Gyroscopic Investing

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Jan 1970: 8.84% CAR, -18.38% MaxDD
Feb 1970: 8.80% CAR, -21.41% MaxDD
Mar 1970: 8.74% CAR, -24.20% MaxDD
Apr 1970: 8.68% CAR, -27.07% MaxDD
May 1970: 8.70% CAR, -26.37% MaxDD
Jun 1970: 8.77% CAR, -25.54% MaxDD
Jul 1970: 8.77% CAR, -25.54% MaxDD
Aug 1970: 8.78% CAR, -25.01% MaxDD
Sep 1970: 8.81% CAR, -23.79% MaxDD
Oct 1970: 8.71% CAR, -22.75% MaxDD
Nov 1970: 8.71% CAR, -22.53% MaxDD
Dec 1970: 8.76% CAR, -21.77% MaxDD

Its quite possible for the MaxDD to be even more worse as monthly 20-year TBond prices could have hid some extra risk between 1970 and 1973.  But I don't recall there being any negative bond shocks during that time.  Whats more bothersome to me is not including the 1968-1970 stock bear market which was a generational worst since 1929-1933 (at least until the even more brutal one in 1973-1974!).

Thank you for sharing.

I'm thinking to open US-HB-PP.

For an european person, where shall I open account safely?

Wow MG, where did you get that data??

And does it take rebalancing into account, or does it assume monthly rebalances?  Also what did you use for gold prices pre 1972?

Interesting choice of starting year...

Was gold using the london fix data?  Also the Krugerrand was introduced in 1967, making 1968 the first year it was easy to invest in physical gold in nice 1oz units at a reasonably small premium to spot.

There are hundreds of years of gold price history.

Simple annual summary:  http://www.onlygold.com/TutorialPages/p ... 0yrsfs.htm

More detailed with various market breakdown:  http://measuringworth.com/gold/  has the official british price of gold since 1257 to 1945, london market price since 1718, U.S. official price since 1786 and the NY market price since 1791. Some years are missing, e.g. London was closed for a few years in the 20th century.

There are more detailed sources for various markets.  E.g. the LBMA makes available their daily fixes since 1968 (they also provide a monthly average) for both gold and silver.

sophie wrote: And does it take rebalancing into account, or does it assume monthly rebalances?  Also what did you use for gold prices pre 1972?

It is annually rebalanced (no transaction costs or taxes) and I used the daily London gold fix and monthly 20-year T-Bonds before 5/1973.  You can get the gold at gold.org and the T-Bonds at FRED.

Wow. I'm duly impressed.

How did you get a 7.5% loss in 2008?

Most PP figures for 2008 range from a 2% loss to basically even.

In 2008 TLT returned 33.76% according to MSN Money
http://investing.money.msn.com/investme ... symbol=tlt

They also say that it beat the index by a wide margin.

This is excellent work MG.
Do you ever sleep?

annieB wrote:This is excellent work MG.
Do you ever sleep?

Not when I got money burning a hole in my pocket begging for unobtrusive answers!

Slotine wrote: Is it possible to break that out into a percentage drawdown graph?

Your wish is my command!  See the OP.

Very interesting chart!  I assume the first year started with the 4x25 allocations.

Was it re-balanced yearly according to the 15/35 boundary rule? Or was it rebalanced back to 4x25 each year?

Thanks!

Back to 4x25 each 366 days.  I can't program the rebalancing bands yet.

Be aware I used 3yr TNotes not T-Bills.  T-Bills will push the MAxDD down to about -22%.  However, I've stopped using them because I-Bonds or E-Bonds or CD ladders won't provide any buffering capital gains like TNotes do (on the secondary market anyway).

Rebalanced to 4x25% each year sounds like a good idea. I wonder if that works even better than the 15/35 bands?

Did you happen to come up with an average rate return?

Thanks again!

meamakim wrote: Rebalanced to 4x25% each year sounds like a good idea. I wonder if that works even better than the 15/35 bands?

Did you happen to come up with an average rate return?

Thanks again!

Probably gives you a somewhat smoother ride but there are some drawbacks. It will likely reduce your long term returns because you may be cutting off a hot asset class too soon and not letting it run to 35%. And it will likely increase your tax bill. Rebalancing creates a tax event. And taxes are just like expenses and fees. The tyranny of negative compound interest is the bane of long term returns.

meamakim wrote: Did you happen to come up with an average rate return?

I edited the OP to show the returns.