The lament of an macroeconomic ideologue.

[touhy]

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.

[Mega]

Re: The lament of an macroeconomic ideologue.

Touhy
Remember, the FED has your back!
Just as the Bank of England has mine (was £1 = $2.10 ish......now £1.23 ish...........with LOTS more to come

[BK]

Re: The lament of an macroeconomic ideologue.

touchy,
I know your pain. Yes there are lots of happy 60-40 holders who are convince because of their brains and good looks their portfolio looks great. The average 60-40 holder assumes that everything will go has it has gone since 2009 and the powers that be will keep equities rising to the sky.

None of us know if any of this is possible or what the future holds. I can tell you that I believe more and more the best time to sell is when investments go up parabolically as they have since 2011. I don't know of a single 60-40 believer who is interested in selling any of their mutual funds and many I know have doubled down on real estate because real estate always goes up.

Consider the story of poor Issac Newton and the South Sea bubble and consider South Sea bubble was the 60-40 of the day. Poor Issac was so brow beat by his friends that he bought back into the South Sea Company Stock because he had to go with the crowd and he was missing out.

https://www.sovereignman.com/finance...-bubble-13268/

Why can't people grasp that owning an investment is often like running a startup company and there are lots of days you will be wrong. But, if you can hang in there long enough and have your some diversification you may discover one day in the distant future that you were right. But, you have to be able to tolerate the pain of being wrong until your investment thesis comes to fruition.

What I am suggesting is very difficult - but, if you can learn to ignore the herd there is a higher likely hood of success. The crowd would have told you to buy as much real estate as possible in 2003-2006 with as much leverage as possible and how would that have worked out???????

Remember, those number on a investment statement are just a current illusion - as long as you don't sell today!

[Mega]

Re: The lament of an macroeconomic ideologue.

This might cheer you:-

[jk]

Re: The lament of an macroeconomic ideologue.

the first rule of investing is don't lose [significant] capital.
the second rule of investing is don't forget the first rule.

you are playing a probabilistic game. you may play the cards perfectly yet still lose the hand. it is only by playing many hands that a winning strategy will reward you.

you have lost your opportunity cost only, not your capital. if you were spirited back to 2009, with only the information you had available at that time, what would have led you to invest differently? what else would you have had to know or believe?

[DSpencer]

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.

I try to console myself by learning from my mistakes. Always run the numbers! The numbers suggest that there are few, if any, people that can reliably beat the market. As they say, "It's difficult to make predictions, especially about the future." I've converted to the philosophy that it's better to own the market through low cost index funds and simply accept the results. Is it really greedy to want an average return?

[BK]

Re: The lament of an macroeconomic ideologue.

Don't make the mistake of thinking all the stocks you've bought are mistakes because they are down.

From 2002-2006 my family was renting a home and I kept saying there is going to be an epic bust and from 2002-2006, I felt awful because I wasn't running with the heard and was sure I was WRONG. About the same time I owned Silver Wheaton shares in my childs college fund account I had paid $10/ share for SLW.

Then the financial crisis hit and SLW collapses to $3 per share. So. I don't own a home and I'm losing my childs college fund on a speculation on a mining stock.

Luckily I was in a frozen-catatonic and didn't do anything stupid like sell my Silver Wheaton. Then one day Silver Wheaton stock starts to rebound and friends start telling us how smart we were for renting a home. Eventually I would sell my childs Silver Wheaton shares at prices from $38 - $40 per share range for a 400% return.

We never did get back into real estate because we aren't living were we plan to live in our old age. But, twelve months ago I again had that familiar feeling that I should have bought a home in 2011 and I'm happy to report I can finally see the end of this echo housing bubble.

In one to two years friends will again tell me - "Boy, you are so lucky to be renting" .

Keep the faith in your choices - make adjustments if the trend change takes longer than you thought, always be educating your self about markets,embrace mistakes or being too early, and most important NEVER, EVER, GIVE UP!

[vt]

Re: The lament of an macroeconomic ideologue.

Spence, that "average" return of index funds beats 80% of managers over the intermediate term and probably 90% plus over the long term. There are very, very few EJs out there and even fewer who have the fortitude to stick with recommendations like EJ, and a few others like Buffett, have recommended over the past 20 plus years.

In a sense "average" is well above average.

[DSpencer]

Re: The lament of an macroeconomic ideologue.

Spence, that "average" return of index funds beats 80% of managers over the intermediate term and probably 90% plus over the long term. There are very, very few EJs out there and even fewer who have the fortitude to stick with recommendations like EJ, and a few others like Buffett, have recommended over the past 20 plus years.

In a sense "average" is well above average.

Very true. With high fees and emotional decisions most people do much worse than the market's overall performance. I'm confused on your last sentence. Are you saying that EJ and Buffett have made similar recommendations?

[vt]

Re: The lament of an macroeconomic ideologue.

No. EJ and Buffett are completely different. While they have very different recommendations they have given better tan average advice in the past. Of course past performance doesn't predict the future.

The key is that very few have been able to beat the indexes consistently, and even fewer investors have the fortitude not to change a good approach or even understand how investments work.

Even those that have beaten indexes for long periods of time have periods of under performance.

[BK]

Re: The lament of an macroeconomic ideologue.

Of course the Indexes have out performed the active managers as the world is awash in money and buying the Index has become the mantra of Wall Street.

I look forward to revisiting this discussion of Indexes vs active investor in 1-3 years.

Lets compare SPY to Tocqueville Gold - and yes during times of euphoria you are best of in SPY, but then when crisis hits TGLDX out performs and makes up for under performance http://finance.yahoo.com/chart/TGLDX...IjoiMTB5In0%3D

I feel like I'm reading an advertisement for Vanguard when I read these posts.

Great article by Jesse Felder on the problems with Index Funds https://www.thefelderreport.com/2014...index-funds/nt

There are lots of Bubble stocks out there that are being obscure by the current market euphoria. When the the euphoria subsides we will see if active management is better or index funds. Kind Regards.

[santafe2]

Re: The lament of an macroeconomic ideologue.

How do you console yourselves as you ponder your investment choices gone wrong?

Have a plan and stick with it. Try to learn from your mistakes. Don't invest in markets you don't understand. Remember that the end will only come once, every other time will just be opportunity knocking.

In 2011-2012 I divested stocks, metals and other investments to raise cash for real estate investments. I'm just now selling the first of those and again raising some cash. It may be several years before another obvious opportunity comes along. Unfortunately, I don't see anything obvious today.

[jk]

Re: The lament of an macroeconomic ideologue.

active management is a zero sum game. leaving aside frictions [commissions, fees, admin costs] all outperformance must be equal in absolute value to all underperformance. that's what the average means. of course there are frictions, and so active management ON AVERAGE will underperform the market by an amount equal to those frictions.

[charliebrown]

Re: The lament of an macroeconomic ideologue.

yes me too, i have left lots of dough on the table.

What I have learned in the process.
Over the past 60 years, S&P 500 / GDP is a very good predictor of long term returns. Right now it does not look so good, due to 2% growth of GDP, and 10% growth of stocks for 8 years now.
Buy low, Sell high, I'm selling into this insanely high market.
I started a permanent portfolio (see harry borwne's writting). This does have 25% gold.
Other money is invested in a 20 stocks / 80 treasury portfolio which has the lowest volatility
I just can't see how the debt pyramid ends well. Debt is increasing exponentially, wages stagnant, poor demographics.
Except for tangible assets, every other asset is some one else's liability. When the debt mountain comes crashing down, what to do????
Serve your family/friends and community.

[jk]

Re: The lament of an macroeconomic ideologue.

yes me too, i have left lots of dough on the table.

What I have learned in the process.
Over the past 60 years, S&P 500 / GDP is a very good predictor of long term returns. Right now it does not look so good, due to 2% growth of GDP, and 10% growth of stocks for 8 years now.
Buy low, Sell high, I'm selling into this insanely high market.
I started a permanent portfolio (see harry borwne's writting). This does have 25% gold.
Other money is invested in a 20 stocks / 80 treasury portfolio which has the lowest volatility
I just can't see how the debt pyramid ends well. Debt is increasing exponentially, wages stagnant, poor demographics.
Except for tangible assets, every other asset is some one else's liability. When the debt mountain comes crashing down, what to do????
Serve your family/friends and community.

i agree wholeheartedly. gmo, cape, and a variety of other measures show 7-12 year expected returns on the stock market at these levels are VERY low. the only times the market has been more highly valued was just prior to the peak in 1999-2000 and in late summer-early fall of 1929.

you might want to visit portfolio charts(dot)com to analyze various asset allocations. especially interesting to me is the "golden butterfly", a slight variation on the permanent portfolio (which is also analyzed there). the former, however, has a number a better characteristics than the latter. the site analyzes and displays graphically returns, standard deviations, length and depth of drawdowns, safe withdrawal rates with either depletion or with maintenance of capital, accumulation without withdrawals, and a number of other factors. as well as illustrating the characteristics of many allocation schemes proposed by "the experts," this free site allows you to analyze any allocation you wish.