Gyroscopic Investing

budd, not perfect but for most, ~50% of their portfolio is doing a halfway decent job buffering a bad day in stocks. So it is working as a diversifier.

Cortopassi wrote: ↑Mon Nov 19, 2018 1:51 pm budd, not perfect but for most, ~50% of their portfolio is doing a halfway decent job buffering a bad day in stocks. So it is working as a diversifier.

Yes that is true, but come on .26% and .17% for gold and LTT’s respectively. Not only that but these investments are -ve YTD so should be attractive when stocks are down 2%. Yet no, they aren’t.

buddtholomew wrote: ↑Mon Nov 19, 2018 10:55 am But alas it was not meant to be.
Gold and LTT’s just sitting there while market down 1.6%
We should change the name to the Perplexed Portfolio

But Budd, the PP doesn’t work on a daily basis...
You’re right, it doesn’t work on a daily, weekly, monthly, annual or decade basis either.

The decade statement, demonstrably, factually wrong. Daily, weekly, monthly, annual...concur.

Kbg wrote: ↑Mon Nov 19, 2018 2:32 pm

buddtholomew wrote: ↑Mon Nov 19, 2018 10:55 am But alas it was not meant to be.
Gold and LTT’s just sitting there while market down 1.6%
We should change the name to the Perplexed Portfolio

But Budd, the PP doesn’t work on a daily basis...
You’re right, it doesn’t work on a daily, weekly, monthly, annual or decade basis either.

The decade statement, demonstrably, factually wrong. Daily, weekly, monthly, annual...concur.

Well as long as it is demonstrably...

Wow, so glad I invested in the Perplexed Portfolio.
Don’t worry, by end of year I am gone permanently.
Good luck with this piece of shit.

buddtholomew wrote: ↑Tue Nov 20, 2018 10:20 am Wow, so glad I invested in the Perplexed Portfolio.
Don’t worry, by end of year I am gone permanently.
Good luck with this piece of shit.

I think it's a wise thing that you are finally going to abandon it. A portfolio that causes you such angst is obviously not the right one for you. Hopefully you will find one that gives you more peace of mind. If you do, please come back and tell us about it. We'll promise not to tell you what a bad portfolio it is.

So it’s meeting everyone’s expectations?
Come on, you’re not serious or lying to yourself if you’re not surprised at how poor the PP is responding.
There have been 3 or 4 negative years for the PP in history and another is on the way...

buddtholomew wrote: ↑Tue Nov 20, 2018 12:08 pm So it’s meeting everyone’s expectations?
Come on, you’re not serious or lying to yourself if you’re not surprised at how poor the PP is responding.
There have been 3 or 4 negative years for the PP in history and another is on the way...

In real terms it's actually been negative about a quarter of the time. See here:

https://portfoliocharts.com/portfolio/p ... portfolio/

Ditto for a Bogleheads-style 60/40 with the highs being higher and the lows lower. Here is that link:

https://portfoliocharts.com/portfolio/classic-60-40/

budd, honestly I wish that the PP were doing better during my time frame (2014 to present) but I think there are a lot of funky economic headwinds that we are faced with at the moment and I'm not willing to go stock heavy. We are emerging from a long period of ZIRP and serious Fed stimulation that was intended to push up stock and bond prices. The 2017 tax cuts helped stocks a lot as well, at least until recently.

From my point of view only cash looks very attractive because holding a big slice allows me to continue on with my life while the mayhem of gold, stocks and treasuries get sorted out. From a starting point of 3% or so there is just not a lot of potential upside on 30-year treasuries. Absent any kind of sustained USD weakness I don't expect gold to do much. Looks like the CAPE 10 is just under 30 which could portend a stretch of mediocrity (or worse) for stocks. Add in the fact that this recovery has only been strong for wealthier Americans and, well, I guess I just don't see that a concentrated bet on stocks is prudent for me. Your situation/personality are probably different from mine and you should just go with an investment mix that you are more comfortable with.

With invested cash yields being cancelled out by inflation and my low short to mid-term expectations for the other three assets being poor, I expect any balanced approach to struggle for a few years. Portfolios are only capable of providing the returns of their underlying assets. I mean, I think that's obvious but sometimes we feel like we "deserve" more than the markets are capable of delivering.

Just my two cents worth. If you decide to go 70/30, 60/40 or whatever and it works out great for you, that's good for me as well as I'll at least be holding some of the same stuff.

Life is short. Your income makes it obvious that you are contributing something of value to society. Crappy skills are seldom rewarded. It just doesn't make sense to have an asset mix that pisses you off.

buddtholomew wrote: ↑Tue Nov 20, 2018 12:08 pm So it’s meeting everyone’s expectations?
Come on, you’re not serious or lying to yourself if you’re not surprised at how poor the PP is responding.
There have been 3 or 4 negative years for the PP in history and another is on the way...

Speaking only for myself, I don't have any short term expectations for the portfolio and as a matter of fact I wouldn't have even known it was doing so badly if it wasn't for your posts. The last time I looked at it was in January when I re-balanced. Like with with any portfolio I've seen negative years before but never anything like I saw when I was stock heavy. I think one of the authors of the book who used to post here once said that he would consider abandoning the PP if it had several negative years in a row. I would probably do the same but I would have to find another strategy that worked better without the risk of large draw downs.

I think it's as timely a time to enter the PP as I have seen in my four years of watching it.

Stocks starting to get beat up, long bonds have gotten beaten up, gold bouncing along possibly along the bottom after getting smacked down, cash finally paying interest.

Why not now?

ochotona wrote: ↑Tue Nov 20, 2018 6:59 pm I think it's as timely a time to enter the PP as I have seen in my four years of watching it.

Stocks starting to get beat up, long bonds have gotten beaten up, gold bouncing along possibly along the bottom after getting smacked down, cash finally paying interest.

Why not now?

Yup.

It’s darkest before the dawn.

The time to buy is when there’s blood in the streets.

Everyone hates the PP right now. Even PP investors. This is when the smart money enters.

Tortoise wrote: ↑Tue Nov 20, 2018 8:12 pm

ochotona wrote: ↑Tue Nov 20, 2018 6:59 pm I think it's as timely a time to enter the PP as I have seen in my four years of watching it.

Stocks starting to get beat up, long bonds have gotten beaten up, gold bouncing along possibly along the bottom after getting smacked down, cash finally paying interest.

Why not now?

Yup.

It’s darkest before the dawn.

The time to buy is when there’s blood in the streets.

Everyone hates the PP right now. Even PP investors. This is when the smart money enters.

So what exactly is the “smart” money buying?

My experience with the PP is that this too shall pass and Gold/LTT’s will continue their decline shortly thereafter.

jacksonM wrote: ↑Tue Nov 20, 2018 1:36 pm

buddtholomew wrote: ↑Tue Nov 20, 2018 12:08 pm So it’s meeting everyone’s expectations?
Come on, you’re not serious or lying to yourself if you’re not surprised at how poor the PP is responding.
There have been 3 or 4 negative years for the PP in history and another is on the way...

Speaking only for myself, I don't have any short term expectations for the portfolio and as a matter of fact I wouldn't have even known it was doing so badly if it wasn't for your posts. The last time I looked at it was in January when I re-balanced. Like with with any portfolio I've seen negative years before but never anything like I saw when I was stock heavy. I think one of the authors of the book who used to post here once said that he would consider abandoning the PP if it had several negative years in a row. I would probably do the same but I would have to find another strategy that worked better without the risk of large draw downs.

The lower drawdowns come hand in-hand with lower gains. That all sounds great until you calculate the opportunity cost for investing in non-equity assets. If you’re not going to look then you’re better off holding a higher stock allocation as you are less likely to capitulate and sell.

Opportunity cost implies a rate of return. If your implied rate of return is high enough, the PP won't meet your criterion. The failure is not in the portfolio, the failure is a mismatch of expectations.

ochotona wrote: ↑Wed Nov 21, 2018 6:26 am Opportunity cost implies a rate of return. If your implied rate of return is high enough, the PP won't meet your criterion. The failure is not in the portfolio, the failure is a mismatch of expectations.

I think you’re right and my expectations have changed over time. The PP served its purpose 7-8 years ago when I was primarily concerned with capital preservation in order to establish a taxable emergency fund. I am now in a better position to weather an equity decline and feel more comfortable taking additional stock exposure.

The stock market has now reset to around Jan-18 so I am getting a second chance to buy stocks at the same price as I would have paid at the beginning of the year, less dividends of course. On my way to 35%, think it’s a good trade off of risk/reward.

buddtholomew wrote: ↑Tue Nov 20, 2018 9:00 pm The lower drawdowns come hand in-hand with lower gains. That all sounds great until you calculate the opportunity cost for investing in non-equity assets. If you’re not going to look then you’re better off holding a higher stock allocation as you are less likely to capitulate and sell.

That last sentence is a pretty bold statement IMHO. How do you know for a fact that there are going to be "opportunity costs" to holding the PP as opposed to stocks? You don't.

jacksonM wrote: ↑Wed Nov 21, 2018 8:40 am

buddtholomew wrote: ↑Tue Nov 20, 2018 9:00 pm The lower drawdowns come hand in-hand with lower gains. That all sounds great until you calculate the opportunity cost for investing in non-equity assets. If you’re not going to look then you’re better off holding a higher stock allocation as you are less likely to capitulate and sell.

That last sentence is a pretty bold statement IMHO. How do you know for a fact that there are going to be "opportunity costs" to holding the PP as opposed to stocks? You don't.

I think that stocks will outperform LTT’s and Gold. I am willing to take that bet the same way you take for granted the PP somehow prrotects you from a drawdown of > 20%. It don’t.

buddtholomew wrote: ↑Wed Nov 21, 2018 8:56 am

jacksonM wrote: ↑Wed Nov 21, 2018 8:40 am

buddtholomew wrote: ↑Tue Nov 20, 2018 9:00 pm The lower drawdowns come hand in-hand with lower gains. That all sounds great until you calculate the opportunity cost for investing in non-equity assets. If you’re not going to look then you’re better off holding a higher stock allocation as you are less likely to capitulate and sell.

That last sentence is a pretty bold statement IMHO. How do you know for a fact that there are going to be "opportunity costs" to holding the PP as opposed to stocks? You don't.

I think that stocks will outperform LTT’s and Gold. I am willing to take that bet the same way you take for granted the PP somehow prrotects you from a drawdown of > 20%. It don’t.

The PP has historically avoided large drawdowns and stocks have outperformed LTT's and Gold in the long run. Past performance is no guarantee of future results for either one of us however. I prefer the PP right now because it is agnostic about the future.

For the record, I'm not trying to change your mind about abandoning the PP. I already said it was probably a good idea for you. We all have our own investing philosophies and risk tolerance. I just take exception when someone bashes another person's choices.

I’m not “bashing anyone’s choices” nor am I looking for guidance on how to proceed.

I continue to hold all 4 assets just not @25% each since that is too agnostic for my tastes when 7/10 years stocks advance. I’ve also seen the following scenario play out countless times when stocks decline. Gold and LTT’s may rally but they will sell off like the plague when equities recover. Just tired of that rodeo ride.

buddtholomew wrote: ↑Tue Nov 20, 2018 8:56 pm
So what exactly is the “smart” money buying?

Two year US Treasuries.

buddtholomew wrote: ↑Tue Nov 20, 2018 12:08 pm So it’s meeting everyone’s expectations?

I’m not sure what my expectations even are, but I’m in no hurry to go all stocks, nor even to sell gold at a loss. (I cannot benefit from tax loss harvesting).

dualstow wrote: ↑Wed Nov 21, 2018 5:41 pm

buddtholomew wrote: ↑Tue Nov 20, 2018 12:08 pm So it’s meeting everyone’s expectations?

I’m not sure what my expectations even are, but I’m in no hurry to go all stocks, nor even to sell gold at a loss. (I cannot benefit from tax loss harvesting).

I’m not in a hurry either, but it’s so easy to say I will wait a little longer...For some reason losses in gold irritate me more than stocks and bonds and I hope that both of us break even in Au soon.

ochotona wrote: ↑Wed Nov 21, 2018 3:55 pm

buddtholomew wrote: ↑Tue Nov 20, 2018 8:56 pm
So what exactly is the “smart” money buying?

Two year US Treasuries.

I bought 2 year notes less than 2 weeks ago at a yield of 2.98%!

It is easier to tolerate stock losses, isn’t it

+1 on 2-yr notes.

buddtholomew wrote: ↑Wed Nov 21, 2018 10:19 am I’m not “bashing anyone’s choices” nor am I looking for guidance on how to proceed.

I continue to hold all 4 assets just not @25% each since that is too agnostic for my tastes when 7/10 years stocks advance. I’ve also seen the following scenario play out countless times when stocks decline. Gold and LTT’s may rally but they will sell off like the plague when equities recover. Just tired of that rodeo ride.

I did convert to the Golden Butterfly a couple of years ago so I'm 40% stock right now. Or at least I was last January.