EU PP 2016-2019

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belgo
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EU PP 2016-2019

Post by belgo » Sat Jun 22, 2019 7:48 am

Dear members, i started with a lot of anxiety a European PP back in February 2016. Even after studying, reflecting and agreeing with the theory, actually buying the 30Y Bund at a yield of 0.86% looked crazy and went against the financial consensus. Results were quite modest in the first years with the bund and gold not moving at all or the Bund even going down in value as everyone had said. This year however - against everyone's predictions- the 30Y Bund discovered new interest rate lows (and price thus increased from about 140 to around 160 now). With gold now finally also going up and stocks up 30% since the start, I am now looking at a net return of just above 5% p.a. over the last 3 years. Inflation is very low in Europe, maybe 1%. I am happy enough with this result as most people who where heavy on stocks last year complain about their returns. And most balanced portfolios at banks cannot show a decent 3 y return net of fees. So still a Harry believer. Who knows what the future brings.
pmward
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Re: EU PP 2016-2019

Post by pmward » Sat Jun 22, 2019 10:16 am

belgo wrote:
Sat Jun 22, 2019 7:48 am
Dear members, i started with a lot of anxiety a European PP back in February 2016. Even after studying, reflecting and agreeing with the theory, actually buying the 30Y Bund at a yield of 0.86% looked crazy and went against the financial consensus. Results were quite modest in the first years with the bund and gold not moving at all or the Bund even going down in value as everyone had said. This year however - against everyone's predictions- the 30Y Bund discovered new interest rate lows (and price thus increased from about 140 to around 160 now). With gold now finally also going up and stocks up 30% since the start, I am now looking at a net return of just above 5% p.a. over the last 3 years. Inflation is very low in Europe, maybe 1%. I am happy enough with this result as most people who where heavy on stocks last year complain about their returns. And most balanced portfolios at banks cannot show a decent 3 y return net of fees. So still a Harry believer. Who knows what the future brings.
This is good to know, as the Fed here is seriously considering following suit with negative rates in the next recession. What are you doing with your cash allocation currently?
belgo
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Re: EU PP 2016-2019

Post by belgo » Sat Jun 22, 2019 11:01 am

I have most cash deposited with a bank that offered 1% for 1 y as a promotion. And I must admit keeping the cash allocation a bit below 25%. The big question is if rates can still go lower in Europe; maybe they can remain low for very long as in Japan. I think for the rest of the year it will be gold that needs to carry the portfolio. The interesting thing is that for the last three years all financial analysts were warning people against buying long term bonds as they saw rates would going up. Now that the opposite has happened, the same analysts see interest rates going down further. Nobody knows really. The US long term rates look a lot more normal than the European. Plenty of room to go down.
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europeanwizard
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Re: EU PP 2016-2019

Post by europeanwizard » Sun Jun 23, 2019 12:58 am

Thanks for reporting back. Very interesting. Since starting, I had severe doubts about the PP in this European environment but it looks like you've done pretty okay. This year also looks to be good, with how gold is doing.
belgo
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Re: EU PP 2016-2019

Post by belgo » Sun Jun 23, 2019 4:15 am

It's quite spectacular how the price of the 2046 Bund increased recently:

https://www.boersentreff.de/bundesrep_d ... nleihe.htm
(sorry can't seem to copy the graph in the post)

It's almost tempting to sell the position before it comes down again..
pmward
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Re: EU PP 2016-2019

Post by pmward » Sun Jun 23, 2019 10:25 am

belgo wrote:
Sat Jun 22, 2019 11:01 am
I have most cash deposited with a bank that offered 1% for 1 y as a promotion. And I must admit keeping the cash allocation a bit below 25%. The big question is if rates can still go lower in Europe; maybe they can remain low for very long as in Japan. I think for the rest of the year it will be gold that needs to carry the portfolio. The interesting thing is that for the last three years all financial analysts were warning people against buying long term bonds as they saw rates would going up. Now that the opposite has happened, the same analysts see interest rates going down further. Nobody knows really. The US long term rates look a lot more normal than the European. Plenty of room to go down.
Yeah with super low or negative yields long bonds can indeed be scary, but they can also be the best performing asset as they return more when rates are lower. See this thread and attached article for more info: viewtopic.php?f=3&t=9941
belgo
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Re: EU PP 2016-2019

Post by belgo » Sun Jun 23, 2019 11:54 am

Thank you for providing the link; quite a fascinating article; it looks like there is still upside potential even if the EU long bond is already at a yield that is very low; I don't really understand why it is this way; i thought price would only change by the interest rate change x duration (eg a drop in yield in the 2046 Bund from 0.9% to 0.5% = 0.4%x21years duration means +- 8.5% change in the price but this is clearly incorrect as shown in the graphs. It means I should always keep the long bond as it does its work even and keeps its upside potential even if rates 'cannot go down a lot more'; if the 30Y Bund is now at +0.5% yield, its price would actually still increase by 20% if the yield would go down to 0%? that is amazing.
pmward
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Re: EU PP 2016-2019

Post by pmward » Sun Jun 23, 2019 4:21 pm

belgo wrote:
Sun Jun 23, 2019 11:54 am
Thank you for providing the link; quite a fascinating article; it looks like there is still upside potential even if the EU long bond is already at a yield that is very low; I don't really understand why it is this way; i thought price would only change by the interest rate change x duration (eg a drop in yield in the 2046 Bund from 0.9% to 0.5% = 0.4%x21years duration means +- 8.5% change in the price but this is clearly incorrect as shown in the graphs. It means I should always keep the long bond as it does its work even and keeps its upside potential even if rates 'cannot go down a lot more'; if the 30Y Bund is now at +0.5% yield, its price would actually still increase by 20% if the yield would go down to 0%? that is amazing.
It is an equalizing force of sorts. When there is little yield, or negative yield, investors require capitol appreciation to make the purchase worth it. Also, note in the article that the gains in a reduction in yield exceed the potential losses for an increase in yield. So it helps to keep the odds stacked in your favor. Low and negative yields are a symptom of high bond demand. Don't forget bond yields are not set by the government, they are set by supply and demand. If there is a lot and increasing demand for long bonds yielding only .5%, one must ask themselves what do the professionals that are buying these things hand over fist know that we don't?
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frugal
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Re: EU PP 2016-2019

Post by frugal » Thu Jul 25, 2019 1:57 pm

Hi,

what about doing EUPP only with:

GOLD
STOCKS
LT-BONDS

?

If you have more cash for any required adjust/balancing.

Thanks.
::)
belgo
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Re: EU PP 2016-2019

Post by belgo » Mon Jul 29, 2019 2:58 am

I see your point. The PP seems overly pessimistic in asking you to keep 25% in cash for a depression scenario. I find it hard as well to stick to it and kept the cash balance at 10-15% knowing that I could free up more cash if really necessary. So in my view you do need to keep a sufficient cash balance for rebalancing and being able to buy at a low when everything falls but 25% is maybe too much.
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frugal
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Re: EU PP 2016-2019

Post by frugal » Wed Aug 07, 2019 12:40 am

belgo wrote:
Mon Jul 29, 2019 2:58 am
I see your point. The PP seems overly pessimistic in asking you to keep 25% in cash for a depression scenario. I find it hard as well to stick to it and kept the cash balance at 10-15% knowing that I could free up more cash if really necessary. So in my view you do need to keep a sufficient cash balance for rebalancing and being able to buy at a low when everything falls but 25% is maybe too much.
8) nice
belgo
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Re: EU PP 2016-2019

Post by belgo » Wed Aug 07, 2019 2:58 am

EU PP has further rallied since my first message. The 30y Bund is now at an all-time low and gold performing very well. Quite pleased with my PP.
tarentola
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Re: EU PP 2016-2019

Post by tarentola » Sat Aug 10, 2019 10:36 am

For info: since 1 January, a vanilla Euro PP of CEU, MTH, GBS and C13, all traded in Paris, is up 12.4%. A vanilla US dollar PP (SPY, TLT, GLD, SHY) is up 10.8%. EUR/USD rate is virtually unchanged since 1 January.
tarentola
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Re: EU PP 2016-2019

Post by tarentola » Thu Sep 05, 2019 2:56 pm

For info again: Amundi started a gold ETC last May. Perhaps of interest to European PP investors as Amundi is owned by Crédit Agricole, which is the biggest bank in France and so relatively secure. Backed by physically allocated gold, held by HSBC.
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frugal
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Re: EU PP 2016-2019

Post by frugal » Fri Sep 06, 2019 12:04 am

tarentola wrote:
Thu Sep 05, 2019 2:56 pm
For info again: Amundi started a gold ETC last May. Perhaps of interest to European PP investors as Amundi is owned by Crédit Agricole, which is the biggest bank in France and so relatively secure. Backed by physically allocated gold, held by HSBC.
Thank you very much!

What is the TICKER symbol?

8)
Kike Moreno
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Re: EU PP 2016-2019

Post by Kike Moreno » Fri Sep 06, 2019 3:47 am

AMUNDI PHYSICAL GOLD ETC (C)

ISIN code FR0013416716

https://www.amundietf.fr/professional/p ... 0013416716
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frugal
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Re: EU PP 2016-2019

Post by frugal » Sun Sep 08, 2019 5:25 am

Kike Moreno wrote:
Fri Sep 06, 2019 3:47 am
AMUNDI PHYSICAL GOLD ETC (C)

ISIN code FR0013416716

https://www.amundietf.fr/professional/p ... 0013416716
Good!

I like to use several tickers for the same asset.

This is not mentioned by HB but i believe it reduces the risk.

Please comment.

😎
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