Gyroscopic Investing

My favorite headline today:

Gold Selloff Leaves Traders Wondering
- Gold prices were plummeting by 2% as brokers and analysts attempted to discern why.

Lots of after-the-fact oracles out there. 

I had the misfortune of hearing someone named Dagen McDowell from FBN ripping into gold in one of the most unenlightened diatribes I've ever heard.

On the other hand, Jim Rickards just tweated "Flush out the weak hands. Flush out the paper players. Flush out leverage. Get down to physical v. central banks."

I think I'll make a small purchase just to show where I stand.

Gold is a volatile asset for sure.

Gold is down 3.71%, Silver down 4.68%.  Seems unnatural that the price of any asset should fluctuate so much in one day.  Especially precious metals in the face of a potential war with Korea.

Manipulation?

It's a speculative asset by nature right? I mean there's no condition or circumstance that guarantees gold will do anything. Theoretically it could plummet even in the face of hyperinflation if it really fell out of favor.

I am reminding myself that PP lost only about 0.6 % so far

I rebalance along the way. You NEVER know in this world so you have to trust the philosophy through thick and thin. It sure looks like gold will test the 1200 level at some point if things go along as they have been. Of course, the Black Swan is always in play for some large event or surprise in the markets. The minute you stop buying gold and load up on stocks, you could get hit.

I am definitely at the rebalancing point as of 4/15

Gold needs to fall another 30% or so for me to hit a rebalancing band (assuming 15/35)..

Blackomen - I am not sure I understand the basis of when you rebalance - I rebalance when any one asset class meets 15/35 from my last rebalance point. Based on my last rebalance which happened last year September sometime  this is how things have changed.

Gold -22%
Stocks +8%
cash ~0%
LT Bonds  +2%

According to my math, that leaves you with 22% of your portfolio in gold.  Pretty far from 15%.

UPDATE based on Rueb's response just below: Xan - I was figuring my rebalance point differently than percent of entire portfolio - from my last balance point gold was down 22% and as whole it is still 18% of my entire portfolio.

Kel wrote: Blackomen - I am not sure I understand the basis of when you rebalance - I rebalance when any one asset class meets 15/35 from my last rebalance point. Based on my last rebalance which happened last year September sometime  this is how things have changed.

Gold -22%
Stocks +8%
cash ~0%
LT Bonds  +2%

Kel, the rebalancing point occurs when you're overall holdings in gold (or another PP pillar) reaches 15% or 35%, not by how much it's value has changed over time. The fact that your gold holdings are down 22% is not what is acted upon, it is rather what is your overall percentage of gold held in your PP. I'm guessing that you're overall gold holding is probably still around 20%.

Thanks Rueb - I didn't quite realize that - there are many different ways of rebalancing .....I was sort of embarressed to even mention how I was doing it in case I was wrong ha ha - oh well.

UPDATE: Well from that perspective Gold is at 18% of my portfolio. Thanks for the feedback

I bought most of my gold (GLD) in the 150's and low 160's, and my weight is also around 22% as of today.

22*0.7 = 15.4% assuming my portfolio value stays constant despite gold's -30% drop.

Also, I try to rebalance to 25/25/25/25 (without selling) whenever I add new money to my portfolio roughly each quarter..  I prefer to avoid having to sell and have to take capital gains whenever a 15/35 rebalancing band is hit.

FWIW, rebalancing events triggered by an asset hitting 15% of the overall portfolio are exceedingly rare.

MediumTex wrote: FWIW, rebalancing events triggered by an asset hitting 15% of the overall portfolio are exceedingly rare.

Yeah, despite this minor gold crash, my stocks are still up more than gold is down. But if gold continues this slide, I could easily hit 15% with it.

I just checked my Morningstar portfolio tracker for VTI, SHY, TLT and GLD. It is showing up around 1% or so for the year. The gold price falling has been offset by very strong stock performance so far. It could go negative, but again I'd just say that looking at assets in isolation is only one part of the story. Stocks have been on a tear.

My Cash just triggered a rebalance.  Buying some gold it looks like.

Edit: I add to cash each month and was getting close anyways.

Bean wrote: My Cash just triggered a rebalance.  Buying some gold it looks like.

Edit: I add to cash each month and was getting close anyways.

Not me.  Gold is going to 1150, or lower.  I know it's against the rules, but I would keep the money in cash.

I'm nowhere near rebalancing, yet.  My 10.5 mo. PP today is showing

20.87% GTU
24.04% TLT
27.01% VTI
28.08% Cash

Portfolio is up .5% as of today's close.  It'll be in the red by the end of this week, for the first time since I set it up.

I remember Guy Adami saying when gold unwinds, it does so very quickly.  I clearly remember the $900 gold of the 80's, reverting to under $300 very, very fast.

Gold still has a way to go.  I'm not a buyer at 1350 even if I needed to rebalance now.

Did HB consider sudden market crashes like these as valid triggers for rebalancing - when it appears pretty clear there's a way to go yet on the downside and we've got computer trading programs artificially accelerating this rapid decline?   

Looks like all commodities got hit so its not just a gold thing.
Think thru making any rash moves here.
The darn thing can reverse as quickly as it fell.

craigr wrote: I just checked my Morningstar portfolio tracker for VTI, SHY, TLT and GLD. It is showing up around 1% or so for the year. The gold price falling has been offset by very strong stock performance so far. It could go negative, but again I'd just say that looking at assets in isolation is only one part of the story. Stocks have been on a tear.

Really?!  I set up 2 PP trackers on Yahoo! Finance at the start of the year to track different PP approaches, using ETFs mentioned in this forum.  Both are down around 2.3% YTD, with gold being hit hardest, cash essentially flat, bonds up slightly, and stocks up nicely.  Not sure why our PPs are performing so differently?  Here are the portfolios I'm tracking:

25.0% SHY
12.5% PHYS
12.5% SGOL
25.0% EDV
25.0% VTI

25.0% SCHO
12.5% PHAU.L
12.5% ZGLDUS.SW
25.0% TLT
25.0% SCHB

rocketdog wrote: Really?!  I set up 2 PP trackers on Yahoo! Finance at the start of the year to track different PP approaches, using ETFs mentioned in this forum.  Both are down around 2.3% YTD, with stocks and gold being hit hardest, cash essentially flat, and bonds up slightly.  Not sure why our PPs are performing so differently?  Here are the portfolios I'm tracking

Today was so volatile it probably depends on when we both checked. Earlier gold was down sharply and stock were slightly up. Then later gold was down sharply and so were stocks.

Right now the portfolio is in the red about -2%. I'm sure the bombs going off in Boston didn't help. The markets were extremely volatile today.

craigr wrote: I just checked my Morningstar portfolio tracker for VTI, SHY, TLT and GLD. It is showing up around 1% or so for the year. The gold price falling has been offset by very strong stock performance so far. It could go negative, but again I'd just say that looking at assets in isolation is only one part of the story. Stocks have been on a tear.

What values did you use at the beginning of the year?  I just set up a PP tracker using those same ETFs as of Jan. 2nd, and it's showing a YTD loss of 2.61%. 

craigr wrote:

rocketdog wrote: Really?!  I set up 2 PP trackers on Yahoo! Finance at the start of the year to track different PP approaches, using ETFs mentioned in this forum.  Both are down around 2.3% YTD, with stocks and gold being hit hardest, cash essentially flat, and bonds up slightly.  Not sure why our PPs are performing so differently?  Here are the portfolios I'm tracking

Today was so volatile it probably depends on when we both checked. Earlier gold was down sharply and stock were slightly up. Then later gold was down sharply and so were stocks.

Right now the portfolio is in the red about -2%. I'm sure the bombs going off in Boston didn't help. The markets were extremely volatile today.

Ah, that's more like it.  You had me worried there!  I was like, "What's Craig doing that I'm not doing?!"