This Forum & Dissenting Opinions of the HBPP

[barrett]

But one thing I now consider highly irresponsible -- and budd's experience is very reflective -- is this braindead idea of lump sum investing into the PP all at once.  It's that kind of braindead crap from Browne, MT and craigr (who are not acknowledged financial experts) that rolls my eyes on top of the "dumbo" portfolio idea from Browne.  As Tyler's pixel charts show, the sequence of risk returns can run as long as 2 years, probably 3 if I remember my own stats correctly (I use daily data, Tyler uses yearly).  No, you should dollar cost average over a period of time (daily, weekly, monthly, quarterly) to get rid of that last remaining sequence of returns risk the all weather PP cannot eliminate.  And then you finally have the Top 1% portfolio.  Top .5% if you can finagle tactical. 

It's only costly if you have a bad entry point. I was lucky enough to have an entry point that was not bad (beginning of 2014). Of course a few years earlier would have been better! I think it's unfair to blame Craig & MT. All they did was write a book (and post prolifically on the topic for a long time). You're a thinking man, MG. You know there are good and bad entry points into any portfolio.

And most of us still have a lot of time on our sides. In 30 or 40 years your buy-in point will still matter, but not enough to put you in the poor house.... especially if you are able to add new money along the way.

Man, this PP thing was crap today! Hopefully tomorrow will be better.

[Pointedstick]

Man, this PP thing was crap today! Hopefully tomorrow will be better.

Wasn't gold--the only asset unique to the PP--up today? When stocks and bonds are down, it's not the PP that's having a bad day, it's everyone.

[Libertarian666]

No one is forced onto Medicaid.  The state is perfectly happy if you forget to apply.

Ironically, Medicaid patients potentially get better care than private patients do, although they're less comfortable.  They spend a lot of time in waiting rooms, see different doctors every time due to resident rotation schedules, and the clinics tend to be vomit colored and a bit smelly.  But the care standards are far, far higher than your typical private hospital.  I took my Dad to local/private hospitals initially, and the care was so awful it was shocking.  It felt like the staff were playing at being doctors and nurses, not doing it for real.

Stick to medical schools' primary teaching sites and you'll be fine.  Or, budget ungodly sums of money for private insurance into your early retirement plans, like $20K/year for a family plan & copays.

Barrett- your suggestion about adjourning for 5 years and then coming back to compare notes is great.  But we're all too prolific & noisy for that option :-)  plus this is too much fun.  (Lovin' the forum again guys!)

According to a study called "The Oregon Health Insurance Experiment", compared to no insurance:
"In the first one to two years, Medicaid increased health care utilization, reduced financial strain, and reduced depression, but produced no statistically significant effects on physical health or labor market outcomes. "

(from http://www.nber.org/oregon/)

Sounds great to me!

[Libertarian666]

Man, this PP thing was crap today! Hopefully tomorrow will be better.

Wasn't gold--the only asset unique to the PP--up today? When stocks and bonds are down, it's not the PP that's having a bad day, it's everyone.

But gold wasn't up enough to make up for all the losses since January 1st, so it's useless!!! 

[barrett]

Man, this PP thing was crap today! Hopefully tomorrow will be better.

Wasn't gold--the only asset unique to the PP--up today? When stocks and bonds are down, it's not the PP that's having a bad day, it's everyone.

Yeah, I see your point but most individual investors don't hold LTTs either. They have bond funds with much shorter durations. LTTs got hit hard enough today to wipe out a year's worth of yield.

Hey doesn't anyone have an actual job around here? How does everyone have so much time for a dang Internet forum?

[Fred]

Man, this PP thing was crap today! Hopefully tomorrow will be better.

Wasn't gold--the only asset unique to the PP--up today? When stocks and bonds are down, it's not the PP that's having a bad day, it's everyone.

But gold wasn't up enough to make up for all the losses since January 1st, so it's useless!!! 

Gold was up and LTT's were down? Damn, I re-balanced from LTT's and Cash into gold yesterday. I'm a market-timing genius.

[Libertarian666]

Man, this PP thing was crap today! Hopefully tomorrow will be better.

Wasn't gold--the only asset unique to the PP--up today? When stocks and bonds are down, it's not the PP that's having a bad day, it's everyone.

Yeah, I see your point but most individual investors don't hold LTTs either. They have bond funds with much shorter durations. LTTs got hit hard enough today to wipe out a year's worth of yield.

Hey doesn't anyone have an actual job around here? How does everyone have so much time for a dang Internet forum?

I don't know about anyone else, but I'm currently more or less a "man of leisure" at the moment.

[Pointedstick]

I sit in front of a computer in my living room all day for work, so forum participation takes up a very small amount of time and I can context-switch back to work in a moment.

[Greg]

Man, this PP thing was crap today! Hopefully tomorrow will be better.

Wasn't gold--the only asset unique to the PP--up today? When stocks and bonds are down, it's not the PP that's having a bad day, it's everyone.

Yeah, I see your point but most individual investors don't hold LTTs either. They have bond funds with much shorter durations. LTTs got hit hard enough today to wipe out a year's worth of yield.

Hey doesn't anyone have an actual job around here? How does everyone have so much time for a dang Internet forum?

I work for the federal government. It's easy to get my job done and lurk on the forum.

[dualstow]

I work for the federal government. It's easy to get my job done and lurk on the forum.

Because of your sig, I always pictured you in some private robotics lab, something like the Batcave.

[Greg]

I work for the federal government. It's easy to get my job done and lurk on the forum.

Because of your sig, I always pictured you in some private robotics lab, something like the Batcave.

That's my home life where I'm working on building my own exoskeleton for the paralyzed that I'd like to put on kickstarter in a year or two.

The government job happened due to a longer story of trying to find funding for grad school, ignorance, contracts with huge termination fees, and lack of information from the people offering me a job after I graduated.

[MachineGhost]

I work for the federal government. It's easy to get my job done and lurk on the forum.

That was a great opening... but I'll be nice.

This specific question for Buffett (ignore the bloviating at the beginning) seems timely with what sophie, PS and Tyler said recently about risk going up once your "needs are met":

https://www.youtube.com/watch?v=C1LiATYSajw

[Greg]

I work for the federal government. It's easy to get my job done and lurk on the forum.

That was a great opening... but I'll be nice.

Now I'm curious as to what you were going to say when you'd be your true self. I'm a big kid, I can take it.

It's actually one of the reasons I'm not a huge fan of my job, because it is a job I'm not really having growth in and isn't challenging me to be better.

[drumminj]

It's actually one of the reasons I'm not a huge fan of my job, because it is a job I'm not really having growth in and isn't challenging me to be better.

I'll let MG make the quips (have to say it felt like an opening to me as well), but I can definitely relate to this.  I worked a job for a year where I could just feel my brain atrophying.  Rather than solving engineering problems, I was pushing pixels around on flash timelines (I'm a software developer). 

I don't regret taking the job, as it got me out of my comfort zone and made me comfortable with pursuing other opportunities, but I wish I had moved on sooner.  Best of luck with your situation!

[Reub]

I work for the federal government. It's easy to get my job done and lurk on the forum.

That was a great opening... but I'll be nice.

Now I'm curious as to what you were going to say when you'd be your true self. I'm a big kid, I can take it.

It's actually one of the reasons I'm not a huge fan of my job, because it is a job I'm not really having growth in and isn't challenging me to be better.

It sounds like you have a typical govt job, Greg. The lack of productivity is outrageous and so are the costs as paid for by taxpayers. Their general lack of real work is only exceeded by their arrogance. Of course, I was the exception in my 30 years as an air traffic controller. 

I would actually suggest keeping your federal no show job and looking  to start a real one on the side, ergo the best of both worlds!

[Greg]

That was a great opening... but I'll be nice.

Now I'm curious as to what you were going to say when you'd be your true self. I'm a big kid, I can take it.

It's actually one of the reasons I'm not a huge fan of my job, because it is a job I'm not really having growth in and isn't challenging me to be better.

It sounds that you have a typical govt job, Greg. The lack of productivity is outrageous and so are the costs as paid for by taxpayers. Their general lack of real work is only exceeded by their arrogance. Of course, I was the exception in my 30 years as an air traffic controller. 

I would actually suggest keeping your federal no show job and looking  to start a real one on the side, ergo the best of both worlds!

That's exactly what I've done Reub. When you're up and out after 40 hours every week (and not an hour more!), then I go home and work either with my engineering consulting company I founded or work on my pet-projects of this powered exoskeleton I like.

[Reub]

We even had one manager who started a company and sold things to the Federal Aviation Administration which held his other job. I doubt that it was legal but they even promoted him after they found out what was going on.

[MachineGhost]

Getting back on topic, the number of weeks the orthodox PP has had a negative sequence of returns is 107.6.  Let's round it up to 108 for dollar cost averaging purposes.  So if you had $100K to plow into the PP, set up autodeposits (and autoinvestment) for $925.93 every week until you are fully invested.  You can sleep at night with this one, budd!

Also, I just noticed that rebalancing annually is actually riskier in terms of MaxDD than using the close equivalent of 30/20 bands.  However, the P2T backtester uses absolute not relative percentage bands, so I cannot test them out on the Risk Parity PP which is stuck with annually (it does beat the orthodox PP rebalanced annually).  The best bands in terms of reward vs risk for the orthodox PP is actually 40/10 not 35/15: 8.98% CAGR, -19.83% MaxDD.  I believe that if we were able to optimize the band percentages used, we would arrive at superior end results.

BTW, the Risk Parity PP outperformance over the orthodox PP is only marginal (<.50% CAGR, several percent less MaxDD).  Is it worth the trouble?  I think it depends on how much gold's unbalanced risk contribution bothers you and whether or not you want the ability to construct a PP portfolio with a specific risk target in mind.  It certainly makes the most sense if you're going to dump cash and do the three assets for higher growth, especially if leveraged.  It could also make a difference between transaction fees eating away too much terminal wealth and not.

However, given the difficulty of knowing exactly which bands to use with the Risk Parity PP and the inferiorness of annual rebalancing vs bands, I will defer to the available data at the moment and not speculate.

[finster869]

Also, I just noticed that rebalancing annually is actually riskier in terms of MaxDD than using the close equivalent of 30/20 bands.  However, the P2T backtester uses absolute not relative percentage bands, so I cannot test them out on the Risk Parity PP which is stuck with annually (it does beat the orthodox PP rebalanced annually).  The best bands in terms of reward vs risk for the orthodox PP is actually 40/10 not 35/15: 8.98% CAGR, -19.83% MaxDD.  I believe that if we were able to optimize the band percentages used, we would arrive at superior end results.

MG- Are you considering new deposits in your band analysis that 40/10 affords better historic returns than 35/15?  If so, how are the new deposits being deposited: (1) placed in cash until the band is hit then reallocated; (2) 25% to each asset class; (3) at the existing percentage of each individual asset class in relation to the entire portfolio; (4) some other manner.

Thanks!

[MachineGhost]

MG- Are you considering new deposits in your band analysis that 40/10 affords better historic returns than 35/15?  If so, how are the new deposits being deposited: (1) placed in cash until the band is hit then reallocated; (2) 25% to each asset class; (3) at the existing percentage of each individual asset class in relation to the entire portfolio; (4) some other manner.

I wondered about that too but the P2T backtester is not that sophisticated.  Even after all these years, I'm still waiting for software or code that can do settable relative percent bands for portfolio rebalancings.  The PP just gets no respect from anyone.  Very frustrating.

Sophie did an analysis on the best way to deal with new deposits.  Search for it.

EDIT: Here's sophie's post: http://gyroscopicinvesting.com/forum/pe ... /#msg35628

[vnatale]

But, given that their approach is likely to be trying to move things in the opposite direction, it's hard to understand how a combination of that plus the stagflation results in ongoing/exacerbated stagflation.

The Fed was clueless in the 1970's.  You're still operating under some assumption that they knew what they were doing.  Arthur Burns royally screwed up through neglect, then the disastrous Monetarism experiment poured gasoline onto the flames of "baked in the cake" inflation and then Volcker via Regean finally came in and set everyone's head straight by jacking up the FFR to nearly 20% and reeling in fiscal policy.

Read this so you get the full overview of the different explanations for stagflation from different schools of economic thought (not all are correct but most are): https://en.wikipedia.org/wiki/Stagflation#Causes

But if the economy sucks, there's no way that employers can just keep paying employees more money - they'll undoubtedly wind up laying people off instead.

Human behavior is wired in such a way in terms of envy that rising prices induces people to spend and hoard, other people notice this activity and spend and hoard also, repeat, and all this spending and hoarding makes people think All Is Well from the dopamine boost.  This is how New Keynesianism views "stimulating the economy".  It's a drug fix.  Throw in guaranteed wage increases each year and its very easy to mask a stagnant economy if you personally feel like you're not the one losing out.  People are also slow to react to higher inflation because they don't think in real terms, only nominal.  Frog in boiling water syndrome.  If you still don't understand, I pass the torch to someone else.

Still reading through this Topic so do not know if this was addressed.....but I do believe that CARTER brought in Volcker.

Vinny

[vnatale]

PS,

Your previous thread comment:

If you want to live off your investments, you just need a shitload of money.

Is 100% correct.  That was always my goal in being too risky for the first 20 years of investing, and getting absolutely freaking nowhere.  Now that I am older, with one child a couple years from college and another one 4 years after that, and at most ideally only 15 working years left, I am 180 degrees polar opposite of what you are saying about yourself become less risk averse.  As my net worth grows, I am much more risk averse. 

I see three cases --

1) Shitload of money.  Then you are right, and I would have been more than happy to have it all in a 5% money market (not possible now or in the foreseeable future)
2) Not enough money to live carefree.  Mentally I am able to deal with that, if it ends up being the case.  Live day to day and do what you can.
3) Somewhere in the middle.  This is ME right now and scares the crap out of me. I want the pendulum to swing to #1, but with things the way they are with the PP and my aversion to too high of a stock concentration, my retirement situation can go either way.  The unknown is the most scary part.

Yes, I agree, Corto. The stage when you have between 5 and 25x expenses is the scary one. You're working toward financial independence, but you're not there yet, and every loss or down year sets back your goal…

For me a bug focus has been on controlling costs. I think you and I have different feelings about college, but if you're going crazy trying to figure out how to spend half a million dollars to send your kids to top-tier schools, I could see how that's stressful. But there are alternatives, I promise! You can beat the system! And I think college is overrated anyway. It's over in four years and even if you have a very negative college experience like I did, you'll probably be just fine if your head is screwed on straight and you have a loving family.

Yup, agree with PS.  Use the PP to build a base of money that will be the most dependable lifeline you can possibly have:  minimized risk of painful drawdowns, plenty of cash to draw on for emergencies, built-in protection against several Black Swan events, and built-in asset management.  This is more dependable than a job or any government benefits you can think of.  Perfect it is not, because there's no such thing, but it's pretty darn close.

Once you have that, you can now go out and take risks that you might otherwise not have.  You can quit your job, start your own business, put new savings into higher yielding but riskier investments, spend money on something you might have hesitated on in the past, etc.  Or just wake up in the morning and feel like you don't need to pander to your boss or take on more work than you really want to.

PS I get the idea that you're pretty close to FIRE - what will you do when you get there?  I figure I'm about 3 years away, but since I'm highly unlikely to lose my job in that 3 years I'm already enjoying some of the above benefits.  Corto - you'll get there soon enough!

And incidentally, who says the PP has "done nothing" for the past two years?  It was negative in 2013 and will be slightly negative this year, probably, but mine was up 9% in 2014.  It's definitely trailed my stock/bond retirement portfolios, but just wait for that next market crash.

This is one of the best sequences of posts I've seen in awhile.  I hope the new PPers take note.  For many of us (myself included) it really is about the long game, staying the course, saving profusely, and reaching your FIRE goals in as safe a manner as possible.  Then afterwards having the financial freedom to get fancy should one choose to do so.

I now return to my lurker hibernaculum.

Another post worthy of being resurrected.

Vinny

[vnatale]

I work for the federal government. It's easy to get my job done and lurk on the forum.

Because of your sig, I always pictured you in some private robotics lab, something like the Batcave.

That's my home life where I'm working on building my own exoskeleton for the paralyzed that I'd like to put on kickstarter in a year or two.

The government job happened due to a longer story of trying to find funding for grad school, ignorance, contracts with huge termination fees, and lack of information from the people offering me a job after I graduated.

Looks like Greg has been fairly inactive here for the last two to three years. Anyone know if he ever did the above?

Vinny