vnatale wrote: ↑
Thu Nov 04, 2021 5:39 pm
As a not so long ago newcomer...I will say again that the liberal usage of acronyms with no explanations were far more confusing than reading anything that mathjak has ever written anywhere at any time.
It's not that kind of confusion.
The thing is that MJ presents his analysis of the current and near future economic conditions and says things to the effect of the PP being a poor investment strategy because it is very obvious that one or more components is going to be doing poorly. This is a suggestion that it is better to time the markets because even if you are correct that LTTs or gold will underperform stocks for a period of time, you need to be right twice in order to get back in when it again becomes the right time.
I don't think MJ believes that it is always going to be a bad time for LTTs but he is unlikely to be able to tell us precisely when that is going to happen. These suggestions, if followed, can be reckless for most people who come here looking for the kind of all-weather approach that the PP provides.
He also suggests things that are purely false which is that the portfolio is too skewed in its exposure to one particular type of risk. LTTs react to nominal rates and gold react to real rates. Stocks respond to growing nominal future earnings and can coincide with a period of falling or rising interest rates.
The PP gives you exposure to the only 2 types of risks that exist. Credit risk and duration risk.
The other two components are insurance so that you can capture the risk premium that you should be compensated for in bearing exposure to those risks. The 25% allocation to cash and gold make it easy to rebalance and because gold has a similar degree of volatility to stocks and bonds across various time frames it is a reasonable position to hold to reduce variance.
The general historical return of the PP is reliable enough so that it is easy to calculate whether this portfolio is suitable for you. If the PP does not provide the necessary return that an investor is looking for, they need to understand that both cash and gold are non-productive assets which lead to a long term drag on portfolio returns, this is no secret.
They can either choose to bear more risk by reducing either gold or cash exposure, this is up to them and no one ever said that the 4x25% PP is the be all and end all that all investors should choose. It is more a framework which is suitable for most people who have substantial funds and low requirements for their portfolio returns. But when they do this they increase the risk of their portfolio relative to the 4x25%.
This is a fact because you are taking on more exposure to credit and/or duration risk.
To think of it any other way is just a misunderstanding of the facts and when someone presents their views as facts when they are actually just using their best analysis which is pretty much a guess/estimate/prediction of the future then I consider that potentially damaging to other readers with unknown investment knowledge.
The fact that Vinny did not understand how the things MJ says can be so "confusing" and the fact that I have seen many people respect MJ's "advice" when it comes to things like LTTs show me that if his posts are left unchecked on this forum, it is potentially harmful to some readers and they might not even know it.