Gyroscopic Investing

dualstow wrote:https://youtu.be/nOr0na6mKJQ

That movie is epic awesomeness.

agreed

Get ready to bend over...

More and more lately I've been considering abandoning the idea of risk parity portfolios like the PP and doing something like a 70/30 switch into a 30/70 when indicated by basic mechanical timing signals. I don't believe one can "time the market" from a day-trading perspective, but backtests show it is possible to use market timing to substantially reduce drawdowns. Like the PP, you give up massive equity-like gains in bull markets. You are also susceptible to black swan events such as the 1987 crash.

Gold's future is cloudy for me. I just don't understand it. And when does the bond party end? Will they play nice during the next crisis? Maybe, but even the Fed admits they are in unchartered territory with monetary policy. They seem genuinely fearful.

I get equities. Are we flying too close to the sun right now? Probably. Will we party like it's 2008 all over again? Probably. Will we then rally to new highs at some point in the future? The long history of the stock market says yes.

Just ranting here.

The gist of your question is, "when everything's high, what do you do?"

I don't think anyone really has an answer, other than "pile into cash and risk missing the party." In this kind of situation, I think the PP is actually one of the best portfolios you can have. You never know which asset is going to fall or crash first, and the other assets all stand to benefit from that happening.

Pointedstick wrote:The gist of your question is, "when everything's high, what do you do?"

I think the gist of iwealth's post is that he's moving into 70% stocks.
...or is that 30% first

dualstow wrote:

Pointedstick wrote:The gist of your question is, "when everything's high, what do you do?"

I think the gist of iwealth's post is that he's moving into 70% stocks.
...or is that 30% first

I think he was thinking of flipping between 70% stocks and 70% bonds?

The PP is pretty inefficient in-between changes to regimes or possible changes to regimes. That's why the net portfolio returns are so low -- you're giving back a lot of gains until another asset starts to pick up the slack (and then has to first overcome the losses of the other assets first). But if that wasn't the case, then everyone would be using the Super PP as their porfolio!

MachineGhost wrote:I think he was thinking of flipping between 70% stocks and 70% bonds?

That's what I got out of it, but then I hesitated when typing out 70% stocks first. As in, right now.
Is that the case, iwealth, or is it 70% bonds first?

The PP is pretty inefficient in-between changes to regimes or possible changes to regimes. That's why the net portfolio returns are so low -- you're giving back a lot of gains until another asset starts to pick up the slack (and then has to first overcome the losses of the other assets first). But if that wasn't the case, then everyone would be using the Super PP as their porfolio!

It was just a rant, btw.

70/30 to 30/70 was just an example. A 60/40 to all cash switch looks great in tests as well. Heck, maybe add 10% gold and do 60/30/10 when bullish switch to 90 cash/10 gold when bearish. The exact allocation isn't important. The goal would be to mitigate risk (loss) during bearish periods while maximizing returns during bullish periods.

If I was to embark on something like this I'd probably wait until there was a signal change to enter any position. You'd be hard-pressed to find a bearish signal right now, so I'd probably stay put until all chosen signals switch. These aren't super secret super complicated signals either, we're talking stuff like 200 SMA, simple MA crossovers, the $OEXA200R signal (Google that if interested), etc. I'm not sure which I'd use, and I'm not sure it really matters. I'd use a combination of 3-4 signals and exit when all are bearish and re-enter when any of the 3-4 turn bullish. It's more about discipline than it is choosing the perfect signal parameters.

I want to be invested. I'm not trying to reduce my max peak to trough drawdown to single digits. I'm trying to figure out what sort of strategy will leave me with the warmest, fuzziest feeling when/if this leg of the Fed-induced multi-asset class bubble pops. Maybe gold survives. We know cash will survive. Equities and LT bonds...eesh.

I'm not a member of the "it's going to be different this time" club. I've always hated that club, but for me, their advertising paraphernalia has been particularly persuasive lately.

iwealth wrote:These aren't super secret super complicated signals either, we're talking stuff like 200 SMA, simple MA crossovers, the $OEXA200R signal (Google that if interested), etc. I'm not sure which I'd use, and I'm not sure it really matters. I'd use a combination of 3-4 signals and exit when all are bearish and re-enter when any of the 3-4 turn bullish. It's more about discipline than it is choosing the perfect signal parameters.

You've probably got ochotona's attention, at least.

Pointedstick wrote:The gist of your question is, "when everything's high, what do you do?"

Logic tells me that when everything is high, it means money has been spread across all assets. Seems like people are betting on everything but cash until the direction of the economic wind is clear. We should be back in traditional PP land when that happens.

My guess is that stocks will bust out over the next four years to new all-time highs. We're entering an age of automation and technology that's never been imagined before and I suspect, approaching 2020, people will be optimistic for the future. Now, I don't know if that's my head or my gut talking, so I'll be sticking with 4x25 for now.

Just letting out a little scream to see gold under $1300, yet again.

It is funny, not necessarily manipulation, but interesting that all these waterfalls seem to happen at specific times of the day.

Yikes!
Easy come, easy go.

buddtholomew wrote:Yikes!
Easy come, easy go.

I think the market is pricing in a Slick Hilly win... i.e. "risk on".

If Trump wins, I'm DCAing extra into the resulting FUBAR. It'll be like a chicken with its head cut off!

Cortopassi wrote:Just letting out a little scream to see gold under $1300, yet again.

It is funny, not necessarily manipulation, but interesting that all these waterfalls seem to happen at specific times of the day.

Big drop in the British pound today, and major strengthening of the U.S. dollar.

I don't pretend to know how it works, but the dollar is up 0.4% and gold is down over 3%. Certainly never 1:1 when this happens. And silver always goes in lockstep.

When they want to pound on gold is is pounded into dust, and rarely is the stock or bond market hit with such force with such regularity.

dualstow wrote:You've probably got ochotona's attention, at least.

I'm actually still desiring to buy and hold physical gold. I don't plan on trend-following it. I suspended my slow buying in December 2015. Look like I may get a chance to buy some more soon. Patience!

Yes, patience is a virtue.

There must be some people, at least those who joined on or around 2010 who are thinking, If I had never discovered the pp and had stuck with my 60/40 stocks, I'd be doing fine right now. Wouldn't have wasted my time with gold.

I feel that sometimes. And, while I usually agree with many that I'd like to make money on the stock market, on prosperity, I would definitely like to see gold rally in my lifetime. I bought more during yesterday's dip but will soon be out of investable cash for a while. Just paid off my loan.

Even as the stock market appears to be peaking, it's getting harder for me to justify buying gold, because I don't know how long I'll have to wait. And, if I have to wait too long, maybe I'll panic and sell gold at breakeven instead of at a profit.

They say you should be buying assets when no one wants them. Hard!

dualstow wrote:I feel that sometimes. And, while I usually agree with many that I'd like to make money on the stock market, on prosperity, I would definitely like to see gold rally in my lifetime. I bought more during yesterday's dip but will soon be out of investable cash for a while. Just paid off my loan.

Two years, my friend. Governments don't go bellyup in fast motion. They drag it out like a dying dinosaur with a whiplasing tail due to self-interest and self-perpetuation. You think the Deep State is just going to give up like the USSR did? It's rather amazing how fast that all fell apart. What was stopping people from revolting before the Wall fell? Nothing really other than psychology.

P.S. Dragonfruit looks weird and tastes weird.

I'll take two years. Now what's all that blather that went along with it? ;-) Upheaval?
Seriously, what is the Deep State. I honestly don't know.

dualstow wrote:They say you should be buying assets when no one wants them. Hard!

So long as they're NOT in a downtrend. That's the difference between being wise and catchng a falling knife.

I thought I posted something on the Deep State a year or two ago, but can't find it. Basically, the Deep State is the unelected, off-budget, military-industrial-intelligence complex that calls the shots.

MachineGhost wrote:

dualstow wrote:They say you should be buying assets when no one wants them. Hard!

So long as they're NOT in a downtrend. That's the difference between being wise and catchng a falling knife.

I just bought another Krugerrand. If it's a falling knife, it's a small one.

dualstow wrote:They say you should be buying assets when no one wants them. Hard!

MachineGhost wrote:So long as they're NOT in a downtrend. That's the difference between being wise and catchng a falling knife.

ochotona wrote:I just bought another Krugerrand. If it's a falling knife, it's a small one.

{quotes un-nested for clarity}

I remember that you were buying just an ounce at a time. Bigger markup that way, but it must feel better than ten coins in these volatile times.

ochotona wrote:I just bought another Krugerrand. If it's a falling knife, it's a small one.

Gold is testing it's 200 day MA. Will we or won't we??? Inquiring minds want to know!