Gyroscopic Investing

I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

All time highs? Can't be a bad decision!

ochotona wrote:All time highs? Can't be a bad decision!

Yeah, it feels right. Just a trim, since I don't think I've done much in like sixteen months.
Also, VFIAX (Vanguard S&P 500) surpassed 200 recently. I know that's silly but it's a nice round number.

dualstow wrote:I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

DS, where do you plan to place the sale proceeds?

Good question. I thought I would park them in short-term treasuries for a while, looked at the potential yield and I balked.
I'm always straight with the pp, leaving the fiddling to the vp. That may look like self-delusion to some, but it helps me follow the rebalancing rules (bands or a minimum of 365 days), and it helps me compare my other stuff against a pure pp.

All that means I will resist the temptation to buy more muni bonds.

I will allow myself a couple weeks of procrastination. Still haven't pulled the trigger on paying off the home equity loan, so I'll get that done this month, and if there's still too much cash left, I will hold my nose and buy those other two assets. For now, it won't kill me to just let it sit in the settlement account.

dualstow wrote:Good question. I thought I would park them in short-term treasuries for a while, looked at the potential yield and I balked.
I'm always straight with the pp, leaving the fiddling to the vp. That may look like self-delusion to some, but it helps me follow the rebalancing rules (bands or a minimum of 365 days), and it helps me compare my other stuff against a pure pp.

All that means I will resist the temptation to buy more muni bonds.

I will allow myself a couple weeks of procrastination. Still haven't pulled the trigger on paying off the home equity loan, so I'll get that done this month, and if there's still too much cash left, I will hold my nose and buy those other two assets. For now, it won't kill me to just let it sit in the settlement account.

I think it would be not really speculating at all to put a "limit buy" order in 1% below today's closing price, and forget about it for a while, and just let random walk take over. Some kind of Scheiss is going to happen in the economic world.

I am sitting on about 35% cash right now but it is very tough to jump back in and rebalance with everything so "high"...

I just sold a house and put some of the earnings into my PP to get it back to 25% each. I don't feel great about buying stocks and bonds, but I think I'd feel much worse if I hadn't put some money into gold and cash too. I have no idea what is going to happen.

Kriegsspiel wrote:I just sold a house and put some of the earnings into my PP to get it back to 25% each. I don't feel great about buying stocks and bonds, but I think I'd feel much worse if I hadn't put some money into gold and cash too. I have no idea what is going to happen.

This is the most logical approach if you ascribe to the PP philosophy.
Unfortunately, it is the most uncomfortable method psychologically since we want to interject our opinions into the decision.
I personally prefer buying according to current percentages.
Seems the least obtrusive.

dualstow wrote:I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

IDK, I think stocks are the way to go. They have so much momentum right now. I'm looking at the banks, railroads, energy, the Dow, Russia, Greece, Hang Seng, Germany and Argentina to name a few. This is mainly for my VP which has been on fire since I made a big bet on stocks on Feb. 11th of this year, at the low.

Could be, Reub. The beauty of the pp, and any set asset allocation strategy in general, is that you don't have to sell out of stocks. Just a little off the sides.

Reub wrote:

dualstow wrote:I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

IDK, I think stocks are the way to go.

I'll be rebalancing myself shortly because I just initiated the rollover from my ex-employer's Vanguard 401k to my Fidelity IRA. Most of it was stock so the figures were all time highs and looked pretty impressive. Unfortunately they were only estimates because what I always hate about 401k rollovers is that the timing of the sale is completely out of your hands. A lot can happen before the transactions are complete. And then, of course, when the rollover is complete you have to decide whether to jump right back in or try to time the market.

Now that I've been forced into retirement at least it will be my last 401k rollover.

Reub wrote:IDK, I think stocks are the way to go. They have so much momentum right now. I'm looking at the banks, railroads, energy, the Dow, Russia, Greece, Hang Seng, Germany and Argentina to name a few. This is mainly for my VP.

Emerging markets and small-cap international (ex-US) are definitely getting revved. I would not be surprised to see them overtake US equities on a 1-year look-back momentum basis. I have started to buy.

Reub wrote:IDK, I think stocks are the way to go. They have so much momentum right now. I'm looking at the banks, railroads, energy, the Dow, Russia, Greece, Hang Seng, Germany and Argentina to name a few. This is mainly for my VP which has been on fire since I made a big bet on stocks on Feb. 11th of this year, at the low.

We're coming out of an 18-month consolidation and literally everything is green at this point but the small & micro-caps. They will be the last to confirm broad "risk on" participation. Not that it really matters, but China has not been participating in the emerging market rally.

I'm effectively 0% in T-Bonds. I see no need to be in them unless stocks decide to go into a bear which is always a possibility between now and November. A surprise Trump win could be like 1987 as people will absolutely panic.

MachineGhost wrote:I'm effectively 0% in T-Bonds.

Ok, so no bonds, but didn't you write a few weeks ago that you were hoping to get out of gold and "into pure treasurys"? Are you holding short-term notes?

dualstow wrote:

MachineGhost wrote:I'm effectively 0% in T-Bonds.

Ok, so no bonds, but didn't you write a few weeks ago that you were hoping to get out of gold and "into pure treasurys"? Are you holding short-term notes?

I don't remember, but I may have had a momentarily lapse of weakness in wanting to be a PP purist before common sense reared its pretty head again. Its all in cash now and I may stack it in 5 year CD's when I get around to it. I plan to put the Treasury hedge back on when there is an appropriate signal on the equity and I'm also also thinking about diversify into other bear-market assets than just Treasuries (i.e. long VIX, short SPY, cyclicals, etc.). I just can't stomach holding 25% into long-duration T-Bonds with governments going bankrupt around the world... you see what happened to the Japanese 40-year bond lately? Petrified.

In other words, I'm convinced stocks, gold and the USD are going to go up and Treasuries murdered. Black swans show up when you least expect them.

MachineGhost wrote:

dualstow wrote:

MachineGhost wrote:I'm effectively 0% in T-Bonds.

Ok, so no bonds, but didn't you write a few weeks ago that you were hoping to get out of gold and "into pure treasurys"? Are you holding short-term notes?

I don't remember, but I may have had a momentarily lapse of weakness in wanting to be a PP purist before common sense reared its pretty head again. Its all in cash now and I may stack it in 5 year CD's when I get around to it. I plan to put the Treasury hedge back on when there is an appropriate signal on the equity and I'm also also thinking about diversify into other bear-market assets than just Treasuries (i.e. long VIX, short SPY, cyclicals, etc.). I just can't stomach holding 25% into long-duration T-Bonds with governments going bankrupt around the world... you see what happened to the Japanese 40-year bond lately? Petrified.

In other words, I'm convinced stocks, gold and the USD are going to go up and Treasuries murdered. Black swans show up when you least expect them.

If you are convinced that stocks, gold, and USD are going to go up why are you all in cash?

dualstow wrote:I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

It seems that political arch villain and billionaire investment tycoon George Soros is doubling down on his bearish US stock market bet so maybe you're right, dualstow.


http://www.marketwatch.com/story/soros- ... 2016-08-16

curlew wrote:If you are convinced that stocks, gold, and USD are going to go up why are you all in cash?

My former unpure Treasuries are all in cash.

Soros is either making a very stupid bet or he's betting on a fall swoon which he'll then cover. At 86 years old and retired I don't think he has any sense of the markets any more, but we'll see. Shorting the Pound in 1992 wasn't his trade, it was Druckenmiller's. He just provided the fund/capital.

Reub wrote:

dualstow wrote:I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

It seems that political arch villain and billionaire investment tycoon George Soros is doubling down on his bearish US stock market bet so maybe you're right, dualstow.


http://www.marketwatch.com/story/soros- ... 2016-08-16

Right about what? I'm not making any bets or predictions. It's just been well over a year since I did any rebalancing.
I have no idea where the market's going.

Managing around the edges has little to no effect on returns but it certainly can benefit psychologically.
1M portfolio, 30% stocks (300K).
Sell 5% (15K) to cash and restore asset allocation.
A 20% decline on the 5% (3K).
Your timely move only resulted in a savings of 3K or .3% of your portfolio.
You still experienced a 57K loss on your remaining 25% invested in stocks.

When I did the math for myself I decided it was not worth it.

buddtholomew wrote:Managing around the edges has little to no effect on returns but it certainly can benefit psychologically.
1M portfolio, 30% stocks (300K).
Sell 5% (15K) to cash and restore asset allocation.
A 20% decline on the 5% (3K).
Your timely move only resulted in a savings of 3K or .3% of your portfolio.
You still experienced a 57K loss on your remaining 25% invested in stocks.

When I did the math for myself I decided it was not worth it.

Budd, in your example the rebalance would require selling $50k of stocks to cash (5% of total portfolio). That's about 17% of the stock holdings, not 5%. A 20% decline on the 17% would be $10k. That's 1% of the portfolio. And, sure, you'll experience a 50k loss on the remaining stock holdings. But not quite as bad a scenario. I see that 1% saving as the difference between, say, a 5% real return for the year and a 6% real return. Not insignificant when compounded. Heck, I would welcome even a 0.3% addition to my CAGR (if this were an annual rebalance scenario).

I knew something was wrong with my math...
Nevertheless, for me it's a taxable account so tax implications are a consideration as well reducing the 1% further.

Time for another trim. My S&P shares are just below doubling, 99.93% Other stock funds are below that.
If I trim now, this trim combined with the August one will form a true rebalance.
No regrets if the market still goes up.
Dow at 25K would be nice.

dualstow wrote:I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.