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29 comments:
Okay random, you've convinced me this investing stuff is simple - as long as you don't get greedy.
On another topic, any votes for undefeated utah for #1 ?
Darn, I was hoping your message was going to be the future's so bright, I gotta wear shades :)
Consensus seems to be forming around the idea of a rally into the inauguration, under-pinned by the promise of an infrastructure stimulus package. I can guarantee you if I try to take advantage, it won't turn out that way!
As a team like Utah could never beat a big school from one of the power conferences how could they possibly...oh, wait
Funny I mentioned in few places my expectation for a bear market rally including an article onSeeking Alpha. That one drew almost 100 comments most of them telling me what an idiot I am (and worse) and as I read Barron's right now it seems like everyone is calling for a rally, that might trump than your Murphy's law-like belief?
You did rather well last year as you have since I have been following you for a few years. I take your comments to heart even if I disagree with you some times.
I was up 0.66% last year having been up 13% at one point and down 18% at another. I got the fourth quarter very wrong. Still 75% or so invested in this rally.
I think the extent and duration of this rally are difficult to predict. But I plan on staying invested for now with oodles of money promised by Washington.
I own MVV and am happy to see the recent negative comments about Middleton buying double long ETF's. Makes me feel better about the coming rally.
I have found Rogers predictions for the market in 2009 very interesting.
SEG
My prediction: the market will go up and the market will go down, in no specific order. Take appropriate action. Over and out.
If I understand what you were saying, your portfolio was down around 19% for 2008. I think you said about half of S&P. As was pointed out the other day, a 50/50 allocation to Vanguard's Total Stock and Total Bond Index Funds would have been down only 16%. For clients in taxable accounts, your manuevering cost them even more.
I guess I'm having trouble seeing how you provided value in 2008. You mentioned you did as well as you did by heeding the inverted yield curve, being double short, avoiding financials, and having lots of cash. All that jockeying for what? What did the tax effects cost?
A 3% difference is 75% of the 4% you say someone can withdraw from a portfolio. A 1% or 2% management fee makes it even worse.
Academic evidence still shows active management detracts value in the long run.
You seem to be too talented playing this fool's game. Why don't you get on board with constructing passive portfolios for your clients tailored to each one's needs.
Below is from Mojena Market Timing
"It looks like we have a lost decade for the market, unless we have a remarkable rally by the end of the year. Through the current week, a portfolio buying and holding the S&P from the beginning of 2000 is down a cumulative 26%, or an annualized loss of 3.3%. The live standard portfolio shows a gain of 30%, which translates to an annual return of 2.9%. The aggressive portfolio leads: 44% overall, 4.1% per year. To put this into a dollar perspective, a $100,000 portfolio starting in 2000 would now mark $74k for buy and holders, $130k for standard portfolio followers, and $144k for those following the aggressive variation. The aggressive strategy nearly doubles the buy & hold strategy."
For those of you who fell in love with buy and hold during the 80's and 90's I strongly suggest you rethink active management for at least the next 5 to 10 years.
DJIA crossed above 65 DMA. Any significance? Why is 200 better than 65?
anon 8:43--I'm not a buyandholder, but the portfolio comparisons you cite are vs. 100% S&P. The poster above is citing a 50/50 portfolio. There are obviously dozens of buy and hold options, depending on one's objectives. Performance results will vary with how one structures the buy and hold portfolio.
If you wait until the S&P goes above the 200-day moving average, you will have missed a major advance. Isn't that too long to wait?
Jeff
Anon 9:01
reread the post and visit Mojena market timing
The aggressive portfolio beat the standard timing model and buy and hold both.
Increasing leverage or decreasing bond exposure will also improve returns, but the three models posted at Mojena are the only ones with reliable tracked data to support my statement. Competent unemotional timing is valuable. The problem is all the incompetent, emotional timing that messes up the data.
I follow Roger because I feel he is competent, rather unemotional, and honest. What more could I ask for?
I wonder how many people use a 50/50 allocation of VTI/BND. A small percentage of investors, I'd bet.
Is "Stock Trader's Almanac" worth a read each year? (Note I'm a buy and hold guy who tweaks things, not a trader)
8:43
Snort,snort...data mining from a market timer...snort, snort.
Everyone should read WJS today. Interesting piece by a psychologist who fell for the Madoff scam. Also, good piece by Jason Zweig regarding financial experts who don't follow their own advice.
Everyone, keep an open mind, and keep reading!
The Utah/Alabama result is just one more bit of evidence supporting the need for play-offs in college football. My recommendation: Let the BCS ratings determine the top 8 teams (and, yes, teams rated 9-12 or so will complain), let the top 8 teams face each other in the 4 major (BCS) bowls, then those winners have a semi-final round of games, and finally a true championship game.
9:17
I think everyone around here would say that leveraging your retirement savings wouldn't be a good idea. Maybe guys at Bear Sterns, Lehman, AIG etc. would disagree.
The observation that a 50/50% portfolio is unlikely to lose as much as a portfolio more heavily weighted to equity in a downward trending equity market should at least be accompanied by its obvious corollary: A 50/50% portfolio won't gain as much as a portfolio more heavily weighted to equity in an upward trending equity market.
The math is trivial but the logical inference is not: A portfolio down 19% needs a hair less than 24% to break even; down 16% needs a bit less than 20% to break even; in an environment where a 4% difference can be made up in a single day's equity market move (or 4% loss avoided by a single trade) it is not the flexible allocation model facing the greater challenge it is any portfolio committed to a fixed, 50% bond allocation, particularly in a recessionary, increasing default-rate, ZIRP environment.
Anyone who has evidence they can reduce downward volatility and increase upward volatility on a reasonably consistent basis (more wins than losses) by allocating or other tactical means would be foolish to do anything other than try to improve that skill. Anyone who lacks evidence they possess that skill would be equally foolish to engage in the practice of tactical alpha but probably would improve their returns by researching and utilizing a more nuanced strategy than 50/50; e.g., http://tinyurl.com/2sncfj
anon 8:23 the benchmark is 100% equities, that is the equity portion of the portfolio, not 50/50. I thought I was pretty clear about that, but not clear enough for you i suppose. additionally this is probably not a useful site for you as I have four and a half years worth posts chronicling why I don't do buy and hold. you believe in it fine, i don't, that is fine too. this site will waste your time. leaving questions and comments on half read (or listened to) posts wastes everyone else's time.
65 day? if you think that is best then do that. I do what i think is best, and i've written about why over 100 times if you care to look.
Jeff, for some yes, for some no. from the video you should conclude I am in the middle.
SD, I buy a trader's almanac every other year.
10:32
I wasn't recommending or not recommending leveraging a retirement portfolio. That is a personal choice.
The leverage proves the timing model worked, not that an individual should use leverage.
RW
Hope Bill Miller et. al. takes your advice.
Roger,
You specifically said you were down about have of the S&P 500. You specifically did not qualify by saying the equity portion only.
RW, your post is quite correct. Benjamin Graham also suggests overweighting equities in down markets and underweighting when valuations become high. What you suggest is in line with his views.
Increasing leverage or decreasing bonds might increase returns. It could also cause a compete disaster.
10:56, academic evidence shows that no one has been able to do this consistently in publicly traded markets.
half not have. sorry.
that has been the context in four years of quarterly recaps. the blog is on ongoing dialogue with a lot of context to many of the concepts.
Roger,
Always enjoy hearing your thought processes. You did good last year for a young'un. I too ended the year down about half as much as the broad market but I arrived at that result very differently from you (being retired and not managing an all stock portfolio). Still, it's the final results that count....
We live to fight another day with Mr. Market....
young'un? did you see that heckle on Seeking Alpha? I will take that one. he practically called me a whippersnapper, not too shabby.
glad you held up on your bottom line hopefully on your sleepability too.
Rob, thanks for the kind word but testimonials create problems that are not intuitive to me, I just no they have to be removed, apologies.
make that know as opposed to no
My apologies Roger as I was not aware of the restrictions. Duly noted, keep up the great blog!
Rob
Congrats Roger on 2008. I continue to appreciate your approach & even-tempered dialogue with those of us using a different investment path. (OT: The recent Seeking Alpha comment exchanges were a stress test & you more than passed.) Even with your consistency, I seem to get almost daily some new info & perspective on topics that reasonate with an old geezer (like saving,protecting what I have). Many thanks for your work.
(Retired) Anna in NC
Rob, no worries, Anna thank you for the kind word.
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