Gyroscopic Investing

That's a reference to the way-creepy and darned good Netflix series "Stranger Things".

I keep thinking that the ideal structure for weathering a severe bear market would be the "Upside Down Permanent Portfolio"

25% cash
25% gold
25% US Treasuries
25% $SH short ETF 500 Bear 1x Shares

Each and every of these assets has an essential and complementary role to play in a market crisis. And if you apply and remove the short ETF when the 12 month and 3 month moving average cross, it would have worked well for these very overvalued markets such as we have; Great Depression, 1969, 1973, Tech Bubble, Financial Crisis.

and if you are wrong ? rising rates will hurt gold and bonds but unless rates rise to quickly stocks can keep going so in that case you lose big time . it is kind of self defeating betting the ranch on one market outcome . much easier to speculate in the case of a down market with just options and forget the gold and bonds as long as you are betting on a severe down turn ..
structuring an entire portfolio for a downturn and basing what you do on some charts to time things out of the portfolio is speculating not investing in my opinion ..

you would have gotten killed in 1982 if you went by "over valued " . with double digit interest rates and the fact p/e''s almost doubled in a year the p/e's were very very high . not high by todays low rate standards but super high for the fact interest rates were double digits .

that was the start of the greatest bull market in history . investors trying to time things were totally caught off guard and many missed the biggest gains before they jumped back in .

mathjak107 wrote:and if you are wrong ? rising rates will hurt gold and bonds but unless rates rise to quickly stocks can keep going so in that case you lose big time . it is kind of self defeating betting the ranch on one market outcome . much easier to speculate in the case of a down market with just options and forget the gold and bonds as long as you are betting on a severe down turn ..
structuring an entire portfolio for a downturn and basing what you do on some charts to time things out of the portfolio is speculating not investing in my opinion ..

you would have gotten killed in 1982 if you went by "over valued " . with double digit interest rates and the fact p/e''s almost doubled in a year the p/e's were very very high . not high by todays low rate standards but super high for the fact interest rates were double digits .

that was the start of the greatest bull market in history . investors trying to time things were totally caught off guard and many missed the biggest gains before they jumped back in .

This is a short-term, tactical port, only applied during bears. It's a spicier alternative to just staying in bonds for the trend-follower.

much easier to buy options and cheaper i think .the problem as we know is always when to stop betting on the decline .

that is why most who do , miss the juiciest gains because they happen before there are signs on the horizon of anything being better

mathjak107 wrote:much easier to buy options and cheaper i think .the problem as we know is always when to stop betting on the decline .

that is why most who do , miss the juiciest gains because they happen before there are signs on the horizon of anything being better

The juicy gains live next door to the juicy losses, at the tops and bottoms. The best idea is to stay out of the bad neighborhood.

as they say , the biggest drops happen when things look good and we are breaking new highs . the biggest gains come from the depths of stock market hell when the word stocks wants to make you vomit .

Read the essay, "Where the Black Swans Hide & The 10 Best Days Myth" by Meb Faber. SSRN ID # 1908469. Buy & hold advocates cherry pick the ten best days and say, "See you have to buy and hold what I'm selling you at all times, and never sell {so I can get my commissions}". But some of the ten best days occur during sucker rallies in terrible bear markets, when you should be out.

Anyway Mathjak I think you missed the entire point of my original post. Do you know what I was advocating in my original post? Let's see if you get it.

a portfolio that bets on a severe downturn only was my take away.

mathjak107 wrote:a portfolio that bets on a severe downturn only was my take away.

So it was a portfolio that was 25% short, and 75% the other three familiar PP components, so the risk of being wrong in the short is mitigated by 75% of everything else that could be beneficial in a recessionary crisis. But you saw "short" and your reaction was "bet", and you reacted to it, spawning a volley that didn't really go anywhere.

Please try to get a sense of the entire reason for a post, and post something constructive instead of just picking at whatever someone writes. Yes, pick at it if they're wrong. But seriously, you got "unwelcomed" from here before, and I am being reminded why. Your IQ is obviously superb, your EQ however... not so sure.

where is the bet on prosperity and not just doom and gloom ?.

if i was going to get the memo that the bull was over and we were going to have a severe down turn i would not bother with that stuff . i would go right to options or futures and bet against the market .

i seem to be missing the logic behind bothering with that portfolio if you are not going to assume prosperity as a possibility . there are to many better more efficient ways to bet on just doom and gloom .

And if you apply and remove the short ETF when the 12 month and 3 month moving average cross

Despite the technical bit above, is that fourth asset holding one of those that is meant to be held for one day at a time only, or...?

ochotona wrote:That's a reference to the way-creepy and darned good Netflix series "Stranger Things".

I saw the title and would have been disappointed otherwise. You should have an S.T. avatar.

I actually would intend to buy and hold GRZZX or SH. If you backtest a portfolio which is 1/2 SH and 1/2 SPY, you get exactly flat, zero, over a long period of time. Holding SH is OK, it doesn't deteriorate. A leveraged inverse ETF really would, however, be dangerous to buy and hold.

The fly I see in the soup is a big one... Central Bank Intervention. We need a situation where markets keep selling off even if Yellin is yellin'. Otherwise Yellin is going to stop you out, and you'll take a loss.

Still watching. Still waiting. Shorts have gotten totally killed in 2017. I think I'd maybe go short with 5% into four different funds from different providers, for a total of 20%. Direxion (SPDN or CHAD), Proshares (many options, but maybe inverse NASDAQ or inverse Russell 2000), Leuthold (GRZZX), and Cambria (TAIL). Wake me up if the fireworks ever start.

Shorts have gotten totally killed in 2017.

There are stranger things than shorting the market, and a lot of experts think it’s a healthy part of the system, but I don’t think I could bring myself to try it. Seems really hard to time.

(Wasn’t that Reub’s line? When “Yellen is yellin”?)

You can get some courage from portfoliovisualizer.com. No matter what, the volatility is going to be soul-sucking. I'm not sure if I can do it either.