Gyroscopic Investing

TennPaGa wrote:

rocketdog wrote:

TennPaGa wrote:If hyper-inflation is coming, where are the signs?  Why is inflation ~ 1.5-2%?  If anything, we are in a period of DEflation.

Who says inflation is only 1.5%-2%?  Based on my buying habits, it's at least twice that.

I would say my own personal inflation rate is similar to yours.  However, even granting that one's personal rate of inflation may be different than the official CPI, does this look like hyper-inflation is coming:

I agree that inflation is not as rampant as some people say and if someone is frugal they could potentially substitute lower quality goods and services that would represent a theoretically deflationary period. However deflation in the past was a result of improved efficiency of domestically produced goods and services or competitive bidding between firms in slower periods of economic growth. Unfortunately this day in age all the deflationary forces are from off shoring suppressing inflation and at the same time monopolistic firms in the areas of energy, health, and food significantly increasing inflation. This is the battle we are observing in the CPI stats. 

Less competition, less domestically produced goods is resulting in a hollowing out of the economy and stagnating innovation.  The employment numbers and job quality/compensation are very misleading and are grossly manipulated. This is what we should be looking at rather than inflation.

hi,

when will you STOP using the HB-PP?

3 years falling, that Craig or MTex says is the stop-loss?

I would probably reevaluate the PP if I have 3 years in a row of negative after-inflation returns.

If traditional-seeming portfolios have been doing worse than the PP in the above scenario, I will probably stay with the PP.

frugal is the international budd 

I agree with the theory and framework behind the PP, but if I were to invest in the plain Jane version of it, I think I would question it more. My concerns with the portfolio have been addressed by my own tweaks and am more confident as a result and will stick to it indefinitely.

The plain Jane version is 25pct in your country's stock market, 25pct in you country's long term bonds, 25pct in gold and 25pct in cash.

My concerns are as follows. I don't like how heavily weighted Canada's stock market is to oil, gas, financials, and mining. I don't see how long bonds have significant upside from here but understand their role in a deflationary environment. I want to be fully invested and am always adding to my positions, so I don't need a heavy cash component. I handle volatility well and don't need that keel to smooth the portfolio. I've always been a proponent of tight/hard money and indexing due to the ineffectiveness of stock pickers beating the market.

As such, my tweaks are...(I'm Canadian by the way)
30pct stocks - 10pct Canadian stock market, 10pct US S&P 500, 10pct Emerging Markets
30pct bonds - 10pct Canadian long bonds, 10pct high yield corp bonds, 10pct XBB Canadian bond universe (includes a wide variety of bonds representative of all bonds in canada)
30pct gold
10pct cash

buddtholomew wrote: frugal is the international budd 

sorry, what do you mean?

frugal wrote:

buddtholomew wrote: frugal is the international budd 

sorry, what do you mean?

You and I experience similar emotions on days where the PP declines in value. If I can offer some advice, don't confuse strategy with outcome.

buddtholomew wrote:

frugal wrote:

buddtholomew wrote: frugal is the international budd 

sorry, what do you mean?

You and I experience similar emotions on days where the PP declines in value. If I can offer some advice, don't confuse strategy with outcome.

Picture budd in a Speedo.

buddtholomew wrote:

frugal wrote:

buddtholomew wrote: frugal is the international budd 

sorry, what do you mean?

You and I experience similar emotions on days where the PP declines in value. If I can offer some advice, don't confuse strategy with outcome.

Europe is performing even worst...

That's tough to see...  better to forget the account and see it again in 3 years

MediumTex wrote:

buddtholomew wrote:

frugal wrote: sorry, what do you mean?

You and I experience similar emotions on days where the PP declines in value. If I can offer some advice, don't confuse strategy with outcome.

Picture budd in a Speedo.

Theres a joke in there, but I cant find it ;-)

buddtholomew wrote:

MediumTex wrote:

buddtholomew wrote: You and I experience similar emotions on days where the PP declines in value. If I can offer some advice, don't confuse strategy with outcome.

Picture budd in a Speedo.

Theres a joke in there, but I cant find it ;-)

That's what she said.  HEY-ooo

Xan wrote:

buddtholomew wrote:

MediumTex wrote: Picture budd in a Speedo.

Theres a joke in there, but I cant find it ;-)

That's what she said.  HEY-ooo

Ha! Gotta love small penis humor...

Given the recent posts, shouldn't this topic be transferred to "Other Discussions?" Alternately, I guess it could be considered a "Variable Portfolio Discussion."

cnh wrote: Given the recent posts, shouldn't this topic be transferred to "Other Discussions?" Alternately, I guess it could be considered a "Variable Portfolio Discussion."

Well played.

All joking aside...I'm starting to get scared. I can't afford to lose this sum of money on a daily basis.

I keep reminding myself its a long term play and not to confuse outcome with strategy.... Even though I'm more PP inspired (roughly half of ret monies) than true PP and more geared to prosperity with 40% tilted stock allocation, but starting in mid/late 2012 wasn't the best timing.... (Moved from a 60/40 TrevH tilted boglehead portfolio)

Non-PP portfolios are also seeing some downside.

http://www.bogleheads.org/forum/viewtop ... 1&t=117958

Investernoob wrote: The last two weeks have been horrendous. I've lost all my gains in REITs, International, Canada, and I'm only slightly ahead in US.

How do people stick in the same investments after years of back and forth prices?

I want to see everything go up, all at once, now.

buddtholomew wrote: All joking aside...I'm starting to get scared. I can't afford to lose this sum of money on a daily basis.

Budd,  It is troublesome to see losses, especially when you are in the drawdown stage such as myself.  But what are we to do?  Go to all cash and lose to inflation in the long run?  Use an all stock or all bond portfolio?  Move in and out of various allocations which would simply constitute market timing?  Most likely, none of these options would have a favorable long term outcome.  The only option that makes sense to me is to develop a simple, well diversified, low cost portfolio.  This may be the PP, stock/bond allocations or stock/bond/hard assets/cash allocations.  Develope your portfolio with risk/return ratios that are comfortable to you, stay the course and rebalance as necessary.  I wish there was another way to make decent returns with little or no risk, but I have yet to find it.

Alanw wrote:

buddtholomew wrote: All joking aside...I'm starting to get scared. I can't afford to lose this sum of money on a daily basis.

Budd,  It is troublesome to see losses, especially when you are in the drawdown stage such as myself.  But what are we to do?  Go to all cash and lose to inflation in the long run?  Use an all stock or all bond portfolio?  Move in and out of various allocations which would simply constitute market timing?  Most likely, none of these options would have a favorable long term outcome.  The only option that makes sense to me is to develop a simple, well diversified, low cost portfolio.  This may be the PP, stock/bond allocations or stock/bond/hard assets/cash allocations.  Develope your portfolio with risk/return ratios that are comfortable to you, stay the course and rebalance as necessary.  I wish there was another way to make decent returns with little or no risk, but I have yet to find it.

Hi,

in my country we can do CD's that are a bit higher than inflation... that's what I was used to...

Alanw wrote:

buddtholomew wrote: All joking aside...I'm starting to get scared. I can't afford to lose this sum of money on a daily basis.

Budd,  It is troublesome to see losses, especially when you are in the drawdown stage such as myself.  But what are we to do?  Go to all cash and lose to inflation in the long run?  Use an all stock or all bond portfolio?  Move in and out of various allocations which would simply constitute market timing?  Most likely, none of these options would have a favorable long term outcome.  The only option that makes sense to me is to develop a simple, well diversified, low cost portfolio.  This may be the PP, stock/bond allocations or stock/bond/hard assets/cash allocations.  Develope your portfolio with risk/return ratios that are comfortable to you, stay the course and rebalance as necessary.  I wish there was another way to make decent returns with little or no risk, but I have yet to find it.

Thanks for your perspective Alan. I too have reached the same conclusion that a buy, hold and re-balance strategy using low-cost, diversified assets is the most appealing approach to investing for the long-term. Unfortunately, losses in the PP weigh heavily on my mind. I do not want to lose the money that I have earned through hard work and sacrifice to the markets.

The market sure likes to shake out the weak hands.
Make a fist...

buddtholomew wrote:

Alanw wrote:

buddtholomew wrote: All joking aside...I'm starting to get scared. I can't afford to lose this sum of money on a daily basis.

Budd,  It is troublesome to see losses, especially when you are in the drawdown stage such as myself.  But what are we to do?  Go to all cash and lose to inflation in the long run?  Use an all stock or all bond portfolio?  Move in and out of various allocations which would simply constitute market timing?  Most likely, none of these options would have a favorable long term outcome.  The only option that makes sense to me is to develop a simple, well diversified, low cost portfolio.  This may be the PP, stock/bond allocations or stock/bond/hard assets/cash allocations.  Develope your portfolio with risk/return ratios that are comfortable to you, stay the course and rebalance as necessary.  I wish there was another way to make decent returns with little or no risk, but I have yet to find it.

Thanks for your perspective Alan. I too have reached the same conclusion that a buy, hold and re-balance strategy using low-cost, diversified assets is the most appealing approach to investing for the long-term. Unfortunately, losses in the PP weigh heavily on my mind. I do not want to lose the money that I have earned through hard work and sacrifice to the markets.

Unfortunately there is no such thing as a riskless investment. Everything has risk, so there is no way to guarantee that you will never lose any money by investing. Sorry, those are just the facts of life.

buddtholomew wrote: All joking aside...I'm starting to get scared. I can't afford to lose this sum of money on a daily basis.

It sounds like you should be investing in yourself rather than others if you are this paranoid about the markets.  There is no asset or investment that does not fluctuate in value.

From your previous posts you have over $1M in assets, which almost irrespective of what you own should be good for $30-40,000 a year...maybe focus on reducing your expense footprint so you can take a deep breath about variability in your NAV?

buddtholomew wrote:

Alanw wrote:

buddtholomew wrote: All joking aside...I'm starting to get scared. I can't afford to lose this sum of money on a daily basis.

Budd,  It is troublesome to see losses, especially when you are in the drawdown stage such as myself.  But what are we to do?  Go to all cash and lose to inflation in the long run?  Use an all stock or all bond portfolio?  Move in and out of various allocations which would simply constitute market timing?  Most likely, none of these options would have a favorable long term outcome.  The only option that makes sense to me is to develop a simple, well diversified, low cost portfolio.  This may be the PP, stock/bond allocations or stock/bond/hard assets/cash allocations.  Develope your portfolio with risk/return ratios that are comfortable to you, stay the course and rebalance as necessary.  I wish there was another way to make decent returns with little or no risk, but I have yet to find it.

Thanks for your perspective Alan. I too have reached the same conclusion that a buy, hold and re-balance strategy using low-cost, diversified assets is the most appealing approach to investing for the long-term. Unfortunately, losses in the PP weigh heavily on my mind. I do not want to lose the money that I have earned through hard work and sacrifice to the markets.

No one likes to lose money.  But again, what are the options?  An all cash portfolio may look good now from a volatility standpoint but in the long run inflation will erode your portfolio.  In 2008, the PP had a substantial drawdown before LTT's kicked in and caused the PP to nearly break even for the year.  Anyone selling at the peak of the drawdown would have regretted it later.  It is hard to watch stocks and bonds declining simultaneously while gold treads water and cash does nothing.  Will this continue?  We don't know.  Budd, I would suspect your 60/40 portfolio is doing no better than the PP.  Should we all move to cash?  I don't know.  Time will tell.  My belief is that this situation is temporary and that sooner or later the cash that is being raised will be looking for a home.  At least I hope so.  I also believe that we will not see short term rates increase for some time.  It is one thing for Uncle Ben to stop QE and another thing to start raising short term rates.  How far can the yield spread widen before something gives?  Since I do not know the answer to any of these questions, and I do not want to go to all cash, I will just keep my simple, diversified, low cost portfolio.

It hurtses us!  Tricksy hobbits!