Gyroscopic Investing

Polls are closing shortly....get your final votes in !

Happy and Prosperous New Year to all ! 

MDF

VTI    +9%
TLT    -18%
GLD    +50%
SHY    +.4%

HBPP    +10.5%


Bonus - SLV +75%

Kshartle wrote: VTI    +9%
TLT    -18%
GLD    +50%
SHY    +.4%

HBPP    +10.5%


Bonus - SLV +75%

well, at least we agree on the direction, but 50 % GLD is a bit optimistic. First inflation has to rock, before GLD will rise. IMO.

Thomas Hoog wrote:

Kshartle wrote: VTI    +9%
TLT    -18%
GLD    +50%
SHY    +.4%

HBPP    +10.5%


Bonus - SLV +75%

well, at least we agree on the direction, but 50 % GLD is a bit optimistic. First inflation has to rock, before GLD will rise. IMO.

GLD went up 54% from 8/23/10 to 8/22/11, that's a little less than the spot price which was probably closer to 60% since I think the high was hit overnight in Asia.

Fingers crossed....there are a lot of shorts to cover.

Maybe only 45%

50% from the start of this year would not even get it back to the all-time high.

Kshartle wrote: GLD went up 54% from 8/23/10 to 8/22/11, that's a little less than the spot price which was probably closer to 60% since I think the high was hit overnight in Asia.

Fingers crossed....there are a lot of shorts to cover.

Maybe only 45%

50% from the start of this year would not even get it back to the all-time high.

Only in your dreams

Thomas Hoog wrote:

Kshartle wrote: GLD went up 54% from 8/23/10 to 8/22/11, that's a little less than the spot price which was probably closer to 60% since I think the high was hit overnight in Asia.

Fingers crossed....there are a lot of shorts to cover.

Maybe only 45%

50% from the start of this year would not even get it back to the all-time high.

Only in your dreams

So in your dreams 50% would get it back to the all-time high?

Libertarian666 wrote:

Thomas Hoog wrote:

Kshartle wrote: GLD went up 54% from 8/23/10 to 8/22/11, that's a little less than the spot price which was probably closer to 60% since I think the high was hit overnight in Asia.

Fingers crossed....there are a lot of shorts to cover.

Maybe only 45%

50% from the start of this year would not even get it back to the all-time high.

Only in your dreams

So in your dreams 50% would get it back to the all-time high?

yeah.....it would still be short of the high from 2011.

That being said.....we'll need a major spark to get it to reverse.

Kshartle wrote:

Libertarian666 wrote:

Thomas Hoog wrote: Only in your dreams

So in your dreams 50% would get it back to the all-time high?

yeah.....it would still be short of the high from 2011.

That being said.....we'll need a major spark to get it to reverse.

Well, if I remember well, you're french. So we could start a war, although we just sold our last tank. But I could throw a patriot-rocket.

I'm not surprised 2013's best AND worst performing assets (Stocks and Gold) hold highest in this survey..

I think Gold has a slightly better shot than Stocks, so I'm going with that.

Tis the season for prognostications...

It is always interesting to go back and see what we thought will happen in the upcoming year...

YTD results as of today: GLD +0.2% VTI +12.8% TLT +21.9% SHY +0.6%...  HBPP: +8.9%...

Thanks for digging out this survey!  Love how this year's winner was the least-loved volatile asset.  It would be great to have a series of stickied threads with each year's predictions in January, then a post at the end of the year with the actual returns.

I'm pretty sure Harry Browne is smiling right now.  And that we all need to go back and review his books.

Here is the link for the HBPP 2014 predictions poll... 

Looks like most will be pleasantly surprised so far if things hold together for another couple of weeks...

http://gyroscopicinvesting.com/forum/pe ... -2014-poll

Still, at some point this 30-year dual bubble in stocks and bonds will end and how will the PP fair if its not a SHTF scenario where gold, guns and ammo becomes the currency of last resort?  So don't pat yourselves on your backs too smugly just yet.

MachineGhost wrote: Still, at some point this 30-year dual bubble in stocks and bonds will end and how will the PP fair if its not a SHTF scenario where gold, guns and ammo becomes the currency of last resort?  So don't pat yourselves on your backs too smugly just yet.

I agree with MachineGhost! I have all my retirement fund in cash 100% and ready to deploy to the HB PP, but I have so many doubts.  Stock and Bond is at all time high.  Gold is still quite high even after the current correction. 

Has there ever been a condition that is similar to where we are now? Stock, Bond, and Gold are all very high or over valued.

I don't know what to do with all the cash.

push3r wrote:

MachineGhost wrote: Still, at some point this 30-year dual bubble in stocks and bonds will end and how will the PP fair if its not a SHTF scenario where gold, guns and ammo becomes the currency of last resort?  So don't pat yourselves on your backs too smugly just yet.

I agree with MachineGhost! I have all my retirement fund in cash 100% and ready to deploy to the HB PP, but I have so many doubts.  Stock and Bond is at all time high.  Gold is still quite high even after the current correction. 

Has there ever been a condition that is similar to where we are now? Stock, Bond, and Gold are all very high or over valued.

I don't know what to do with all the cash.

By what metric are stocks, bonds, and gold over value?

push3r wrote:

MachineGhost wrote: Still, at some point this 30-year dual bubble in stocks and bonds will end and how will the PP fair if its not a SHTF scenario where gold, guns and ammo becomes the currency of last resort?  So don't pat yourselves on your backs too smugly just yet.

I agree with MachineGhost! I have all my retirement fund in cash 100% and ready to deploy to the HB PP, but I have so many doubts.  Stock and Bond is at all time high.  Gold is still quite high even after the current correction. 

Has there ever been a condition that is similar to where we are now? Stock, Bond, and Gold are all very high or over valued.

I don't know what to do with all the cash.

HBPP x Cash to dampen volatility is a recipe for success in my opinion.

dualstow wrote: Kim Kardashian and Kanye West will split up, citing irreconcilable differences.

The pp will be ok.

Looks like they are still going "strong" hah, with a baby to boot.

does the possibility of a "currency event" concern u...having all in cash? if not, u have much more confidence in our overlords than i.

MachineGhost wrote: Still, at some point this 30-year dual bubble in stocks and bonds will end and how will the PP fair if its not a SHTF scenario where gold, guns and ammo becomes the currency of last resort?  So don't pat yourselves on your backs too smugly just yet.

LOL

Missed the big year for long term bonds, huh?

U mad bro?

upside wrote:

MachineGhost wrote: Still, at some point this 30-year dual bubble in stocks and bonds will end and how will the PP fair if its not a SHTF scenario where gold, guns and ammo becomes the currency of last resort?  So don't pat yourselves on your backs too smugly just yet.

LOL

Missed the big year for long term bonds, huh?

U mad bro?

I didn't miss it.  Just concerned about the future.  The PP isn't historically battle-tested under the conditions I'm worried about.  What is more deflationary than stocks and bonds declining at the same time?

MachineGhost wrote: I didn't miss it.  Just concerned about the future.  The PP isn't historically battle-tested under the conditions I'm worried about.  What is more deflationary than stocks and bonds declining at the same time?

MG, Why do you say that bonds tanking is 'deflationary'? Was that a typo or do you just mean deflating to the spirit (not to mention the portfolio)?

Also, I am curious, are you tilting away from a straight 4X25 PP due to your fear of stocks and bonds possibly declining at the same time? I have the same concerns about bond prices. As has been discussed many times, the lower the yield gets, the less potential upside there is. It seems to me that the only really good argument for holding them much below 2.5% or so is that the steady coupon payments would probably be beating the low inflation that should accompany such a valuing of that asset. And, even then, it only make sense to hold them if one feels that rates will stay down.

I've posted that last comment on a few threads and don't seem to get much interest.

barrett wrote: MG, Why do you say that bonds tanking is 'deflationary'? Was that a typo or do you just mean deflating to the spirit (not to mention the portfolio)?

Deflation means a loss of confidence about the future.  The problem is there could be an extended period of time between a loss of confidence and the market's speculative adoption of gold (or crypto-hash) as a new currency -- if at all, because real assets are crushed under deflationary conditions.  The PP had a barely profitable year in 2008 only because gold finally responded just in the nick of time and it is profitable only by a quirk of the calendar.  I guess the best example would be Iceland's implosion and a Iceland PP was decimated by 75%+.  If three assets go down at once with only cash being the winner in a Mother-Of-All-Dual-Bubble-Pop-Deflations, there's no way the PP can offset it.  I think Ray Dalio understood this problem which is why they shift from a All Weather portfolio to a special Deflationary Proof portfolio, but it still implies no loss of sovereign confidence.

What if gold's current deflationary downdraft is joined by bond yields skyrocketing and overvalued stocks imploding?  The U.S. is the world's monetary reserve standard and Romanesque Empire.  If we lose both the local and the world's confidence, everyone will be literally fracked.  No way around it.  But its no comfort to lose less than everyone else; I don't want to lose anything at all!

Also, I am curious, are you tilting away from a straight 4X25 PP due to your fear of stocks and bonds possibly declining at the same time? I have the same concerns about bond prices. As has been discussed many times, the lower the yield gets, the less potential upside there is. It seems to me that the only really good argument for holding them much below 2.5% or so is that the steady coupon payments would probably be beating the low inflation that should accompany such a valuing of that asset. And, even then, it only make sense to hold them if one feels that rates will stay down.

So far I've tilted by lowering the bond duration and I'm not fully invested in prosperity either (I'm completely out of public stocks other than my VP).  I'm okay with this because I can manage the downside risk of equity and gold myself rather than rely on bonds or gold to hedge equity.  But even this won't completely fix the core problem I outlined above.

I've posted that last comment on a few threads and don't seem to get much interest.

It's because we really don't have a realistic alternative.  If you're a PP buy and holder, messing with the gold or bond allocation is dangerous.  You need the protection for when stocks collapse.  Maybe the weights are not optimally matched but I don't think fixing that is going to fix the core problem I outlined above either.

The only consolation I can give is that Japan and Europe's long-term yields are currently 50% less than ours.  So there's still room for bonds to go up.  What happens when yields are near 0% or negative is beyond me, but if people want to pay the government to hold their savings, then I guess dats dem breaks.

It should be pretty obvious the PP is a bet on government not doing stupid fracking things like QEternity instead of fundamental structural reform and allowing creative destruction.  Just look at Argentina.  When did everyone turn into such pussies?

MachineGhost wrote: If three assets go down at once with only cash being the winner in a Mother-Of-All-Dual-Bubble-Pop-Deflations, there's no way the PP can offset it.  I think Ray Dalio understood this problem which is why they shift from a All Weather portfolio to a special Deflationary Proof portfolio, but it still implies no loss of sovereign confidence.

Well, yes, if three out of four assets go way down, then that is not good. If they go down some, at least with the PP you can rebalance and buy things when they are relatively cheap. Or, if you are still accumulating, you can just buy the laggers and be well positioned for when things turn around. I guess this is all obvious. I'm just trying to help you be less cranky about the future. Yes, here in the US we have major structural problems but that doesn't always portend a total financial meltdown. I guess I just think that overall the PP is set up to be really defensive.

You referenced 2008... I have looked back at how the PP assets did in 2008 and it seemed to me that there was only about a 4-6 week lag between stocks tanking and LTTs shooting up more than 30%. Gold was up marginally that year. So, yes, to a certain extent, the fact that the PP was only down 2% for the year was due to a "quirk of the calendar." But it was never down more than about 10%. My stock and bond (NOT LTTs, of course) portfolio got knocked down 25-30% and didn't even start recovering until March of 2009.

Barrett, here is the approach I am taking with regards to your question on LTT's. I will say up front that the bias is for yields to rise in the near future.

Hold LTT's at 25% of the PP.
Hold sufficient cash beyond 25% to reduce fixed income duration.

1. You do not violate the PP - 4x25
2. You hold cash in your VP.
3. You lower FI duration to 5.6 years in my case.

Just a little mental accounting and I suspect this is how MG is rationalizing holding LTT's as well.

Barrett's question is a good one.  There's been some threads on it previously.  I think the conclusion was that it is reasonable to switch the LTT allocation to cash once interest rates go down enough.  It wasn't so clear how to decide when to jump back in though.

The trick is to decide what that number will be, write that down somewhere, and then sit tight.  The consensus was somewhere between 1-1.5% I think, based on Japan's experience.  A lot of the earnings in the historic Japanese PP come from rebalancing due to long bond rates bouncing up and down.  Managing the timing of getting out & back into long bonds might require a lot of portfolio watching, which may not be the best use of your time.  When bonds move, they move FAST...you'd really have to be watching closely.  And in the end you may not save yourself that much...remember than when bonds are going down, something else is going to be doing well.