The PP, marginal utility, and investment "faith"

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Re: The PP, marginal utility, and investment "faith"

Post by seajay » Tue Jan 11, 2022 2:46 am

I've noticed in the past that even adjusting to different start months for yearly data can throw out quite dissimilar worst case years outcomes. Whether the yearly granularity aligns with or avoids a volatility spike (volatility tends to cluster so a negative spike at one point tends to have a adjacent positive spike)

Example for 20% each in US TSM/Global exc. US/US total bonds/global bonds/gold ... where 2008 had a -15% countered by a 2009 +22% and otherwise all bad years were around -5% or less.

Brief/interim volatility is only a risk if you actually need to liquidate large amounts at a time when the volatility has spiked to the negative side, otherwise it isn't a risk, just noise.
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Re: The PP, marginal utility, and investment "faith"

Post by Hal » Tue Jan 11, 2022 4:47 am

mathjak107 wrote:
Tue Jan 11, 2022 1:49 am

It is to heavy in long term bonds for my taste and I want more diversification on the gold side now with other inflation hedges…i would limit long term bonds to 5% …..
Mathjak, seeing you are a little bond adverse, I thought you might find this series of articles interesting.

Enjoy!
https://www.idiosyncraticwhisk.com/search?q=bonds
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Re: The PP, marginal utility, and investment "faith"

Post by mathjak107 » Tue Jan 11, 2022 5:13 am

To be honest I am not really interested in past articles or charts .

I am no longer a fan of driving and looking at what was .

I am interested in where we have been heading and what my best guess of the future looks like and it looks like this inflation will be not so transitory and it will stubbornly be stuck in a rut .

I am not against bonds , I own lots of bonds of all types but I am against having way to much money tied up in where rates and inflation go …so I am weighted from Long to ultra short with only a small amount going out longer.

Having to much tied up in gold is no help with moderate inflation at all like commodities are as an example .so while I hold gold I only hold 5% of total investable assets in it …the rest of the gold budget is split between 5% commodities, 5% bitcoin in gbtc recently added but still down for me , and 10% in a strategic real return fund .

So all that splits what the pp would have in just gold…..

The horses are 25-30% in equities and 17% in high yield funds which act more like equities then bonds but are far less aggressive.

All the rest are an assortment of bond etfs like BIL ,SHY , FTBFX ,VGSH , ETC

So the bias is way more short term ..40% of the bond budget is short to ultra short
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Re: The PP, marginal utility, and investment "faith"

Post by Hal » Tue Jan 11, 2022 5:29 am

Thanks for explaining your rationale Mathjak.

For the folk who don't like reading, here's the article summary in one image ;)
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 10:27 am

The GB survives 97% of monte carlo simulations with a 4% withdrawal rate....... and a 75 YEAR RETIREMENT HORIZON. :o

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I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by mathjak107 » Tue Jan 11, 2022 10:42 am

However as I point out the 4% swr is based on 1907 , 1929 ,1937 ,1965 ,1966 which were the worst dates to date ,so what you are looking at is a withdrawal rate but it is not the same as the term safe withdrawal rate .

Actually if we eliminate those worst case dates with a conventional 60/40 a draw rate could be increased to 6-1/2% according to kitces .
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 10:57 am

I love how Tyler hasn’t chimed into this thread at all lmao.
I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by mathjak107 » Tue Jan 11, 2022 12:08 pm

It isnt just sustaining a draw rate ….the other part of the equation is the balance along the way or left over .

60/40 has left one with more than they started with 90% of all rolling 121 30 year retirements to date .

67% of the time it left you with 2x what you started with and 50% of the time 3x what you started with all at 4% inflation adjusted
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 2:48 pm

Charts. I love charts. Here is one from ray dalio’s new book.
It really speaks for itself.

Hard money portfolios. Hell yeah.

3F358F6D-A1A3-4A89-9CEA-79BC7FBA9C1D.jpeg
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I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by johnnywitt » Tue Jan 11, 2022 3:14 pm

Hal wrote:
Sun Jan 09, 2022 5:01 pm
Just another point to add :)

On listening to HB's radio show yesterday, he advised that he wanted the most volatile assets in the four asset classes. So.....
1/ Did SCV ETF's exist back in 2004?
2/ Substituting SCV for the TSM provides a return improvement
and
3/ 40% SCV in the Golden Butterfly actually has a lower Ulcer Index and higher return than the standard GB
You said it before Hal & I tend to think you're right on the SCV component to a PP. Of course, it would no longer be a HBPP, but it would be a PP. If you look at what HB recommended back then, there wasn't, to my knowledge, any kind of equivalent to an indexed SCV Fund. In fact, I think old Harry got it wrong because he thought the volatility was in Growth Factor, when, in fact, we now know that it is in SCV. The Guy had it basically figured out though, as did 'Jacob the Rich' in the 15th Century, or Tyler does with his GB. Long Term one probably will do well if they just pick a solid portfolio (maybe even the Pinwheel FWIW) that they have faith in and stick with it like an English Bulldog. Emotional discipline being the key element in investing???
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Re: The PP, marginal utility, and investment "faith"

Post by johnnywitt » Tue Jan 11, 2022 3:24 pm

Smith1776 wrote:
Tue Jan 11, 2022 2:48 pm
Charts. I love charts. Here is one from ray dalio’s new book.
It really speaks for itself.

Hard money portfolios. Hell yeah.


3F358F6D-A1A3-4A89-9CEA-79BC7FBA9C1D.jpeg
First all FUCK Ray Dalio! Ray is, and has, been talking up China for years now. Why, because Chine is about 65% of his Fund.
Secondly, you have to look at these highly volatile asset classes as a package & not individually. Furthermore, you have to accept the fact that if you are truly holding a diversified portfolio, by definition, at least one of these asset classes will be on its ass at any given time.
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Re: The PP, marginal utility, and investment "faith"

Post by johnnywitt » Tue Jan 11, 2022 3:29 pm

mathjak107 wrote:
Tue Jan 11, 2022 5:13 am
To be honest I am not really interested in past articles or charts .

I am no longer a fan of driving and looking at what was .

I am interested in where we have been heading and what my best guess of the future looks like and it looks like this inflation will be not so transitory and it will stubbornly be stuck in a rut .

I am not against bonds , I own lots of bonds of all types but I am against having way to much money tied up in where rates and inflation go …so I am weighted from Long to ultra short with only a small amount going out longer.

Having to much tied up in gold is no help with moderate inflation at all like commodities are as an example .so while I hold gold I only hold 5% of total investable assets in it …the rest of the gold budget is split between 5% commodities, 5% bitcoin in gbtc recently added but still down for me , and 10% in a strategic real return fund .

So all that splits what the pp would have in just gold…..

The horses are 25-30% in equities and 17% in high yield funds which act more like equities then bonds but are far less aggressive.

All the rest are an assortment of bond etfs like BIL ,SHY , FTBFX ,VGSH , ETC

So the bias is way more short term ..40% of the bond budget is short to ultra short
HAHA! You're like the Italian that gets in a Ferrari and straight away rips out the damn rearview mirror. 8)
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Re: The PP, marginal utility, and investment "faith"

Post by mathjak107 » Tue Jan 11, 2022 3:47 pm

Don’t need to know where I was unless I am in reverse …all I want to concentrate on is where I am going and how I am going to get there
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Re: The PP, marginal utility, and investment "faith"

Post by flyingpylon » Tue Jan 11, 2022 4:03 pm

Smith1776 wrote:
Tue Jan 11, 2022 10:57 am
I love how Tyler hasn’t chimed into this thread at all lmao.
Too busy cranking out excellence.
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 5:23 pm

flyingpylon wrote:
Tue Jan 11, 2022 4:03 pm
Smith1776 wrote:
Tue Jan 11, 2022 10:57 am
I love how Tyler hasn’t chimed into this thread at all lmao.
Too busy cranking out excellence.
Definitely. O0
I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by mathjak107 » Tue Jan 11, 2022 5:31 pm

johnnywitt wrote:
Tue Jan 11, 2022 3:24 pm
Smith1776 wrote:
Tue Jan 11, 2022 2:48 pm
Charts. I love charts. Here is one from ray dalio’s new book.
It really speaks for itself.

Hard money portfolios. Hell yeah.


3F358F6D-A1A3-4A89-9CEA-79BC7FBA9C1D.jpeg
First all FUCK Ray Dalio! Ray is, and has, been talking up China for years now. Why, because Chine is about 65% of his Fund.
Secondly, you have to look at these highly volatile asset classes as a package & not individually. Furthermore, you have to accept the fact that if you are truly holding a diversified portfolio, by definition, at least one of these asset classes will be on its ass at any given time.
The problem is when economic events have 3 and 4 assets that are suppose to yin and Yang all follow each other down.

If nothing else the low volatility bill of goods some portfolios sell one on can be far greater then expected
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 6:24 pm

I don't care what ya'll say. I like Ray Dalio.

Well, I don't like how often he goes "um" in his interviews and speeches. That's about it.
I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by I Shrugged » Tue Jan 11, 2022 6:27 pm

HB liked growth stocks specifically, because of how they are bid up during bull markets.
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 6:46 pm

I Shrugged wrote:
Tue Jan 11, 2022 6:27 pm
HB liked growth stocks specifically, because of how they are bid up during bull markets.
How would you define growth stocks?
I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by Hal » Tue Jan 11, 2022 6:49 pm

johnnywitt wrote:
Tue Jan 11, 2022 3:14 pm
Long Term one probably will do well if they just pick a solid portfolio (maybe even the Pinwheel FWIW) that they have faith in and stick with it like an English Bulldog. Emotional discipline being the key element in investing???
^ Quote of the year ;) ^

I suspect people lose more trying to beat the market with the latest and greatest allocation, rather than accepting what the market has to offer...
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Re: The PP, marginal utility, and investment "faith"

Post by barrett » Tue Jan 11, 2022 6:53 pm

Smith1776 wrote:
Tue Jan 11, 2022 6:24 pm
I don't care what ya'll say. I like Ray Dalio.
There's a young guy from my gym who interviewed with Bridgewater a couple of years back (didn't get the job). He said that Bridgewater gets a huge portion of its gains from currency trading... that the rest of its investments are nothing special. Interesting if it's true.

My issue as an individual investor listening to Dalio is that he never really gives out the secret sauce (except when cornered by Tony Robbins). And he is way too cozy with China.

Smith, are you leaning toward implementing a GB there in Canada?
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 6:58 pm

barrett wrote:
Tue Jan 11, 2022 6:53 pm
Smith1776 wrote:
Tue Jan 11, 2022 6:24 pm
I don't care what ya'll say. I like Ray Dalio.
There's a young guy from my gym who interviewed with Bridgewater a couple of years back (didn't get the job). He said that Bridgewater gets a huge portion of its gains from currency trading... that the rest of its investments are nothing special. Interesting if it's true.

My issue as an individual investor listening to Dalio is that he never really gives out the secret sauce (except when cornered by Tony Robbins). And he is way too cozy with China.

Smith, are you leaning toward implementing a GB there in Canada?
Fair criticisms. I like his views on history and global geopolitics. I think it's fascinating personally.

Yup! Definitely leaning towards the GB for my dad's estate assets. I can't find a better selection of ETFs than the ones I listed earlier in this thread, so I will probably use those for implementation.
I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by Smith1776 » Tue Jan 11, 2022 7:03 pm

It's true that Dalio has never written a full exposition on his investment process but I think I've got it in the abstract.

Step 1 - Identify as many independent and investible sources of risk and return that you possibly can
Step 2 - Allocate your dollars to each source of risk and return in proportion to their relative levels of riskiness so that their risk contributions are roughly equal. Your portfolio is now maximally diversified from the perspective of "post modern portfolio theory".
Step 3 - Lever up or down on this maximally diversified portfolio so that it matches your risk tolerance
Step 4 - Profit

8)
I still find the James Rickards portfolio fascinating.
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Re: The PP, marginal utility, and investment "faith"

Post by Hal » Tue Jan 11, 2022 7:26 pm

FWIW: If investing as a resident of a country with a very small economy (eg NZ, Australia, Fiji) I think it would be easiest and most efficient to just set up a 3x33% portfolio consisting of International Bonds, International Shares and Gold.

Why not 25% of your local currency? Well, if the Fiji dollar experienced a "tight money recession" or "inflation", none of the other asset classes listed above would react as it would in a standard US PP. The local economy would be too small to take a chance with a 100% of your allocation. Granted it would be worthwhile to hold some local currency, but not 25% if you are investing a large amount.

Just a random thought....
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Re: The PP, marginal utility, and investment "faith"

Post by perfect_simulation » Wed Jan 12, 2022 7:55 am

I Shrugged wrote:
Tue Jan 11, 2022 6:27 pm
HB liked growth stocks specifically, because of how they are bid up during bull markets.
Additionally, HB said that interest rates are low during times of Prosperity. And growth stocks benefit the most in that environment.
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