Gyroscopic Investing

PrimalToker wrote: ↑Sun Sep 13, 2020 3:20 pm
Whether you stick with LTTs or move to cash it doesn't really matter, you're going to do better than the average investor out there.

You can say the same thing about buying hurricane insurance if you live in Michigan. But, at a certain point, the cost of the insurance just becomes a silly bet. I am trying to protect ALL of my dollars, not just some of them.

Choosing to believe that the HB PP will provide you with safety going forward is fine. Some people need to believe in an afterlife for the same psychological reasons. Feeling "safe" is a huge psychological need.

Personally, I try not to get too hung up on Browne, I need to see graphs and data so I can make real risk-adjusted decisions. In fact, the points I made about Browne were because I think that you have 2 different kinds of people on this forum.

Some are literally following what Browne wrote as if he was some type of prophet. His message supposedly timeless (keep in mind if Dalio died last year, people would still be following his now outdated advice). I was pointing out that his views were certainly not timeless even in his own investing timeline (and him being older for his most recent views does not necessarily translate into wiser).

Also keep in mind that some people here take Browne's "philosophy" with a grain of salt. Some of us already had a similar investment strategy without Harry Browne (after-all, there are tons of people that have a balance of stock/intermediate treasuries/gold that never even heard of HB). Others may have found it researching lazy portfolios in a simba spreadsheet. Either way, some of us had the RESEARCH lead us to a similar ALLOCATION as Browne had. From there we found this forum. It was NOT from some simplified "set in stone" economic cycles and the debatable narrative that went around it.

In other words, the SAFETY ALLOCATION that led us here, is now leading us away from here. It isn't performance chasing. In fact, it is the opposite.

From my perspective, Harry Brown's PP should simply be treated like a well-behaved child. You can feel pretty safe trusting it during regular times... but if the house is on fire, you better keep an eye on it.

For example, correct me if I am wrong, but if you had some 1946 Hungary inflation where prices doubled every 15.6 hours, in a HB PP you would just keep trading in that gold for more of that awesome Hungarian paper.

The safety of the PP can be an illusion in abnormal situations. We are currently in an abnormal situation.

ahhrunforthehills wrote: ↑Sun Sep 13, 2020 4:31 pm From my perspective, Harry Brown's PP should simply be treated like a well-behaved child. You can feel pretty safe trusting it during regular times... but if the house is on fire, you better keep an eye on it.

All well and good. I know when I first started with it, we were talking about similar stuff (IIRC it was adding 5% to stocks and taking it away from gold, and adding international stocks).

For example, correct me if I am wrong, but if you had some 1946 Hungary inflation where prices doubled every 15.6 hours, in a HB PP you would just keep trading in that gold for more of that awesome Hungarian paper.

The safety of the PP can be an illusion in abnormal situations. We are currently in an abnormal situation.

Just before I got here, a guy named Clive was making that argument (but where gold was the declining asset that you kept rebalancing into as it went to 0).

Big difference though with the bonds .....we hit the ground floor ..it is not just business as usual and rates fall ....this time and this close to zero may very well be the this time is different scenario .....it is a totally different game in my opinion

mathjak107 wrote: ↑Sun Sep 13, 2020 5:08 pm Big difference though with the bonds .....we hit the ground floor ..it is not just business as usual and rates fall ....this time and this close to zero may very well be the this time is different scenario .....it is a totally different game in my opinion

+1

So then the question becomes what to do with the bond and cash allocation, as well as if any tweaks are in order with the other assets.

If one is going to stick with 100% Treasuries it's hard for me to see any argument for anything longer in duration than Tbills given the yield curve. At ~.13% interest it's easy to see the appeal of, say, an equally safe short-term CD from Ally Bank or Navy Federal Credit Union paying .80-.90% and of course maxing out the 10K yearly limit for iBonds is a no-brainer.

Beyond that I really don't know. Locking in a negative nominal return for short-term TIPS doesn't appeal. A truly heretical thought would be to put up to 20% in a short-term corporate bond fund for some real return on part of what is after all a 50% bond and cash allocation in the PP. The Fed is backstopping corporates in a massive way and Powell made it clear last Friday that they intend the current interest rate situation to persist for years to come.

Any other bright ideas?

I'm thinking about getting a mortgage.

Kriegsspiel wrote: ↑Sun Sep 13, 2020 6:37 pm I'm thinking about getting a mortgage.

Isn't that basically shorting the dollar, with leverage?

It might be a bright idea! Ideally I'd use my VA loan to buy a multifamily property where the rent from the other units will cover all of my housing expenses. And after a year I have the option of moving out and renting the unit I was living in for cash flow.

I also like the idea of buying a house in need of a total rehab and fixing it up myself while living in it, but I can't use the VA loan for something like that.

I don’t think I could ever get into real estate now. The government was just way too quick to halt evictions during a downturn without compensation to landlords. Not to mention, if things don’t get better economically, property taxes will probably get nasty.

I think the safest approach currently is either 25% stock, 25% gold, and 50% STT if you are thinking a MAJOR crash is fairly possible in the next few years. 30%/30%/40% if you think the stock market isn’t facing a major crash (or go for a 2:1 stock to gold ratio of 40/20/40 if you are feeling extra bullish).

I don’t think you necessarily need LTT when Gold can basically pull the same wagon.

https://www.listenmoneymatters.com/wp-c ... eather.jpg

drumminj wrote: ↑Sun Sep 13, 2020 7:52 pm

Kriegsspiel wrote: ↑Sun Sep 13, 2020 6:37 pm I'm thinking about getting a mortgage.

Isn't that basically shorting the dollar, with leverage?

actually a mortgage is neutral by itself .. it is what you buy with it that is the investment with leverage ... as an example , if i bought bonds with that mortgage money the mortgage is not an inflation hedge .