Moving up to 4.9%
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- mathjak107
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Re: Moving up to 4.9%
well you wouldn’t use it instead of long term treasuries , you would use it with them , especially at times we are at record lows to hedge the damage of a rate rise .
again , these are not stand alone investments. they are improved ways of making portfolios smoother and less volatile under more varied outcomes .
we saw how things went down the crapper in 2022 and saw how that is an example of the achilles heel in conventional investing …
we saw 3 asset classes get hit and if we count inflations effect on cash instruments then all 4 got hit .
today there are remedies for that available to retail investors.
these strategies were only available to the wealthy thru hedge fund strategies
again , these are not stand alone investments. they are improved ways of making portfolios smoother and less volatile under more varied outcomes .
we saw how things went down the crapper in 2022 and saw how that is an example of the achilles heel in conventional investing …
we saw 3 asset classes get hit and if we count inflations effect on cash instruments then all 4 got hit .
today there are remedies for that available to retail investors.
these strategies were only available to the wealthy thru hedge fund strategies
Re: Moving up to 4.9%
Meant to throw this in earlier, with the last post
- mathjak107
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Re: Moving up to 4.9%
interesting .
but that is an example of what i am saying here …it’s important to keep an open mind to the fact that old school methods may have been the way in the day but it just had to many shortcomings
but that is an example of what i am saying here …it’s important to keep an open mind to the fact that old school methods may have been the way in the day but it just had to many shortcomings
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Re: Moving up to 4.9%
Rising long rates are the PPs weak point...so what % PFIX? Or maybe PP theory needs an update to hold a lot less LTTs when they yield less than 2.5%. Zero lower bound is real
edit1: https://old.reddit.com/r/LETFs/comments ... implified/
edit1: https://old.reddit.com/r/LETFs/comments ... implified/
- mathjak107
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Re: Moving up to 4.9%
i have never given any thought to using it since i have no real interest rate risk anymore but about 5% of the portfolio seems like a recommended starting point .
personally i rather not take on that interest rate risk with bonds over 5 years so i use a mix of laddered bonds with about 2.5 years average duration for them all .
with no recession in the picture as of now i have been using fidelity floating rate high yield for years and recently added fidelity high income , so those two are the bulk of my fixed income plus i recently added a short term bond ladder of treasury bonds out to 5 years with a average duration of 2.49 years just yesterday .
those holding bonds the last few years need an incredible increase just to get even , forget about getting back what was given up
i still have a lot of my fixed income side in money markets since bonds have done nothing except go down and eventually will ladder them in under 5 year treasuries but there is little pressure to do so .
since i run 40-50% equities , which includes leveraged funds there is a lot of money in cash on the fixed income side which eventually i will ladder but not in funds .
if we hit over 5% i may do up to 7 years but realistically i see no reason to go out even 7 years
the nice thing about being so far above goal is you can be as conservative or aggressive as you want .
all, the good years i had has us at a way way higher balance 10 years in to retirement then the day we retired , despite spending down 6 figures a year
https://pictureperfectportfolios.com/st ... -etf-pfix/
personally i rather not take on that interest rate risk with bonds over 5 years so i use a mix of laddered bonds with about 2.5 years average duration for them all .
with no recession in the picture as of now i have been using fidelity floating rate high yield for years and recently added fidelity high income , so those two are the bulk of my fixed income plus i recently added a short term bond ladder of treasury bonds out to 5 years with a average duration of 2.49 years just yesterday .
those holding bonds the last few years need an incredible increase just to get even , forget about getting back what was given up
i still have a lot of my fixed income side in money markets since bonds have done nothing except go down and eventually will ladder them in under 5 year treasuries but there is little pressure to do so .
since i run 40-50% equities , which includes leveraged funds there is a lot of money in cash on the fixed income side which eventually i will ladder but not in funds .
if we hit over 5% i may do up to 7 years but realistically i see no reason to go out even 7 years
the nice thing about being so far above goal is you can be as conservative or aggressive as you want .
all, the good years i had has us at a way way higher balance 10 years in to retirement then the day we retired , despite spending down 6 figures a year
https://pictureperfectportfolios.com/st ... -etf-pfix/
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Re: Moving up to 4.9%
In a deflation, I think you want as few counterparties as possible. Promises from AQR do you no good if they’ve gone belly up.
- mathjak107
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Re: Moving up to 4.9%
if all my investment decisions the last 30 plus years were based on what if we have deflation , i would be a whole lot poorer for it .
in fact what happened in 2022 and the pp crapped the bed is the more likely scenario when risk is off today and all computer driven models follow the same path .
with high frequency trading today being 80% of the days trades , computer algorithms tend to all follow the same selling
and risk goes off in all asset classes together .
2022 saw the alternatives do just fine in a just about a shut down economy
pretty much when it comes to investing this sums it up for me

in fact what happened in 2022 and the pp crapped the bed is the more likely scenario when risk is off today and all computer driven models follow the same path .
with high frequency trading today being 80% of the days trades , computer algorithms tend to all follow the same selling
and risk goes off in all asset classes together .
2022 saw the alternatives do just fine in a just about a shut down economy
pretty much when it comes to investing this sums it up for me

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Re: Moving up to 4.9%
As we are a whole lot poorer for all of the unused insurance we’ve paid throughout our lives. Yet, since we have but one path through life we consider outcomes that are unlikely to happen.
If all you’re interested in is the highest expected returns, what are you doing messing around with hedging strategies?
Some of the risks that the PP protects you from are once in a few generation risks. They’re the kind of risks that don’t show up in a standard risk/return analysis because they just don’t happen often enough. This kind of protection is hard for some people to appreciate, it seems.
If all you’re interested in is the highest expected returns, what are you doing messing around with hedging strategies?
Some of the risks that the PP protects you from are once in a few generation risks. They’re the kind of risks that don’t show up in a standard risk/return analysis because they just don’t happen often enough. This kind of protection is hard for some people to appreciate, it seems.
Last edited by Jack Jones on Sat Jan 18, 2025 6:20 am, edited 2 times in total.
- mathjak107
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Re: Moving up to 4.9%
If you read my posts I have said over and over gains are secondary to risk vs reward
All these newer portfolios have a better risk reward than the pp
The reaper beat not only the PP but 60/40 since 2019 and blew away the pp in both much less risk and return in the debacles while the pp got crushed
These are not new untested strategies
They have been done by hedge funds for decades
So we already experienced the flaw in the pp and not 50 years ago but today in our real world
On the other hand researching back in to time the hedge fund data shows they protected their clients who wanted less gains but more risk parity thru more varied outcomes
Hey if you are happy with the results of the pp stay with it
I want better protection in what we are experiencing and so I will try what so far has met the bill of goods where the pp has not
it has fallen short in return vs the risk to get that return compared to other options
It’s only now retail investors have access to these optional ways to develop a portfolio risk parity
All these newer portfolios have a better risk reward than the pp
The reaper beat not only the PP but 60/40 since 2019 and blew away the pp in both much less risk and return in the debacles while the pp got crushed
These are not new untested strategies
They have been done by hedge funds for decades
So we already experienced the flaw in the pp and not 50 years ago but today in our real world
On the other hand researching back in to time the hedge fund data shows they protected their clients who wanted less gains but more risk parity thru more varied outcomes
Hey if you are happy with the results of the pp stay with it
I want better protection in what we are experiencing and so I will try what so far has met the bill of goods where the pp has not
it has fallen short in return vs the risk to get that return compared to other options
It’s only now retail investors have access to these optional ways to develop a portfolio risk parity
- Pointedstick
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Re: Moving up to 4.9%
Deflation is not a significant risk in modern economies; they simply don't work that way any more.
You wouldn't buy flood insurance if you live at the top of a hill in the desert. Insure against the risks you actually face.
You wouldn't buy flood insurance if you live at the top of a hill in the desert. Insure against the risks you actually face.
- mathjak107
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Re: Moving up to 4.9%
we can insure anything and everything today . you need to choose what you insure against carefully .
insurance has a cost to it .
i wouldn’t insure against deflation much at all anymore …if anything inflation and potential rising rates are a far far greater risk .
a big risk today is the expectations built in to a lot of stock prices . i see that as an area i want to hedge against most but that doesn’t mean i don’t want to not invest either in equities .
any bonds i buy now are just insurance against falling rates but since they are individual bonds and are laddered out only 5 years they won’t do much for deflation
we have tools and products now that can protect that process while not restricting gains much
Re: Moving up to 4.9%
I think of Japan as having a modern economy. And I view deflation as a significant risk that materialized for Japan, the dominant economic theme in recent decades: https://en.wikipedia.org/wiki/Lost_DecadesPointedstick wrote: ↑Sat Jan 18, 2025 4:19 pm Deflation is not a significant risk in modern economies; they simply don't work that way any more.
- mathjak107
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Re: Moving up to 4.9%
japan made every error in the book including raising rates when they should have open the spigots , which caused their deflation and we learned exactly what not to do from them .
odds of deflation happening are as slim as can be anymore .
it’s like preparing to fight the last war .
any issues that send us reeling will likely be very different once again then what you prepared for by gearing up to fight the last war
which is why the pp crapped the bed just when it was needed most in 2022.
other portfolios with more modern tools did fine , but not the pp
odds of deflation happening are as slim as can be anymore .
it’s like preparing to fight the last war .
any issues that send us reeling will likely be very different once again then what you prepared for by gearing up to fight the last war
which is why the pp crapped the bed just when it was needed most in 2022.
other portfolios with more modern tools did fine , but not the pp
- Pointedstick
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Re: Moving up to 4.9%
I see Japan as evidence for my supposition that "you can't economically outrun the collapse of your country's economy." Because that's what happened to Japan: they went from the world's biggest rising star to being outcompeted at every turn, with the scars of a falling GDP and population to prove it.
In such an environment, merely staying afloat with an "insurance style" portfolio like the PP may indeed be the best you can do — maybe a little better with some of mathjak-style modern optimizations.
But you have to make that judgement for yourself whether your home country is on an upward trajectory or a downward one to determine whether this is a good idea, especially compared to alternatives like getting out. An earlier version of me spent years as a Libertarian, and personally I feel like there's a very firm bias in that outlook towards seeing the glass as half empty. This predisposes one towards avoiding losses more than achieving gains. Sometimes that's warranted, IMO but less often than you think.
In such an environment, merely staying afloat with an "insurance style" portfolio like the PP may indeed be the best you can do — maybe a little better with some of mathjak-style modern optimizations.
But you have to make that judgement for yourself whether your home country is on an upward trajectory or a downward one to determine whether this is a good idea, especially compared to alternatives like getting out. An earlier version of me spent years as a Libertarian, and personally I feel like there's a very firm bias in that outlook towards seeing the glass as half empty. This predisposes one towards avoiding losses more than achieving gains. Sometimes that's warranted, IMO but less often than you think.
- mathjak107
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Re: Moving up to 4.9%
then you have to do what you have to do .
bet on the long shot …
but like i said years ago here , that is expensive coverage and those who bought in to it have sustained severe losses for it
most have not only sustained losses on their long term treasuries but the amount given up in gains that was not had elsewhere make the prevention likely worse then the insurance can cover
as peter lynch said, more money is lost or given up in preparation for the next recession, or worse than has been lost in any downturn turn and that especially applys to deflation scenarios in my own opinion
but that’s your choice and you have to do what you are comfortable with.
but there are much better methods to day of even protecting against that deflation than wishy washy long term bonds that only protect when the planets align just right simply because there are so many other methods. available today to investors who want to hedge that when risk is off risk assets today , it’s off
bet on the long shot …
but like i said years ago here , that is expensive coverage and those who bought in to it have sustained severe losses for it
most have not only sustained losses on their long term treasuries but the amount given up in gains that was not had elsewhere make the prevention likely worse then the insurance can cover
as peter lynch said, more money is lost or given up in preparation for the next recession, or worse than has been lost in any downturn turn and that especially applys to deflation scenarios in my own opinion
but that’s your choice and you have to do what you are comfortable with.
but there are much better methods to day of even protecting against that deflation than wishy washy long term bonds that only protect when the planets align just right simply because there are so many other methods. available today to investors who want to hedge that when risk is off risk assets today , it’s off
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Re: Moving up to 4.9%
Would you please provide some basis for these claims? A book you read on the topic would do. Thanks!Pointedstick wrote: ↑Sat Jan 18, 2025 4:19 pm Deflation is not a significant risk in modern economies; they simply don't work that way any more.
You wouldn't buy flood insurance if you live at the top of a hill in the desert. Insure against the risks you actually face.
My understanding (from The creature from Jekyll Island) is that the money supply is controlled by the federal reserve, which is controlled by private bankers. They can and will turn off the spigots when it suits them.
- mathjak107
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Re: Moving up to 4.9%
The Federal Reserve Bank of Atlanta and the St. Louis Fed both estimate that the probability of deflation in the United States is 0%.
The US has only experienced deflation twice in the last 60 years, in 2009 and 2015.
both were short lived
The US has only experienced deflation twice in the last 60 years, in 2009 and 2015.
both were short lived
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Re: Moving up to 4.9%
mathjak107 wrote: ↑Sun Jan 19, 2025 5:57 am The Federal Reserve Bank of Atlanta and the St. Louis Fed both estimate that the probability of deflation in the United States is 0%.
The US has only experienced deflation twice in the last 60 years, in 2009 and 2015.
both were short lived
Some of the risks that the PP protects you from are once in a few generation risks. They’re the kind of risks that don’t show up in a standard risk/return analysis because they just don’t happen often enough. This kind of protection is hard for some people to appreciate, it seems.
Re: Moving up to 4.9%
If anything is learned from the pandemic I think it will be that putting a ton of money directly into the hands of citizens/consumers will reverse a potential deflationary scenario very quickly. Of course there's no guarantee that direct handouts will always be politically feasible.
I am doing as Mathjak is doing (though not because of him) and keeping bond maturities very short. Will know how that works out in a few years but holding long bonds is just not for me. Unless rates go up much higher, I still see them as having the worst reward-to-risk ratio of the traditional PP components.
I am doing as Mathjak is doing (though not because of him) and keeping bond maturities very short. Will know how that works out in a few years but holding long bonds is just not for me. Unless rates go up much higher, I still see them as having the worst reward-to-risk ratio of the traditional PP components.
- mathjak107
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Re: Moving up to 4.9%
i use my bond ladder as i would cds …no longer than 5 years tops and held to maturity.
the advantage to cds is with new yorks high state and local taxes these are exempt .
i dont use bonds as any kind of protection for equities , they stink at that .
i use actual hedges to protect both stocks and bonds so being subject to the wishy washiness of long term treasuries are over for me .
i will likely do another ladder this week and space them differently then the last group so they fall out different times of the year .
the advantage to cds is with new yorks high state and local taxes these are exempt .
i dont use bonds as any kind of protection for equities , they stink at that .
i use actual hedges to protect both stocks and bonds so being subject to the wishy washiness of long term treasuries are over for me .
i will likely do another ladder this week and space them differently then the last group so they fall out different times of the year .
- dualstow
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Re: Moving up to 4.9%
It’s natural to hate holding long bonds when one gets older, especially after recent disappointment. And that, despite the fact that they really performed well for me, because interest rates kept falling.
I keep weighing it against owning shares of Berkshire or Alphabet, and it seems silly.
Still, all this talk about how x can’t possibly happen again … kind of makes me want to hold some long bonds. Just not as many as I’m supposed to hold. Living in the States, I tend to lean toward prosperity. Even when I think we’re on a downward trajectory, it’s not a path to Venezuela’s situation. Just a bumpy stretch of road.
I keep weighing it against owning shares of Berkshire or Alphabet, and it seems silly.
Still, all this talk about how x can’t possibly happen again … kind of makes me want to hold some long bonds. Just not as many as I’m supposed to hold. Living in the States, I tend to lean toward prosperity. Even when I think we’re on a downward trajectory, it’s not a path to Venezuela’s situation. Just a bumpy stretch of road.
This post sponsored by the new Vanguard t-bill ETF: VBIL
- mathjak107
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Re: Moving up to 4.9%
it took a long time for many to realize that bonds are not protection for equities , in fact they need protection like equities do , especially long term bonds which don’t see saw reliably with stocks .
even gold has been tied to equities and bonds which really hurts when they move down together . it can be like being 75% equities in volatility.
so to really protect reliably you need assets that work reliably and actually can be counted on when stocks fall because they use hedging techniques that move pretty reliably.
it’s like shorting the market as an example always see saws reliably .
these etfs today do a whole lot more though than just short the market but it’s an example of greater reliability.
i know in life i always try to get better at what i do by let’s call it refining the process . i hope whatever mistakes i made got weeded out and improved on year after year
well as time moves on we have better and better tools available to us to refine that process..
even gold has been tied to equities and bonds which really hurts when they move down together . it can be like being 75% equities in volatility.
so to really protect reliably you need assets that work reliably and actually can be counted on when stocks fall because they use hedging techniques that move pretty reliably.
it’s like shorting the market as an example always see saws reliably .
these etfs today do a whole lot more though than just short the market but it’s an example of greater reliability.
i know in life i always try to get better at what i do by let’s call it refining the process . i hope whatever mistakes i made got weeded out and improved on year after year
well as time moves on we have better and better tools available to us to refine that process..
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Re: Moving up to 4.9%
Yeah I think we have different ideas of protection and different scales of time in mind.
Over large scales of time, I have more faith in my counterparty (USA) than yours (AQR?).
Over large scales of time, I have more faith in my counterparty (USA) than yours (AQR?).
- mathjak107
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Re: Moving up to 4.9%
not me .
long term treasuries already failed at running with the ball as support for a portfolio.
alternative funds as protection has demonstrated they can run with the ball .
so until shown they can’t i rather go with alternatives for my protection.
i don’t need a fair weather friend that only works when rates are falling and leaves me unprotected and worse off when they go up which is what the pp does
long term treasuries already failed at running with the ball as support for a portfolio.
alternative funds as protection has demonstrated they can run with the ball .
so until shown they can’t i rather go with alternatives for my protection.
i don’t need a fair weather friend that only works when rates are falling and leaves me unprotected and worse off when they go up which is what the pp does
Last edited by mathjak107 on Sun Jan 19, 2025 11:33 am, edited 2 times in total.
- Pointedstick
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Re: Moving up to 4.9%
A good introduction can be found in "The Seven Deadly Innocent Frauds of Economic Policy", by Warren Mosler, which is available online at https://warrenmosler.com/wp-content/upl ... l-2024.pdfJack Jones wrote: ↑Sun Jan 19, 2025 4:13 amWould you please provide some basis for these claims? A book you read on the topic would do. Thanks!Pointedstick wrote: ↑Sat Jan 18, 2025 4:19 pm Deflation is not a significant risk in modern economies; they simply don't work that way any more.
You wouldn't buy flood insurance if you live at the top of a hill in the desert. Insure against the risks you actually face.
I've read this book too, and ultimately I find its perspective to be skewed towards theory and ideology rather than being particularly descriptive of the world we live in today. It's thinly-disguised monetarism wrapped up in a whole lot of the author's political ideology and preferences.Jack Jones wrote: ↑Sun Jan 19, 2025 4:13 am My understanding (from The creature from Jekyll Island) is that the money supply is controlled by the federal reserve, which is controlled by private bankers. They can and will turn off the spigots when it suits them.
However Monetarism failed to explain reality for decades, and is not considered to be a credible school of economic thought today. No central banks follow its prescriptions, and viewing an economy through its lens will often provide an inaccurate impression.
My personal conclusion has been that an economy's ultimate constraint in a reasonably representative government is the people. If the people are highly indebted (as they are in the modern 1st world countries we're talking about), they will simply not tolerate deflation*, as it is ruinous to their standard of living. Thus, every representative government will move heaven and earth to prevent it — often making mistakes and breaking things in the process, but generally succeeding in preventing sustained deflation. Instead, the economy almost always ends up with inflation, its opposite. People find this preferable because it reduces the value of their fixed debts and increases the paper value of what assets they do own. Everyone likes for their number to go up, poor and rich alike.
As a result, any monetarist-thinking central bankers who actually try to contract the money supply in a bid to produce deflation will quickly find that not only does it not work the way they think, but every member of that economy from the very poor to the very rich have lined up in opposition to it. They will immediately change their tune or be replaced by the parts of the government that are elected. Mostly this never happens because people who become central bankers are smart enough to realize this and not try it.
*Why did Japan tolerate deflation? My reading is that it happened for a combination of cultural factors, the fact that their economy was actually deteriorating and shrinking, and also the incompetence of the Japanese central bank — which had the misfortune of learning a lot of these lessons that everyone else would later follow.