp's four assets instead of the vp. Out of sheer laziness, I have put money into the vp because it was more convenient and not because of some strategy. I then rationalized because it's so hard to buy ten gold coins at a time. In 2016 I'm really going to stay on target. Make the pp a bigger part of my total.
Yes. 2032 is definitely the year. It all has to do with calculating and utilizing the value of pi properly. ;)
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Re: Any Changes for the New Year?

Post by dualstow » Tue Dec 29, 2015 4:54 pm

Aha! So it's not just me! Thank you, Reub. I feel unburdened of my Cassandra complex.
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Re: Any Changes for the New Year?

Post by Dieter » Tue Dec 29, 2015 4:57 pm

While small is a small percentage of total stock market, if in a tax advantages account, look at going with a large balanced fund (S&P 500, Wiltshire(?) 1000, ....) instead of total stock market to have more distinct large vs small.
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Re: Any Changes for the New Year?

Post by Cortopassi » Tue Dec 29, 2015 11:00 pm

Pug,

That's a very good question.  In the end I think the major item for me is the lack of potential return going forward, possibly for decades, of short term treasuries/cash.  So more than anything it is to separate out a rainy day cash portion and take the 25% that I currently have dedicated to cash and allocate some of that more aggressively.

If cash/STT was making me 5% like 10 years ago, I wouldn't be considering this.  If the Fed moves Fed funds rate to 2-3% in the next year or two, I will probably move more back into short term.

Please, I am happy to hear out anyone on why this is a bad idea!
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Re: Any Changes for the New Year?

Post by Dieter » Tue Dec 29, 2015 11:28 pm

Cortopassi wrote: Pug,

That's a very good question.  In the end I think the major item for me is the lack of potential return going forward, possibly for decades, of short term treasuries/cash.  So more than anything it is to separate out a rainy day cash portion and take the 25% that I currently have dedicated to cash and allocate some of that more aggressively.

If cash/STT was making me 5% like 10 years ago, I wouldn't be considering this.  If the Fed moves Fed funds rate to 2-3% in the next year or two, I will probably move more back into short term.

Please, I am happy to hear out anyone on why this is a bad idea!
Emerging Market and Small Cap Value can be quite volatile.
Possibility that Short Term Treasuries will be the best performer in the near term (better than Gold & LTT this year.)
Stocks have been on a tear for a while

FWIW, my PP-ish account is in retirement and also tilted for growth (~ 45/25/10/20), so quite similar to what you have, including SCV. I don't have an explicit emerging allocation - have thought about it, but looks like a wild ride. I have International Small instead, which also isn't a bastion of stability, but works for me.

But bottom line -- won't know the best answer for a few years....
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Re: Any Changes for the New Year?

Post by AdamA » Tue Dec 29, 2015 11:42 pm

Cortopassi wrote: You may recall my intention was to revisit the 25/25/25/25 allocation in January, thinking about switching to a Golden Butterfly or similar variant -- at a minimum adding some level of small cap and/or international.

The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.

I am leaning toward a middle ground allocation that increases stocks and does as little as possible in forcing me to trade out of existing positions, at least in taxable accounts.  I do have two others where the total stock exposure is 45% and 50% but I figure that's pushing it.

The main source of new buying for the stock exposure comes from cash, so little selling.

My allocation targets:

20% Total Stock Market
10% Small Cap Value
10% Emerging Market
25% LTTs
10% Cash/STTs
25% Gold

I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
How much better do you think this will perform vs the PP?
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Re: Any Changes for the New Year?

Post by Hal » Wed Dec 30, 2015 3:46 am

My pennies worth....

Assuming you are into the PP for stability, not maximum return,  then I would play it by the numbers and not try to predict.

This actuarial blog has a good article you can reference against from a non-PP perspective.

http://actuary-info.blogspot.com.au/201 ... escue.html

Hal
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Re: Any Changes for the New Year?

Post by Cortopassi » Wed Dec 30, 2015 8:03 am

Hal wrote: My pennies worth....

Assuming you are into the PP for stability, not maximum return,  then I would play it by the numbers and not try to predict.

This actuarial blog has a good article you can reference against from a non-PP perspective.

http://actuary-info.blogspot.com.au/201 ... escue.html

Hal
and
AdamA wrote:
How much better do you think this will perform vs the PP?
Certainly stability is one major aspect, but I do need to consider the growth side as well.

As to how much better, that is a 50/50 crapshoot going forward.  Historically it returns more, but as I've stated many times, the future can be completely different no matter how long the time frame.  The question is are the odds better that it will perform better than the standard PP?  Again, it is a crapshoot and needing to feel comfortable in one's allocation.  Mentally, I am comfortable with gold and bonds where they are at, and I feel stocks are a bit light after doing this 2 years and STTs are a bit heavy in the current environment.

I understand this will invite more volatility, which I would not look forward to.  But I have calmed enough over the past few years to realize worrying about it, and the performance concerns and watching of my portfolio becomes less and less part of my life.  Which to me means I am ready to mentally handle a more volatile portfolio that could bring more return, while still sleeping at night.
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Re: Any Changes for the New Year?

Post by Cortopassi » Wed Dec 30, 2015 8:09 am

It has been a poor year, hasn't it?

[img width=800]http://i.imgur.com/zrsLnBh.jpg[/img]
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Re: Any Changes for the New Year?

Post by dualstow » Wed Dec 30, 2015 10:05 am

Cortopassi wrote: It has been a poor year, hasn't it?

http://i.imgur.com/zrsLnBh.jpg
Was PRPFX really down 12%?
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Re: Any Changes for the New Year?

Post by barrett » Wed Dec 30, 2015 11:06 am

Cortopassi,

My first reaction is that if you are pondering a change, then I should stand pat! Although I have to admit
that I take offense at suggestions by you and Dualstow that your market intuition is worse than mine.

Seriously though, you are still relatively young and a lower cash position can probably make sense. From my perspective,
that cash is in the PP for two main reasons. First it gives you all kinds of flexibility to handle big life events like job loss,
college or housing expenses, the wedding of a kid, etc. The 2nd reason though is that it allows one to pounce if there is
another 2008-style crash. There may be another assets to sell down but it's not guaranteed.

My own feeling is that there just may be a few years of paltry returns as discussed in other threads. I am staying balanced
but please refer back to the above statement. Might be time to fiddle with percentages due to my track record.
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Re: Any Changes for the New Year?

Post by Cortopassi » Wed Dec 30, 2015 11:47 am

dualstow wrote:
Cortopassi wrote: It has been a poor year, hasn't it?

http://i.imgur.com/zrsLnBh.jpg
Was PRPFX really down 12%?
Looks like there was a big dividend/cap gain early Dec. which dropped the share price.  Don't think what you are thinking is correct.
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Re: Any Changes for the New Year?

Post by Cortopassi » Wed Dec 30, 2015 11:57 am

barrett wrote: Cortopassi,

My first reaction is that if you are pondering a change, then I should stand pat! Although I have to admit
that I take offense at suggestions by you and Dualstow that your market intuition is worse than mine.

Seriously though, you are still relatively young and a lower cash position can probably make sense. From my perspective,
that cash is in the PP for two main reasons. First it gives you all kinds of flexibility to handle big life events like job loss,
college or housing expenses, the wedding of a kid, etc. The 2nd reason though is that it allows one to pounce if there is
another 2008-style crash. There may be another assets to sell down but it's not guaranteed.

My own feeling is that there just may be a few years of paltry returns as discussed in other threads. I am staying balanced
but please refer back to the above statement. Might be time to fiddle with percentages due to my track record.
barrett, Happy New Year,

I'm basically going to start the process by pushing cash I have been accruing in 401k and IRA accounts into SCV an EM and see where the percentages fall.  It's cash I couldn't really touch anyway.  I have no interest in waiting to pounce on a crash that may or may never come.  I waited years after 2009 for hyperinflation, gold going to the moon, the market crumbling and that got me less than nowhere.

It's been a slow process for me, but in the near 2 years with the PP I am calmer.  I am less agitated (actually rarely nowadays) when I hear AMZN is almost $700 (you've got to be kidding, right? :o) and gold is barely holding above $1000.  It would have killed me daily to see and hear these things between 2009 and 2013.  Now it's like, eh, whatever. 

My goal in 2016 is to slowly shift some of these allocations and see if I can keep my sanity when every move I make is guaranteed to start off in the red!
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Re: Any Changes for the New Year?

Post by rickb » Wed Dec 30, 2015 12:47 pm

Cortopassi wrote:
dualstow wrote:
Cortopassi wrote: It has been a poor year, hasn't it?

http://i.imgur.com/zrsLnBh.jpg
Was PRPFX really down 12%?
Looks like there was a big dividend/cap gain early Dec. which dropped the share price.  Don't think what you are thinking is correct.
The perf charts from stockcharts.com are dividend adjusted, see http://stockcharts.com/freecharts/perf.php?prpfx

Looks like it's down about 6% for the year.
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Re: Any Changes for the New Year?

Post by Cortopassi » Wed Dec 30, 2015 12:57 pm

MangoMan wrote: My advice would be to get rid of your cash and LTT and go with intermediate treasuries for 50% of your portfolio.
That way, the drag of 0% cash won't be as painful.
I would also advise resizing your pictures/charts to 400 pixel width for better readability.
Got you on the pics.

Not sure on the allocation advice?  My tentative allocation would bring LTT/cash/STT to 35% from 50, and I am applying the rest to a higher stock allocation.  Are you basically advising against a higher stock allocation?  Why intermediate?  LTT(TLT) down about 4% or so for the year, Intermediate (VBILX) down 2%, STT a ittle down.  Doesn't it all wash out if I have 25/25 LTT/STT vs 50% INT?
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Re: Any Changes for the New Year?

Post by barrett » Wed Dec 30, 2015 1:02 pm

MangoMan wrote: My advice would be to get rid of your cash and LTT and go with intermediate treasuries for 50% of your portfolio.
That way, the drag of 0% cash won't be as painful.
Pug, Is this what you have done? Sort of a gold-heavy/stock-light Desert Portfolio? I've contemplated shortening up treasury duration but it's because I have some other deflation protection (slew 'o savings bonds) that can't fit neatly into a 4X25.
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Re: Any Changes for the New Year?

Post by Cortopassi » Wed Dec 30, 2015 7:23 pm

Pug,

No need for me to rush into anything.  I'll probably just start by adding a few small % into SVC or EM and slowly see how things go.

Happy New Year!

Mike
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Re: Any Changes for the New Year?

Post by ochotona » Thu Dec 31, 2015 11:41 am

FWIW, even though I am using Dual Momentum, for my wife's IRAs I have her in buy-and-hold 30% equities, 70% bonds (2/3 US Treasures, 1/3 investment grade corporates) at this time. I think the PP equity allocation is prudent now, for a buy-and-hold person. If there is a bear market in the couple of years, the plan is to get her back up to a 60/40 stance.
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Re: Any Changes for the New Year?

Post by sophie » Fri Jan 01, 2016 8:35 pm

MangoMan wrote: Whatever your desired allocation to stocks and gold, the remainder could go into ITT to save you the pain of no interest cash.
My PP has about 30% cash at the moment, and I'm quite happy about that - although it'll go down after the annual retirement account contributions get invested.  Based on its performance in 2015 I'm not sure holding it qualifies as "pain."  It's hard to predict of course, but you may well be do best to hang onto your cash in 2016.  Also, you can improve returns a bit by holding I Bonds and keeping some cash in online savings accounts. 

I was actually thinking the opposite:  whether to hold money earmarked for bonds in cash until the Fed is finished raising interest rates.  Anyone know the latest gossip??  This article suggests that we should expect as many as four more quarter point rate increases over the next year, so that the Federal funds rate will be in the 1-1.3% range by this time next year:

http://www.thestreet.com/story/13405598 ... think.html
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Re: Any Changes for the New Year?

Post by Reub » Fri Jan 01, 2016 10:18 pm

Sophie, I believe that is the Fed's plan. But they said that it's data dependent  so who knows? I'm remembering back to 2000 and 2008, the last times that we had the final year of a two term Presidency, and to how the markets crashed as the Administrations were leaving office. It was as if somebody had pulled the plug! That might change the Fed's plans if it happens again. Happy New Year!
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Re: Any Changes for the New Year?

Post by Cortopassi » Mon Jan 04, 2016 3:47 pm

It'll be interesting to see if there is a big bounce-back tomorrow, like what seemingly has happened for years now, or if this is the start of something bigger.  Gold and TLT were nice to hold today, and I made no moves yet to increase my stock %.
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Re: Any Changes for the New Year?

Post by EdwardjK » Mon Jan 04, 2016 4:30 pm

In 2015, my entire portfolio decreased by $156K.  The Permanent Portfolio portion accounted for $143K of that loss. Even with its lower volatility, I would have been better off with my money in the bank.
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