Gyroscopic Investing

mathjak107 wrote: historically stocks have always cycled around faster even when they dip so if I had to hitch my wagon to a horse that  would be my choice .

that has always been the best gainer long term and had near zero loses over 20 or more years unless self inflicted. . even 15 years has been loss free.

OK, but you are very close to retirement. Not to be callous, but how many more 15 to 20-year cycles do you realistically have?

Also, and don't answer this if it's too personal, but why are you even still playing the investment game? Why not go all cash and call it a day?

barrett wrote:

mathjak107 wrote: historically stocks have always cycled around faster even when they dip so if I had to hitch my wagon to a horse that  would be my choice .

that has always been the best gainer long term and had near zero loses over 20 or more years unless self inflicted. . even 15 years has been loss free.

OK, but you are very close to retirement. Not to be callous, but how many more 15 to 20-year cycles do you realistically have?

Also, and don't answer this if it's too personal, but why are you even still playing the investment game? Why not go all cash and call it a day?

Gosh, I sound like a complete A-hole. But figuring out how people are ticking is interesting.

rickb wrote: So - you're not rebalancing your overall percentages to anything in particular, but rather maintaining separate "PP" and "VP" accounts?  This sounds to me very much like Browne's PP rules (never rebalance OUT of your PP, but do whatever you want with your VP including transferring money into your PP).

Nope, I don't rebalance or transfer money between the PP and VP.

mathjak107 wrote: i would say the  downward  spiral the long bond and its funds has seen for more than  6 months now  isn't exactly predicting rates will rise with no success . 

it is already happening as the long bond' s yield  went up a full point from its low which is a big hit for funds like TLT .

[...]

what are the returns on the 4 part pp since bnds flipped in january ?  i don't track the pp except for the time frame i bought a few weeks ago before changing my mind so i don't know but i doubt they are positive with TLT down 7% including interest ,  gld is down over 2%
vti is up 3.50%

7% is a big hit? Doesn't really seem so terrible to me. A few more of these and rates will be up to 5%

the 7% is after you negated the interest too. it is total return so it is down almost 10 from the first of the year.

however I think it was in feb the long bond bottomed out before it started rising so tlt fell to this point from about 138.00

on the other hand more conventional  models like the fidelity insight models which are typical of any mix with those allocations  , since the turn in bonds  are up .

the conservative income and capital preservation model with 26% equity and shorter maturity bonds are up 1.90%  , the growth and income model is up 3.60% and the  growth model up almost 6% .



Mathjak,

What are the YTD returns on these portfolios, or is this what you are quoting?

Thanks.

that is the year to date. the bond fund portions  were up much higher when bonds hit their low in feb so basically the gains are gone but the shorter term bond funds are still to the right of zero a bit.

my own model is doing slightly better since I shortened bond maturity's more than they did as well as holding a bit more foreign so equity's have less weight from longer maturity bonds pulling the portfolio down...

Hello everybody!

I use it because I was not good trading, but I wanted to do it for a living.

Also I use it because of the track record.

Hope that it works in EUROPE.

Regards.

Having a PP and a VP is like being a devout Christian with a mistress on the side!!! 

FYI, the fall in long term bonds and risk of further declines, and the astounding deadness of gold, has stopped me out of the HBPP totally. When gold was non-responsive to Grexit, I knew all of the goldbuggery was false and a lie. I'm in the same camp as mathjak107.  I'm now in a 60% / 20% intermediate bonds / 20% cash portfolio with 11 years left to go to retirement. I am waiting until this old bull runs out of steam and falls over, then I will redeploy the piles of cash, like I did in the 2009 slump. Also will put aside some funds to buy gold when it's 20-50% off from where it is now.

I put a reminder event to remind myself to look on 1/1/2020 to see how the past five years have been for the HBPP. I'll be that much closer to retiring, I will re-consider it as a distribution-stage allocation.

mathjak107 wrote: your best bet is to do exactly what pointed stick did if you run a variable.

no matter how you try to disguise your re-weighting things with a vp and calling it a separate portfolio your money has no memory as to  which gang it belongs too.

it is like buying a target fund then buying all kinds of other investments  un-doing what the target fund is trying to do .

if you have a vp look at it all together or you are fooling yourself but not your money .

as a true pp'er you have to live with the thought any moment can be the moment you have been waiting for , ( otherwise why hold so much gold  when conditions are so far off for it ?) and to be weighted the wrong way can undo years of waiting for this moment .

so you should look at your total portfolio as just that instead of a part time pp'er with a side bet . . .

@Mathjak -- In the spirit of the topic, perhaps you should simply post why you invest the way you do.  I respect your position and experience, and think you can contribute a lot more than simply challenging the PP in every thread.  Being a professional naysayer will only last for so long before it becomes a broken record. 

I invest the way I do because I am retiring and more chicken than I used to be.

I was always a very aggressive investor with a long term view so volatility wasn't an issue.  there is really little risk in diversified funds as long term over 111 30 year time frames there are nearly no losses and most times pretty good gains.

but for retirement I want less volatility , I want something more conventional that should support a 3-4% swr and leave plenty for the kids.

so I find a 50-60% equity mix is right for me.  the other 40% is a mix of different  types of bond funds . 

fair amounts of equity's work well because when we get good up turns the extra growth cushions the down turns .

so much so that even 100% equity's in retirement has over a 90% success rate even through time frames that included the great depression.

so while no one can predict the future I prefer to at least leave the gate with the best model I can put together  that is neither to conservative nor to volatile .
then like steering that big ship I nudge the portfolio over time to better keep it on course and fitting the  big picture a bit better.

right now my big picture says stay away from excessively interest rate sensitive bonds and don't tie up money in gold at this stage .


I have never been a what if kind of investor running every possible negative scenario through my head that may never come to pass  although if I let myself I could be quite good at paralyzing myself.

I invest in the PP because it's the best portfolio for my needs. 

My career accumulation phase was notably truncated by aggressive saving after only 14 years, so 30-year returns were irrelevant.  I chose to meet my wealth goals with greater certainty by maximizing my savings rather than maximizing average investment returns. Looking back, considering I graduated in 2000 and compound real stock market returns were negative for the next 12 years, I'm thankful I didn't follow the traditional path.  The long run is too long for my tastes.  I discovered the PP several years before retirement, and it was a godsend for my planning and security. 

Now in early retirement, the PP provides plenty of returns to support my lifestyle without the requisite market swings.  It protects both my nest egg and my sanity.  And thanks to the broad diversification and a strategy that focuses more on capital gains than other portfolios, the PP is also tremendously tax efficient for an early retiree with lots of levers to pull for tax management.  With multiple tools my chest, I will effectively pay no taxes most years even while living very comfortably.

If the portfolio ever stops meeting my needs, I'll look for other options.  However, based on the strong economic theory behind it I think that day will be a long time coming. 

I hope it keeps on doing what it's supposed to do. It would be nice if the portfolio wasn't just a long-bond anomaly.

Tyler wrote: I invest in the PP because it's the best portfolio for my needs. 

My career accumulation phase was notably truncated by aggressive saving after only 14 years, so 30-year returns were irrelevant.  I chose to meet my wealth goals with greater certainty by maximizing my savings rather than maximizing average investment returns. Looking back, considering I graduated in 2000 and compound real stock market returns were negative for the next 12 years, I'm thankful I didn't follow the traditional path.  The long run is too long for my tastes.  I discovered the PP several years before retirement, and it was a godsend for my planning and security. 

Now in early retirement, the PP provides plenty of returns to support my lifestyle without the requisite market swings.  It protects both my nest egg and my sanity.  And thanks to the broad diversification and a strategy that focuses more on capital gains than other portfolios, the PP is also tremendously tax efficient for an early retiree with lots of levers to pull for tax management.  With multiple tools my chest, I will effectively pay no taxes most years even while living very comfortably.

If the portfolio ever stops meeting my needs, I'll look for other options.  However, based on the strong economic theory behind it I think that day will be a long time coming.

Tyler wrote: I invest in the PP because it's the best portfolio for my needs. 

My career accumulation phase was notably truncated by aggressive saving after only 14 years, so 30-year returns were irrelevant.  I chose to meet my wealth goals with greater certainty by maximizing my savings rather than maximizing average investment returns. Looking back, considering I graduated in 2000 and compound real stock market returns were negative for the next 12 years, I'm thankful I didn't follow the traditional path.  The long run is too long for my tastes.  I discovered the PP several years before retirement, and it was a godsend for my planning and security. 

Now in early retirement, the PP provides plenty of returns to support my lifestyle without the requisite market swings.  It protects both my nest egg and my sanity.  And thanks to the broad diversification and a strategy that focuses more on capital gains than other portfolios, the PP is also tremendously tax efficient for an early retiree with lots of levers to pull for tax management.  With multiple tools my chest, I will effectively pay no taxes most years even while living very comfortably.

If the portfolio ever stops meeting my needs, I'll look for other options.  However, based on the strong economic theory behind it I think that day will be a long time coming.

I wish I could get by with short term bonds ,tips, and an immediate annuity and not have to deal with markets at all. but our retirement wants require more income than that can safely spin off.

Having a VP and a separate PP is delusional?  To the contrary, putting funds in different buckets can be extremely valuable.  Drawing demarcation lines and making certain funds "off-limits" is of very high value to most people.  Look at automatic savings programs that transfer funds from one account to another.  One could accomplish the same thing by just leaving everything in the same account and not spending it... in theory.  But even then, you have to at least mentally segregate it.  This seems to be an almost universal psychological truth.  This is just how people deal with their money.  Humans like organizing things according to use, not just having everything in one big undifferentiated pile.

Regarding "doom and gloom about gold and bonds": gold is gold, and long-term dollar bonds are in some very important and real ways the anti-gold.  It stands to reason gold and anti-gold are not always going to be synchronized.  Gold will do well in inflation, and bonds will do well in deflation.  If one were really convinced that interest rates were going to go significantly up for many years to come, up to 5, then 10, then 15 percent, that would eventually be very good for gold.  Ditching gold would be the last thing one would want to do.  Sum up: if one has a certain predictive view about what the inflation rate is going to be in the future, it would make sense to sell off one of these two assets, either gold or long bonds: gold if you think rates will fall, bonds if you think rates will rise.  It doesn't really make sense (to me, personally) to sell off both.

It appears that the story of gold is the story of the dollar. I don't know if the inflation narrative for gold still applies, or if it does, under what specific conditions. It's not anything I want to place an implicit, unquestioned bet on any longer.

Today, as inflation and interest rates slowly creep upwards, non-US investors flock to the "least dirty shirt and least low-yielding sort-of safe haven (for now) US Dollar". The rising US Dollar kills gold, all other metals, and oil (why I lost my job here in Texas in March. Yes, that got my attention). So gold and anti-gold can and have been falling simultaneously now... since February 1.

The mechanism of non-correlated trajectories that cancel out is broken for a while. When it comes back.. who knows?

LC475 wrote: Regarding "doom and gloom about gold and bonds": gold is gold, and long-term dollar bonds are in some very important and real ways the anti-gold.  It stands to reason gold and anti-gold are not always going to be synchronized.  Gold will do well in inflation, and bonds will do well in deflation.  If one were really convinced that interest rates were going to go significantly up for many years to come, up to 5, then 10, then 15 percent, that would eventually be very good for gold.  Ditching gold would be the last thing one would want to do.  Sum up: if one has a certain predictive view about what the inflation rate is going to be in the future, it would make sense to sell off one of these two assets, either gold or long bonds: gold if you think rates will fall, bonds if you think rates will rise.  It doesn't really make sense (to me, personally) to sell off both.

Another one bites the dust...not surprised...aren't these the same people that were telling me just weeks ago that the PP was not for me!! Go figure...

As Bernstein said, there is nothing wrong with the PP portfolio, but rather the investors that cannot stick with the plan when equity markets are rising.

Here is the exact quote:

"And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."

I think the combo of the crash of china's markets and everyone wondering if Greece was going to be the next Lehmann kind of made this the biggest  event in a while . kind of the one pp users have a vision of taking everything down.

but when gold didn't react and the surge in treasury's turned in to a fall  I think some kind of said "if not now , when?"  and became disheartened .

mathjak107 wrote: I think the combo of the crash of china's markets and everyone wondering if Greece was going to be the next Lehmann kind of made this the biggest  event in a while . kind of the one pp users have a vision of taking everything down.

but when gold didn't react and the surge in treasury's turned in to a fall  I think some kind of said "if not now , when?"  and became disheartened .

Why would Greece potentially leaving the Euro cause the gold price in dollars to spike? Gold wasn't protecting dollar-denominated assets from anything.

Also, Greece didn't leave (yet).

Pointedstick wrote:

mathjak107 wrote: I think the combo of the crash of china's markets and everyone wondering if Greece was going to be the next Lehmann kind of made this the biggest  event in a while . kind of the one pp users have a vision of taking everything down.

but when gold didn't react and the surge in treasury's turned in to a fall  I think some kind of said "if not now , when?"  and became disheartened .

Why would Greece potentially leaving the Euro cause the gold price in dollars to spike? Gold wasn't protecting dollar-denominated assets from anything.

Also, Greece didn't leave (yet).

As I understand it, there are so many behind the scene derivatives, CDOs, etc. that even though you hear very often Greece is no big deal, everything is so inter-related and leveraged that a relatively "small" event could bring pain to many places outside Europe.

ochotona wrote: Today, as inflation and interest rates slowly creep upwards, non-US investors flock to the "least dirty shirt and least low-yielding sort-of safe haven (for now) US Dollar". The rising US Dollar kills gold, all other metals, and oil (why I lost my job here in Texas in March. Yes, that got my attention). So gold and anti-gold can and have been falling simultaneously now... since February 1.

Wouldn't this mean that this is a great time to buy gold? The dollar won't remain as strong as it is currently.

atrus138 wrote:

ochotona wrote: Today, as inflation and interest rates slowly creep upwards, non-US investors flock to the "least dirty shirt and least low-yielding sort-of safe haven (for now) US Dollar". The rising US Dollar kills gold, all other metals, and oil (why I lost my job here in Texas in March. Yes, that got my attention). So gold and anti-gold can and have been falling simultaneously now... since February 1.

Wouldn't this mean that this is a great time to buy gold? The dollar won't remain as strong as it is currently.

No one knows. That is the concise answer to your question. Gold/USD relationship is only one part of the equation. The other part is inflation expectations. There is no inflation in the US or any other part of the world (except Brazil).

I will say one thing , the recovery in equity's was just startling .

mathjak107 wrote: I will say one thing , the recovery in equity's was just startling .

Then i assume you are 100% equities, leveraged x 5. No....?

I wish I was this week but nope  only a 55/45 mix