Gyroscopic Investing

Bernstein should have been telling his audience that financial success means not running with the herd.

jhogue wrote: ↑Mon Aug 03, 2020 6:31 pm Bernstein should have been telling his audience that financial success means not running with the herd.

Actually, running with the heard is a pretty good investment strategy in aggregate. One cannot simultaneously believe in cap-weighted index funds and not believe in running with the heard. It's inconsistent. Mr. Market is usually pretty freaking smart. There are some pretty big misses from time to time, and that is where a small select group who can see what the crowd does not see gets very rich (or a few got really lucky at a big guess).

Allocation is really more about risk and financial success is more about hard work, good saving habits, financial planning and not having overly destructive cognitive biases.

Meb Faber wrote a great book several years back about the long term performance of various popular portfolios and you can see it on Tyler's risk and returns chart...take a look at roughly the 3.75% real line...pretty much everything gets you to the same place with some having a smoother ride than others.

at this point in time all asset classes in the pp are running with the herd . that scares me which is why i cut the amounts i had in the pp down drastically after taking huge profits ...

every financial forum has TLT AND GLD on the hot list . i am really only comfortable with them as long as they are contrarian and not herd investments .

i still have 7 figures in it but not multiple 7 figures like i did .


we made enough in gains this year to just "do nothing " but wait and see how things unfold ...

Almost, but not quite. The real return on Cash is now negative. That alone explains why so many keep hunting for Cash alternatives with junk like less than investment grade corporate bonds.

the BBB range is the most popular credit range for bonds in most bond funds . it is the sweet spot .

it is the last stop before falling below investment grade .

with the bulk of the holds BBB any cut in credit rating will force all these funds , pensions , insurers , etc , who can't hold anything not investment grade to dump these in mass with little takers.

this will be a disaster in the credit markets

Yes.

A 1 year T-bill yields +0.10%. A 1 year Corporate BBB yields + 1.10%. Anybody holding the latter will feel like they got a haircut in the form of a guillotine if there is a corporate downgrade of BBBs. Especially in this market, it makes no sense at all to hold anything but Treasurys for Cash.

jhogue wrote: ↑Wed Aug 05, 2020 9:56 am Yes.

A 1 year T-bill yields +0.10%. A 1 year Corporate BBB yields + 1.10%. Anybody holding the latter will feel like they got a haircut in the form of a guillotine if there is a corporate downgrade of BBBs. Especially in this market, it makes no sense at all to hold anything but Treasurys for Cash.

Exactly.
I suspect those who hold Total Bond Fund, e.g., a lot of the Knuckleheads, will be very unhappy when (not if) that happens.
In uncertain times like these, return of capital is much more important than return on capital.

I've got some 5 year treasuries maturing soon and I'm considering 1 year CD's at 1%. I just can't see near 0% in treasuries for cash purposes.

I've also got some 5% PenFed 10 year CD's maturing next year. Never dreamed I'd go that far out when I purchsed, but it sure paid off.

PenFed is not a bad outfit by any means, but the real question is how liquid those CDs will be during the next financial crisis. What is the penalty for breaking them?

jhogue wrote: ↑Wed Aug 05, 2020 9:11 pm PenFed is not a bad outfit by any means, but the real question is how liquid those CDs will be during the next financial crisis. What is the penalty for breaking them?

Kind of a moot (or mute as they say on the interweb) point for me as they mature in January. The reason I bought them 10 years ago was because they only had a 6 mo interest penalty. Would never have gone that long duration without that privilege.

PenFed used to run some real good deals on CD's but now they don't seem any better than many others. I'm amazed I can do a few basis point better at my local small town credit union.

Kbg wrote: ↑Mon Aug 03, 2020 8:05 pm

jhogue wrote: ↑Mon Aug 03, 2020 6:31 pm Bernstein should have been telling his audience that financial success means not running with the herd.

Actually, running with the heard is a pretty good investment strategy in aggregate. One cannot simultaneously believe in cap-weighted index funds and not believe in running with the heard. It's inconsistent. Mr. Market is usually pretty freaking smart. There are some pretty big misses from time to time, and that is where a small select group who can see what the crowd does not see gets very rich (or a few got really lucky at a big guess).

Allocation is really more about risk and financial success is more about hard work, good saving habits, financial planning and not having overly destructive cognitive biases.

Meb Faber wrote a great book several years back about the long term performance of various popular portfolios and you can see it on Tyler's risk and returns chart...take a look at roughly the 3.75% real line...pretty much everything gets you to the same place with some having a smoother ride than others.

He has since come out with another book.

Meb Faber Uncovers, Again, the Best Investment Writing

https://www.thinkadvisor.com/2018/08/29 ... from-famo/

Vinny

yankees60 wrote: ↑Sat Sep 19, 2020 9:00 pm He has since come out with another book.

Meb Faber Uncovers, Again, the Best Investment Writing

https://www.thinkadvisor.com/2018/08/29 ... from-famo/

Vinny

+1