Gyroscopic Investing

Libertarian666 wrote:

Mdraf wrote:

MediumTex wrote: I still get kind of hot thinking about how easy it would have been to avoid a lot of this pension funding trouble if there had been more PP-oriented managers running pension funds' investment strategies, rather than the slick gunslingers who charged 150 basis points to share their brilliance up through 2007, and who then reassured their clients when everything fell apart that "No one could have seen this coming.  No one."

You're right of course but the pension fund managers would get fired if their returns didn't keep up with the herd

How can you make a lot of money as a "fund manager" if your advice is always the same: 4x25%?

MediumTex wrote:

Libertarian666 wrote:

Mdraf wrote: You're right of course but the pension fund managers would get fired if their returns didn't keep up with the herd

How can you make a lot of money as a "fund manager" if your advice is always the same: 4x25%?

You speak in riddles and platitudes like Michael Cuggino and Ray Dalio do.  It's also helpful to do that "I could tell you, but then I'd have to kill you" thing that Maverick did in Top Gun.

Dieter wrote: Just don't tell them the secret sauce... "We have provided a consistent 3-6% annual REAL return over the last 30 years. Our unique investment approach tactically allocates funds based on market conditions across multiple distinct asset classes."

(Aka, 4x25. 15/35 rebalance bands)

Although maybe go a bit stock heavy to have less tacking error (vs stocks) to explain.

Dieter wrote: Just don't tell them the secret sauce... "We have provided a consistent 3-6% annual REAL return over the last 30 years. Our unique investment approach tactically allocates funds based on market conditions across multiple distinct asset classes."

TennPaGa wrote:

MediumTex wrote:

Dieter wrote: Just don't tell them the secret sauce... "We have provided a consistent 3-6% annual REAL return over the last 30 years. Our unique investment approach tactically allocates funds based on market conditions across multiple distinct asset classes."

The Multi-Market Cycle Optimizer ("MMCO") strategy utilizes a series of proprietary quantitative and qualitative data inputs to predict market conditions within a set of predefined realms.  We have a staff of experts in various fields who constantly sift and refine the data inputs based upon a matrix that tracks, among other things, economic, financial, demographic, and psychological metrics with weightings that are dynamically adjusted by our proprietary trading algorithms.  The MMCO's prop trading program dampens the chaotic conditions within the portfolio using a cutting edge combination of market timing tools, scientific principles of human behavior, and language patterns that we have detected when playing certain classic rock albums backward at half-speed.

Excellent.  And sad.  Sadly excellent.  Excellently sad.

You should conduct some social science research.  Talk to some of the same people you mention in the prior post, except tell them you've dropped the PP, but have this new strategy...

MediumTex wrote:

Dieter wrote: Just don't tell them the secret sauce... "We have provided a consistent 3-6% annual REAL return over the last 30 years. Our unique investment approach tactically allocates funds based on market conditions across multiple distinct asset classes."

(Aka, 4x25. 15/35 rebalance bands)

Although maybe go a bit stock heavy to have less tacking error (vs stocks) to explain.

Here are the standard responses I get from money managers when I describe the PP:

1. "Something like that might work for a couple of years here and there, but that's just not a good portfolio.  Isn't it obvious that gains in one asset are going to be offset by losses in another?"

2. "That's a ridiculous portfolio.  I don't need to look at any performance figures to know that.  I can tell by just listening to your description of it."

3. "That might be an okay portfolio, but 30 year treasuries are way too risky.  Didn't anyone tell you that rates are about to start rising?"

4. "That might be an okay portfolio, but 25% in gold is way too much.  Do you have any idea what would happen to the portfolio if gold crashed like it did in the early 1980s?"

5. "That might be an okay portfolio, but it doesn't have nearly enough equity exposure.  Are you not aware that stocks will always beat every other asset if you give them enough time?"

6. "That might be an okay portfolio, but 25% in cash makes no sense at all, especially with t-bill rates at 0%.  I'm not sure what kind of wacky portfolio would want a 25% allocation to an asset that has a zero return."

7. "I know some analysts up in the New York office.  I can't make any promises because those guys are very busy, but I will see if I can have one of them take a look at the portfolio for you.  The crew up there pretty much knows what the market is going to do next.  Like I said, though, those guys are very busy, so I don't know if they will be able to look at it or not."

8. "Don't you think that if the portfolio really did what you say it does that we would all be using it?"

9. "Sheesh.  I can't imagine trying to keep all those assets straight.  With assets that volatile, you would have to watch that thing every minute the markets were open."

10. "Does the portfolio come with beans and bullets too?"

blackomen wrote: In early 2012, I was chatting with some other investment professionals about our performance the previous year..  I had made about 10%..  they get curious and ask what I did.  I explain the PP..  5 minutes later, they tell me I got lucky.

Pointedstick wrote:

murphy_p_t wrote: "Secular low in bonds not reached"

likely/maybe...but looks like 30 year rate headed back to other side of channel before they go lower....somewhere north of 4%

I've been assuming this ever since MT predicted that rates would bounce between 4.5% and 2.5% for the appreciable future. Nearly everything I've seen him predict has come to pass.

Peak2Trough wrote: The thing that has me believing Lacy's prediction more than any other is that everyone is seemingly taking the other side of that bet.