The lament of an macroeconomic ideologue.

[touhy]

Re: The lament of an macroeconomic ideologue.

Thanks for the replies. Not sure I feel better, but I am learning things from your comments.

CharlieBrown, my plan for the last few years has been to enter the Permanent Portfolio too. While I have the gold and cash portion locked down, I am finding it so difficult to buy the bond/equity portions in this present macroeconomic environment. Intellectually I know waiting for the "right" entry point is contrary to the strategy of that portfolio. And my reluctance makes me wonder if I will have the fortitude to execute the required re-balancing. I am an "emotional investor", much to my detriment. That is why I consider myself an ideologue. A curse.

[jk]

Re: The lament of an macroeconomic ideologue.

given that both bonds and stocks are at historically high valuations, i think you are right to wait. otoh, if you feel you must enter, just buy, say, 40%, of your intended allocations.

bernard baruch: "i made my money by selling too soon."

[touhy]

Re: The lament of an macroeconomic ideologue.

jk, portfoliocharts.com is a great site I have spent time on. I wish their historical data set went back a bit further. The sustainable withdrawal rates for portfolios like the G. Butterfly seem quite optomistic (but they do make me feel better).

[jk]

Re: The lament of an macroeconomic ideologue.

jk, portfoliocharts.com is a great site I have spent time on. I wish their historical data set went back a bit further. The sustainable withdrawal rates for portfolios like the G. Butterfly seem quite optomistic (but they do make me feel better).

i also wish the data went back farther, but i gather the longer you go back the more restricted you are in asset choices in order to have data. otoh, it goes back to 1972 iirc, so it includes interest rates going sky high and then coming back down to recent lows, stocks in bear, then bull, then crash, then bull, then bear, then bull, then crash, then bull - so there's a variety of conditions covered.

in any case, "past performance etc" we always have to deal with uncertainty.

[Southernguy]

Re: The lament of an macroeconomic ideologue.

Find this discussion very enlightening. Today a simple, yet interesting work in zerohedge.
http://www.zerohedge.com/news/2017-03-30/margin-debt-hits-new-record-high-analysts-say-%E2%80%9Cdon%E2%80%99t-worry%E2%80%9D


See also: http://www.zerohedge.com/news/2017-0...present-danger

[wayiwalk]

Re: The lament of an macroeconomic ideologue.

given that both bonds and stocks are at historically high valuations, i think you are right to wait. otoh, if you feel you must enter, just buy, say, 40%, of your intended allocations.

bernard baruch: "i made my money by selling too soon."

Nice quote, jk, perfect for this conversation!

[charliebrown]

Re: The lament of an macroeconomic ideologue.

There are no safe havens, everything has been bid up to the moon, stock, bonds, real-estate. If the gold/oil ratio is an accurate valuation for gold, it is bid up too.
That's what happens when central banks around the world create trillions of dollars electronic wealth, the first receiver of the hot money is paper financial assets.
I have not done the grunt work, but the balancing of bonds may make some of these portfolios not perform so well. How much can bonds appreciate when a 10 year
pays 2.5% In times past, when stocks fell, bonds were paying 5, 10% etc. Maybe I should closely look at the mid 70's when stocks were in the tank, AND bonds were
getting ground to the ground with ever rising interest rates.

You either invest, or watch your savings erode 5% per year. (I don't believe the 2% fake number reported by the BLS).
The only basic neccessity which is deflating, is clothing, food,housing,school,medicine, and transportation are way up.
Why is health care 15% of the economy and an only 5% of the CPI basket? Housing replaced with rent equivalent mumbo jumbo,
food and fuel are too "volatile" to count???

This post started off with the OP lamenting he thought that with macro economic foresite he would stay out of the market.
Keynes said the market can stay irrational longer than you can stay solvent. Well we are living in that time.
Will it all blow up next week, or ten years from now? 10 years from now you are down 50%

I have repeated frequently on this site that it will be an interesting day when we can no longer roll over our old debt into new debt at a lower rate.
If things stay as they are now, that is only about 1 or 2 years away. Unless interest rates swoon again.

[BK]

Re: The lament of an macroeconomic ideologue.

charlie brown,
Clothing is inflating through the fall in quality. I just threw away a flannel shirt I purchased in Bloomingdales in 1994 and when I ski I prefer to where my 1992-93 Marmot fleece. My favorite dress shoes are a pair of black Wright shoes with a steel shank manufactured in the United States in 1992 (prior to the company being sold to over seas company).

I can't find a tennis shoe for my teenager cheaper than $94-$120 that will last.

Our guest room has a down comforter and cover that I purchased in Bloomingdales in 1992. My wife has yet to find any of similar high quality for our master bedroom that does leak feathers and the fabric doesn't fade.

I throughly believe that most inflation takes place in drastically reduced quality of merchandise. Today Auto manufactures now deliver most cars with painted aluminum rims, the high quality polished aluminum rims of 10-15 years ago would raise the cost of you average car by $2-$3K.

[davidstvz]

Re: The lament of an macroeconomic ideologue.

It's a rainy Sunday morning here in the middle of the empire. I ran the numbers...... Never run the numbers.

The numbers I refer are those calculating what my portfolio would be worth had I continued to invest in the usual 60/40 stock-bond allocation advocated by those sophisticates on the street since 2009. Not for me, I had to be wiser. ...Instead, I have seemingly outsmarted myself of perhaps a portfolio doubling with my sophisticated, yet unrequited, macro-economic outlook favoring gold and liquidity. Dabbling in venture capital for me has served little more than the addition of salt rubbed into the wound.

Surely I am not the only one. Misery loves company.

How do you console yourselves as you ponder your investment choices gone wrong? I would welcome the advice.

(And if anyone wishes to gloat I stand ready to take that too. I can enjoy a pity party for myself as much as the next fellow.

N.B. I really do realize I am being greedy. I am indeed fortunate to have my health, my relative wealth, my relative liberty, safety, and usual good cheer. But my lessor angels of humanity are still sad over the lost opportunity.

My two worst investments were a $5,000 dollar drum set that I never play anymore (when a $2,000 dollar set would have done fine) and something like $24,000 worth of gold that I eventually sold for around $20,000. All told, that's about $7,000 wasted. I mostly just don't think about it. What I've learned is that I don't have the faintest idea what to do with my money. As an average Joe I can invest a virtually unlimited amount of money at 4.25% "interest" at any given moment by paying my mortgage off faster and that's probably the largest and safest return I can muster.

[llanlad2]

Re: The lament of an macroeconomic ideologue.

Thanks for the replies. Not sure I feel better, but I am learning things from your comments.

CharlieBrown, my plan for the last few years has been to enter the Permanent Portfolio too. While I have the gold and cash portion locked down, I am finding it so difficult to buy the bond/equity portions in this present macroeconomic environment. Intellectually I know waiting for the "right" entry point is contrary to the strategy of that portfolio. And my reluctance makes me wonder if I will have the fortitude to execute the required re-balancing. I am an "emotional investor", much to my detriment. That is why I consider myself an ideologue. A curse.

In your position I would make a plan. Give yourself a time horizon to reach your baseline holding that you want to achieve.I think I would look at a 4 year horizon as we should have had a correction by then(in equities and bonds). Then average in and decide on the dates you will invest on (4 dates in the year). This should take all the emotion out of it. If a crash happens in the next two years you will still be overweight cash and will be able to benefit.
.

[LazyBoy]

Re: The lament of an macroeconomic ideologue.

As an average Joe I can invest a virtually unlimited amount of money at 4.25% "interest" at any given moment by paying my mortgage off faster and that's probably the largest and safest return I can muster.

This was on of our best moves. By the time you're done and have more cash accumulating, maybe there will be better investment options.

[vt]

Re: The lament of an macroeconomic ideologue.

What about the mortgage tax deduction? The real cost of the loan is lower than the rate. Some financial planners say don't pay off your mortgage.

[jk]

Re: The lament of an macroeconomic ideologue.

a fixed rate mortgage is also an inflation hedge. houses historically track inflation [they don't beat it]. but fixed rate mortgages will lose value under inflation, and lighten the liability load on your balance sheet.

[touhy]

Re: The lament of an macroeconomic ideologue.

"average in and decide on the dates you will invest on (4 dates in the year). This should take all the emotion out of it. If a crash happens in the next two years you will still be overweight cash and will be able to benefit".


That's excellent advice llanlad2. Making that first purchase is going to be a tough one though.

Thank you.

[davidstvz]

Re: The lament of an macroeconomic ideologue.

I do need to take the mortgage interest deduction into account, but since it's only a deduction and not a credit or anything, the value can't be more than the tax bracket I'm in... so it's still a fairly reliable and safe "return", just not quite as high as the raw interest rate.

As for holding a mortgage as an inflation hedge... I'm not sure I follow. Owning a house as an inflation hedge (a larger house vs. a smaller house) makes some sense (larger/better land makes more sense since a house is a depreciating asset), but with regards to the mortgage, it goes back to the matter of the interest rate vs. the gain on any other investment you can make. The interest you're avoiding on the mortgage is as reliable as a bond... If the bond market blows up and interest rates go through the roof, assuming I can keep a job and my income becomes inflated along with everything else, I could pay off the mortgage with cheap dollars if I hadn't paid it off early. But that assumes that the dollars I saved by not paying it off found something better to do and in my case, I doubt they would.